AI interpretation based on checked source excerpts. Issuer assertions and evidence limitations remain explicit.
Policy quality-scores-2: six equally weighted categories. The overall score requires full coverage. Missing inputs are not zero. Qualitative grades are sourced interpretations, not probabilities. 6/6 · 18/10/2026
Moat31
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
structural advantage · 1/4 · Purchasing capabilities and reported biosimilar savings support customer value, while Aetna's population demonstrates scale. Neither establishes relative cost superiority or barriers to replication, and disclosed customer switching flexibility weakens defensibility.
durability · 1/4 · Competitive bidding and customer mobility make persistence fragile. Regulatory constraints have already influenced bidding decisions; proposed PBM settlement disclosures do not establish durable protection.
customer dependency · 1/4 · Health insurance customers explicitly have considerable switching flexibility. Prescription volume growth demonstrates demand indirectly, but acquisition and utilization effects prevent interpreting it as evidence of customer lock-in.
erosion resilience · 2/4 · First-half 2026 operating results improved despite pricing offsets, demonstrating some operating resilience. Health Services and pharmacy adjusted operating income improved only modestly, however, and the comparison benefits from the absence of substantial prior-year charges.
Pricing power38
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
realized pricing · 1/4 · Regulatory price reductions and reimbursement pressure are observed adverse pricing outcomes. Pharmacy sales growth benefited from mix, volume and manufacturer brand inflation, which does not establish CVS's ability to raise its own net prices.
retention · 2/4 · Prescription and same store volume growth provide indirect evidence of continuing demand. Acquisition effects and increased utilization contribute to growth, while insurance customers retain substantial switching flexibility. No renewal or customer retention rate is supplied.
margin resilience · 2/4 · Consolidated operating income grew faster than revenue in the first half of 2026, and segment reconciliations show underlying improvement beyond prior-year charges. Pharmacy and Health Services adjusted earnings advanced only slightly, limiting evidence of broad, sustained resilience.
contractual freedom · 1/4 · Government business requires competitive bidding, CMS payment mechanisms determine important premium components, and realized pharmacy reimbursement pressure constrains terms. Purchasing negotiations provide some discretion, but the passages do not establish broad unilateral pricing freedom.
Predictability100
Five consecutive annual periods. Equal weights: nondeclining revenue frequency; revenue-growth volatility (5–40pp); positive FCF frequency; FCF-margin volatility (3–20pp). Stability indicator, not a growth forecast.
- Nondeclining revenue years (%)
- 100.00
- Revenue growth volatility (pp)
- 2.66
- Positive FCF years (%)
- 100.00
- FCF margin volatility (pp)
- 1.39
Financial strength3
Equal-weight grades: debt/FCF (1–8x), net debt/earnings before interest and tax (0–5x), interest service (1–12x), current ratio (0.75–2x). Earnings use reported operating income, or reported pretax profit plus reported interest expense when operating income is unavailable. Interest service uses earnings/interest expense; if unavailable, it uses reported operating cash flow/cash interest paid, without relabeling cash paid as accrued expense. Nonpositive cash flow/earnings score 0 for their service component; reported zero interest with a positive numerator scores 100. Net cash scores 100 for net leverage. Missing disclosures remain unavailable. General nonfinancial-company rubric, not a credit rating; exceptional and nonoperating gains are not normalized out. IFRS finance-cost and cash-flow classifications retain their reported scope.
- debtFcfGrade
- 0.00
- netDebtEbitGrade
- 0.00
- interestCoverageGrade
- 4.49
- currentRatioGrade
- 7.39
- Debt / FCF (x)
- 8.27
- Net debt / operating income (x)
- 12.04
- Interest coverage (x)
- 1.49
- Current ratio (x)
- 0.84
Capital allocation82
Three-year equal-weight indicators: pretax return on average invested capital (0–25%; equity + debt − cash, each year and its prior year), share-count growth (0–5%, lower better), share-based cost/revenue (2–20%, lower better), consolidated FCF/net income (0–1x). Return uses reported operating income or, if unavailable, EBIT calculated from reported pretax profit plus reported interest expense; exceptional/nonoperating gains are not normalized out. Share-based cost uses the reported cash-flow add-back or, if absent, separately reported recognized compensation expense; the latter never becomes an FCF adjustment. Nonpositive net income scores 0 for cash conversion; absent income/FCF stays unavailable. Nonpositive invested capital has no defined return and remains unavailable. Does not establish acquisition quality or buyback timing.
