CVS Health is having a good day. The stock jumped more than 6% on Wednesday after the health solutions giant reported first-quarter earnings that crushed expectations and raised its outlook for the year. The numbers tell a story of a company that's managing its medical costs better than Wall Street expected, even as it navigates some tricky transitions in its insurance business.

Let's start with the headline numbers. CVS reported adjusted earnings of $2.57 per share, well above the $2.20 analysts were looking for. Revenue came in at $100.43 billion, up 6.2% from a year ago and also ahead of the $95.09 billion consensus. Adjusted operating income rose 12.5% to $5.15 billion, driven largely by strength in the Health Care Benefits segment.

Segment Performance Shows Diverging Trends

Not all parts of CVS are moving in the same direction, but the overall picture is positive. The Health Care Benefits segment — which includes the Aetna insurance business — saw revenue rise 3.3% to $35.97 billion. That growth came from the government business, partially offset by the company's decision to exit the individual exchange market in 2026. That exit is a strategic move: CVS is pulling back from a volatile part of the insurance market where it was losing money.

The Health Services segment, which includes pharmacy benefit management (PBM), grew revenue 11% to $48.24 billion. That was driven by pharmacy drug mix and brand inflation, though continued pharmacy client price improvements partially offset the gains. The Pharmacy & Consumer Wellness segment — your neighborhood CVS stores — saw sales essentially flat at $31.99 billion. Prescription volume and drug mix helped, but those gains were largely offset by regulatory-related price reductions on certain drugs, new generic introductions, and ongoing pharmacy reimbursement pressure.

Key Metrics Improve Despite Membership Decline

The most important metric for any health insurer is the medical benefit ratio (MBR) — the percentage of premiums spent on medical claims. CVS's MBR improved to 84.6% from 87.3% a year ago. That's a big drop, and it means the company is keeping more of every premium dollar as profit. The improvement came from better underlying performance in the government business and the absence of a premium deficiency reserve that weighed on results last year. Lower favorable prior-year development partially offset those gains.

Medical membership stood at 26 million, down about 600,000 members from the end of 2025. That decline reflects the exit from the individual exchange business, partially offset by growth in Commercial ASC membership. So CVS is getting smaller in some areas but more profitable.

Prescriptions filled increased 3.6% to 451.2 million, helped by incremental volume from Rite Aid prescription file acquisitions and higher utilization. That was partially offset by the loss of long-term care pharmacy volume following the deconsolidation of Omnicare.

CVS Health Raises 2026 Outlook

Given the strong start to the year, CVS raised its full-year 2026 adjusted earnings guidance from $7.00–$7.20 per share to $7.30–$7.50. That's above the Wall Street consensus of $7.16. The company also now expects 2026 sales of more than $405 billion, up from prior guidance of at least $400 billion and ahead of the $404.87 billion estimate.

That's a meaningful upgrade, and it suggests management sees the momentum continuing.

CVS Health Expands Biosimilars Strategy Across Formularies

Beyond the earnings beat, CVS made a strategic move on Tuesday that could have long-term implications for both the company and the broader drug pricing landscape. CVS announced it will update its core commercial template formularies to accelerate the adoption of lower-cost biosimilars across several therapeutic areas.

Starting July 1, 2026, CVS Caremark will prioritize FDA-approved biosimilars — many of which are designated as interchangeable and have no clinically meaningful differences versus reference products — over select branded drugs. The most notable change: the formulary will move away from Johnson & Johnson's Stelara (ustekinumab) in favor of lower-cost interchangeable biosimilars, including Pyzchiva and Yesintek.

This is a big deal. Stelara is a blockbuster drug used for autoimmune conditions like psoriasis and Crohn's disease, and it generates billions in revenue for J&J. By pushing patients toward biosimilars, CVS is using its PBM leverage to drive down costs. And it's not just about saving money for the system — CVS said most members will face $0 out-of-pocket costs for these therapies after the change. That's a powerful incentive for patients to switch.

This move fits into a broader trend of PBMs and insurers pushing for biosimilar adoption as a way to control drug spending. For CVS, it's also a way to differentiate its PBM offering in a competitive market.

CVS Health Price Action

Investors clearly liked what they saw. CVS shares were up 6.09% at $85.60 at the time of publication on Wednesday, hitting a new 52-week high. The stock has been on a roll, and this earnings report gives it more fuel.

The combination of a strong quarter, raised guidance, and a forward-looking biosimilar strategy paints a picture of a company that's managing its core business well while also positioning for future cost savings. For a company that operates at the intersection of insurance, pharmacy, and drug pricing, that's a powerful trifecta.