UnitedHealth Group (UNH) is having a rough week. First, the U.S. Centers for Medicare & Medicaid Services dropped the news Monday that Medicare rates for insurers would stay essentially flat next year. Then Tuesday morning, the healthcare giant reported earnings that missed on revenue and offered a 2026 sales outlook that left Wall Street wanting more.
The numbers tell a complicated story. Fourth-quarter adjusted earnings came in at $2.11 per share, barely edging past the $2.10 consensus estimate, but down dramatically from $6.81 a year ago. Revenue grew 12% year-over-year to $113.215 billion, which sounds impressive until you realize analysts were expecting $113.817 billion. In this business, close doesn't count.
What's really catching investors' attention is the medical care ratio, which measures how much of premium revenue goes toward actual medical claims. For fiscal 2025, it hit 89.1%, including a 20 basis point hit from loss contracts. Strip that out and you get an adjusted MCR of 88.9%, still up a hefty 340 basis points from the prior year. The fourth quarter was even tougher at 92.4%. Higher medical costs are squeezing margins, and it shows.
"We confronted challenges directly and finished 2025 as a much stronger company, giving us the momentum to better serve those who count on us and continue to improve our core performance," said Stephen Hemsley, CEO of UnitedHealth Group, putting the best spin possible on a difficult year.
Breaking Down the Business
The UnitedHealthcare segment, which handles the insurance side, posted solid growth with revenues jumping 17.50% year-over-year to $87.11 billion. The division now serves 49.8 million people, adding 415,000 members over the past year. Growth is happening, just not profitably enough to satisfy the market.
Optum, the company's healthcare services arm, grew revenues 8% to $70.33 billion. That's respectable, though the slower pace compared to UnitedHealthcare reflects the different dynamics of service versus insurance businesses.
Looking Ahead to 2026
Here's where things get interesting. UnitedHealth expects adjusted earnings of over $17.75 per share for fiscal 2026, essentially in line with the $17.74 consensus. But the revenue forecast is where the disappointment really lands: management sees 2026 sales topping $439 billion, versus Wall Street's expectation of $454.60 billion. That's a gap of roughly $15 billion, which explains why the stock is getting hammered.
CFO Wayne DeVeydt struck an optimistic tone: "UnitedHealth Group's 2026 outlook reflects a business delivering durable performance improvement and margin expansion through greater operating discipline and precise execution."
The company is banking on operational improvements to drive margins higher. Management expects the consolidated medical care ratio to improve 30 basis points to 88.8%, plus or minus 50 basis points, reflecting repricing efforts across the business. The operating cost ratio should tick down 10 basis points to 12.8%, supported by cost discipline and productivity initiatives.
Translation: UnitedHealth plans to charge more and spend less to protect profitability in a challenging environment.
Price Action: UNH stock was trading down 15.79% at $296.11 during premarket trading Tuesday, according to market data.