- 3-year pre-tax operating return (%)
- 7.13
- 3-year average dilution (%)
- -1.15
- 3-year average SBC / revenue (%)
- 0.15
- cashConversionGrade
- 100.00
Management56
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
capital discipline · 2/4 · First-half 2026 operating cash flow of $10.594 billion supported $1.540 billion of capital spending, $3.287 billion of debt repayments and $1.725 billion of dividends, with no second-quarter repurchases. Cash flow benefited partly from timing; substantial obligations, increased diluted shares and prior asset-related charges temper the assessment.
incentive alignment · 3/4 · Actual 2025 grants emphasize performance stock units, multi-year measurement, a subsequent holding period, leverage, Medicare quality, engagement and relative shareholder returns. Disclosed recoupment and payout protections reinforce alignment. Adjusted earnings dominate measurement, and ownership amounts and realized payouts are missing.
execution · 2/4 · Execution is assessed from operating outcomes: consolidated and Health Care Benefits earnings improved, cash generation increased and prescription demand grew. Prior charges, acquisition-supported volume, timing effects and limited underlying growth in other segments make the evidence mixed rather than uniformly strong.
governance · 2/4 · Disclosed board strategy oversight, a Lead Independent Director and compensation safeguards provide concrete governance mechanisms. Combining Chair and CEO roles concentrates authority, and the passages do not demonstrate exceptional oversight effectiveness or supply full ownership and independence details.
Evidence
The Company operates a group purchasing organization that negotiates pricing for the purchase of pharmaceuticals and rebates with pharmaceutical manufacturers on behalf of its participants and provides various administrative, management and reporting services to pharmaceutical manufacturers.
Health Services business description: group purchasing organization · Filed 05/08/2026
Complementing this effort, our formulary strategy continues to balance cost and coverage by prioritizing clinically effective therapies, delivering more than $1.5 billion in client savings through biosimilar adoption.
Chair and Lead Independent Director message: reported biosimilar client savings · Filed 03/04/2026
These increases were partially offset by regulatory-related price reductions on certain drugs, the impact of recent generic drug introductions and pharmacy reimbursement pressure.
Pharmacy & Consumer Wellness operating discussion: realized pricing offsets · Filed 05/08/2026
In July 2026, the Company and the FTC announced a proposed settlement agreement that would resolve all of the FTC’s outstanding investigations related to the Company’s PBM and affiliated pharmacy businesses, including rebate, pharmacy network, contract, and vertical integration issues.
PBM litigation and investigations: proposed FTC settlement · Filed 05/08/2026
The proposed settlement is subject to a public comment period after which the FTC will decide whether to issue a final order approving the settlement.
PBM litigation and investigations: settlement approval remained pending · Filed 05/08/2026
•In our Health Care Benefits segment, our customers have considerable flexibility in moving between us and our competitors.
Risk factors: Health Care Benefits customer switching flexibility · Filed 10/02/2026
•In our Health Care Benefits segment, we must often bid against our competitors in a highly competitive environment to acquire and retain our government customers’ business.
Risk factors: competitive government insurance bidding · Filed 10/02/2026
CMS has proposed requiring that health plans offering certain dual eligible programs must also offer Medicaid programs, which has resulted in the Company refraining from bidding in certain jurisdictions and could further impact the Company’s ability to obtain or retain membership in its dual eligible programs.
Risk factors: actual decisions to refrain from bidding following a CMS proposal · Filed 10/02/2026
Health Care Benefits Segment The Health Care Benefits segment operates as one of the nation’s leading diversified health care benefits providers through its Aetna® operations, serving an estimated more than 37 million people as of December 31, 2025.
