Humana (Humana (HUM)) reported a solid second quarter on Wednesday — earnings and revenue both beat Wall Street's expectations. But investors weren't impressed. The stock dropped 6.6% in premarket trading, settling around $363.07.

The problem? Expectations had gotten too high. After rival UnitedHealth Group (UNH) raised its full-year forecast earlier this month, investors were hoping Humana would follow suit. Instead, Humana kept its 2026 adjusted earnings outlook unchanged at at least $9 per share — slightly above the $8.94 consensus, but not the upgrade the market wanted.

"Investor expectations for health insurers had risen after peers such as UnitedHealth Group Inc. reported strong Medicare Advantage trends, improved cost management and raised their forecasts, leaving Humana's modest earnings beat and unchanged full-year outlook short of expectations," Reuters reported, citing analysts.

The Numbers

Humana's second-quarter adjusted income came in at $7.61 per share, up from $6.27 a year ago and above the $7.22 consensus estimate. Revenue hit $40.89 billion, up from $32.39 billion and beating the $40.61 billion forecast.

The growth was driven by Medicare Advantage membership, which rose 23% year-over-year to 6.45 million individual members. Total medical membership reached 17.91 million, up from 14.84 million. Total Medicare members — including both Advantage and stand-alone prescription drug plans — climbed to 11.13 million from 8.23 million.

Costs Are Improving

Humana's insurance segment benefit ratio — the percentage of premiums paid out as claims — was 91.2%, consistent with the company's expectation of slightly above 91%. The adjusted consolidated operating cost ratio improved to 9.7%, down 120 basis points from a year ago. The insurance segment operating cost ratio fell to 7.1%, also down 120 bps.

The company attributed the improvement to "operating leverage from membership and revenue growth, along with tactical cost-cutting and transformation efforts, which remain on track."

Guidance: Mixed Signals

Humana affirmed its fiscal 2026 adjusted EPS target of at least $9, but lowered its GAAP EPS guidance to at least $6.52 from at least $8.36. The GAAP cut reflects non-cash items, including amortization of intangible assets and investment losses. The consensus GAAP estimate was $8.55.

The company also reaffirmed its insurance segment benefit-ratio outlook of 92.75% (plus or minus 25 basis points) and its consolidated operating cost-ratio outlook of 10% (plus or minus 25 basis points).

On the membership front, Humana continues to expect individual Medicare Advantage growth of approximately 25% over 2025, group Medicare Advantage growth of about 150,000 members, and individual Medicare stand-alone PDP growth of roughly 1,000,000 members.

For the full year, Humana expects sales of at least $160 billion, including insurance segment sales of at least $155 billion and CenterWell segment revenues of at least $25 billion.

The Takeaway

Humana delivered a solid quarter — beating estimates, growing membership, and improving costs. But in a market where UnitedHealth had already raised the bar, simply meeting expectations wasn't enough. Investors wanted a reason to get more excited about the rest of 2026, and Humana didn't give them one.