Health Care Benefits business description: population served at December 31, 2025 · Filed 10/02/2026
•Pharmacy same store sales increased 3.0% in the six months ended June 30, 2026 compared to the prior year.
Pharmacy & Consumer Wellness results: first-half 2026 pharmacy same store sales · Filed 05/08/2026
The increase was primarily driven by pharmacy drug mix, the 6.9% increase in pharmacy same store prescription volume on a 30-day equivalent basis and brand inflation.
Pharmacy & Consumer Wellness results: prescription volume, mix and brand inflation · Filed 05/08/2026
Prescriptions filled •Prescriptions filled increased 4.0% on a 30-day equivalent basis in the six months ended June 30, 2026 compared to the prior year primarily driven by incremental volume resulting from the Company’s Rite Aid prescription file acquisitions and increased utilization, partially offset by the absence of long-term care pharmacy prescription volume following the deconsolidation of Omnicare.
Pharmacy & Consumer Wellness results: prescription growth drivers and acquisition effects · Filed 05/08/2026
40 The following are reconciliations of consolidated operating income (GAAP measure) to consolidated adjusted operating income, as well as reconciliations of segment GAAP operating income (loss) to segment adjusted operating income (loss): Three Months Ended June 30, 2026 In millions Health Care Benefits Health Services Pharmacy & Consumer Wellness Corporate/ Other Consolidated Totals Operating income (loss) (GAAP measure) $ 2,191 $ 1,603 $ 1,411 $ (502) $ 4,703 Amortization of intangible assets (1) 237 130 64 — 431 Net realized capital (gains) losses (2) (2) — — 15 13 Acquisition-related integration costs (3) — — — 10 10 Adjusted operating income (loss) $ 2,426 $ 1,733 $ 1,475 $ (477) $ 5,157 Three Months Ended June 30, 2025 In millions Health Care Benefits Health Services Pharmacy & Consumer Wellness Corporate/ Other Consolidated Totals Operating income (loss) (GAAP measure) $ 1,002 $ 1,102 $ 736 $ (459) $ 2,381 Amortization of intangible assets (1) 293 141 60 — 494 Net realized capital losses (2) 13 — — 14 27 Acquisition-related integration costs (3) — — — 28 28 Legacy litigation charges (4) — 291 542 — 833 Loss on Accountable Care assets (5) — 41 — — 41 Office real estate optimization charges (6) — — — 4 4 Adjusted operating income (loss) $ 1,308 $ 1,575 $ 1,338 $ (413) $ 3,808 Six Months Ended June 30, 2026 In millions Health Care Benefits Health Services Pharmacy & Consumer Wellness Corporate/ Other Consolidated Totals Operating income (loss) (GAAP measure) $ 4,997 $ 2,950 $ 2,545 $ (1,109) $ 9,383 Amortization of intangible assets (1) 473 272 127 1 873 Net realized capital (gains) losses (2) (3) — — 32 29 Acquisition-related integration costs (3) — — — 22 22 Adjusted operating income (loss) $ 5,467 $ 3,222 $ 2,672 $ (1,054) $ 10,307 Six Months Ended June 30, 2025 In millions Health Care Benefits Health Services Pharmacy & Consumer Wellness Corporate/ Other Consolidated Totals Operating income (loss) (GAAP measure) $ 2,676 $ 2,329 $ 1,600 $ (850) $ 5,755 Amortization of intangible assets (1) 587 285 120 1 993 Net realized capital (gains) losses (2) 34 (15) — 29 48 Acquisition-related integration costs (3) — — — 73 73 Legacy litigation charges (4) — 291 929 — 1,220 Loss on Accountable Care assets (5) — 288 — — 288 Office real estate optimization charges (6) 4 — 2 4 10 Adjusted operating income (loss) $ 3,301 $ 3,178 $ 2,651 $ (743) $ 8,387 _____________________________________________ (1)The Company’s acquisition activities have resulted in the recognition of intangible assets as required under the acquisition method of accounting which consist primarily of trademarks, customer contracts/relationships, covenants not to compete, technology, provider networks and value of business acquired.
Operating income reconciliation: first-half 2026 and 2025 segment results and adjustments · Filed 05/08/2026
4 Index to Condensed Consolidated Financial Statements CVS Health Corporation Condensed Consolidated Statements of Cash Flows (Unaudited) Six Months Ended June 30, In millions 2026 2025 Cash flows from operating activities: Cash receipts from customers $ 198,468 $ 186,500 Cash paid for inventory, prescriptions dispensed and health services rendered (107,589) (101,198) Insurance benefits paid (58,403) (58,844) Cash paid to other suppliers and employees (21,315) (18,630) Interest and investment income received 1,021 972 Interest paid (1,551) (1,484) Income taxes paid (37) (863) Net cash provided by operating activities 10,594 6,453 Cash flows from investing activities: Proceeds from sales and maturities of investments 7,483 6,866 Purchases of investments (8,704) (7,186) Purchases of property and equipment (1,540) (1,350) Acquisitions (9) (139) Other 12 23 Net cash used in investing activities (2,758) (1,786) Cash flows from financing activities: Commercial paper borrowings (repayments), net — 921 Repayments of long-term debt (3,287) (762) Dividends paid (1,725) (1,706) Proceeds from exercise of stock options 217 191 Payments for taxes related to net share settlement of equity awards (154) (125) Other (62) (45) Net cash used in financing activities (5,011) (1,526) Net increase in cash, cash equivalents and restricted cash 2,825 3,141 Cash, cash equivalents and restricted cash at the beginning of the period 8,712 8,884 Cash, cash equivalents and restricted cash at the end of the period $ 11,537 $ 12,025 5 Index to Condensed Consolidated Financial Statements CVS Health Corporation Condensed Consolidated Statements of Cash Flows (Unaudited) Six Months Ended June 30, In millions 2026 2025 Reconciliation of net income to net cash provided by operating activities: Net income $ 5,952 $ 2,795 Adjustments required to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,241 2,325 Stock-based compensation 442 262 Loss on sale of subsidiary — 236 Deferred income taxes and other items (241) (283) Change in operating assets and liabilities, net of effects from acquisitions: Accounts receivable, net (533) (4,139) Inventories 1,624 671 Other assets 1,355 (969) Accounts payable and pharmacy claims and discounts payable (344) 3,831 Health care costs payable and other insurance liabilities 665 (34) Other liabilities (567) 1,758 Net cash provided by operating activities $ 10,594 $ 6,453 See accompanying notes to condensed consolidated financial statements (unaudited).
Condensed consolidated cash flow statements: first-half 2026 and 2025 · Filed 05/08/2026
The increase was primarily due to the timing of payments and receipts and improved operating performance in the Health Care Benefits segment in the six months ended June 30, 2026.
Liquidity discussion: cash flow improvement attributable to timing and operating performance · Filed 05/08/2026
In millions Total Current Long-Term Operating lease liabilities (1) $ 19,387 $ 2,626 $ 16,761 Finance lease liabilities (1) 1,960 139 1,821 Contractual lease obligations with Target (2) 2,268 — 2,268 Long-term debt (3) 63,709 4,007 59,702 Interest payments on long-term debt (3) 44,003 2,933 41,070 Opioid litigation settlement obligations (4) 3,975 648 3,327 Other long-term liabilities on the consolidated balance sheets (5) Future policy benefits (6) 4,477 360 4,117 Unpaid claims (6) 801 202 599 Policyholders’ funds (6) (7) 937 615 322 Total $ 141,517 $ 11,530 $ 129,987 _____________________________________________ (1)Refer to Note 7 ‘‘Leases’’ included in Item 8 of this 10-K for additional information regarding the maturity of lease liabilities under operating and finance leases.
Future cash requirements: debt, interest, leases and litigation obligations · Filed 10/02/2026
Fiscal Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs April 1, 2026 through April 30, 2026 — $ — — $ 11,500,000,143 May 1, 2026 through May 31, 2026 — $ — — $ 11,500,000,143 June 1, 2026 through June 30, 2026 — $ — — $ 11,500,000,143 — — Item 3.
Stock repurchases: no purchases during the second quarter of 2026 · Filed 05/08/2026
The MP&D Committee approved the following long-term incentive components to the executive compensation program in 2025: • Maintained the NEO long-term incentive mix of 60% PSUs, 20% RSUs and 20% stock options, other than for Mr.
Executive compensation: approved 2025 long-term incentive mix · Filed 03/04/2026
Joyner who received 75% PSUs and 25% RSUs (see pages 61-63 for details) • Maintained the one-year holding period following the vesting of the three-year PSUs • Retained three-year cumulative Adjusted EPS measurement for PSUs (70% weighting) • Modified the Strategic Scorecard metrics to support achievement of our long-term strategy (30% total weighting, each metric to be weighted 10%, with curves ranging from 50% payout at threshold and 200% at maximum performance): » Strategic Metric 1: Debt Pay Down Ratio (Ratio of Adjusted Debt to Adjusted EBITDA at year-end 2027) (New for 2025) » Strategic Metric 2: Medicare Stars Performance (Percentage of Medicare members in 4+ Star-rated plans over a three-year period) (Refined for 2025: measured relative to a comparator group of Medicare companies) » Strategic Metric 3: Customer Engagement (Percentage of unique customers with 2+ CVS Health offerings at year-end 2027) • Maintained rTSR modifier (+/- 25%) 2026 Proxy Statement 59 Back to Contents The MP&D Committee approved long-term incentive compensation awards for employees, including the NEOs, and made annual grants of long-term equity-based incentives in April 2025 (other than for Mr.
Executive compensation: CEO award mix, holding period, performance metrics and annual grants · Filed 03/04/2026
We apply leading executive compensation practices Performance Metrics Aligned with Stockholder Interests Recoupment Policies and Commitment to Disclose any Recoupment Majority of Total Compensation Opportunity is Performance-Based Limited Perquisites and Personal Benefits Long-Term Incentive Award Payouts are Capped No Excise Tax Gross-Ups Post-vest Holding Period on Net Shares Resulting from PSUs for NEOs Broad-Based Severance Plan Applies to Executives No Upward Modifier to any Outstanding PSUs if Absolute TSR is Negative Robust Stock Ownership Guidelines Double Trigger Vesting of Equity Awards Upon a Change in Control Broad Anti-Pledging and Anti-Hedging Policy Dividend Equivalents on RSUs and PSUs Paid Only When Awards Vest Reconciliation in Proxy Statement of any Non-GAAP Performance Metric to the Most Directly Comparable GAAP Financial Measure No Option Repricing; No Recycling of Shares Board Committee Oversight of Comprehensive Annual Compensation Program Risk Assessment Cash Severance Policy Capped at 2.99x Base Plus Bonus Workforce Modifier Metric in the MIP (downward-only) for Senior Executives 2025 Business and Performance Highlights In 2025, we advanced our strategy and achieved significant milestones that we believe will help us to achieve our ambition to be America’s most trusted health care company.
Executive compensation practices: recoupment, payout limits and shareholder protections · Filed 03/04/2026
2026 Proxy Statement i In 2025, we made important leadership updates to strengthen the focused execution of our strategy, including David’s appointment as Chair of the Board, beginning January 1, 2026, in addition to his role as President and CEO.
Board leadership: combined Chair and CEO roles effective January 1, 2026 · Filed 03/04/2026
Mike continues to serve as the Board’s Lead Independent Director, providing leadership and strong independent oversight.
Board leadership: continuing Lead Independent Director · Filed 03/04/2026
22 CVS Health Back to Contents The Board’s Role in Strategy and Succession Planning As part of its review of the Company’s strategy, the Board: • Reviews the Company’s financial performance on a regular basis at Board meetings and through regular updates from management; • Periodically reviews and assesses the Company’s short- and long-term strategy and performance, on both an absolute basis and in relation to the performance, practices and policies of its peers; • Receives updates regarding strategic matters throughout the year; • Receives reports from management and presentations by expert external speakers that are often invited to present to the Board; and • Provides input and oversight on short-term strategic goals and sets the long-term strategic direction of the Company at the annual strategy-focused meeting.
Board role: financial, strategic and succession oversight processes · Filed 03/04/2026
The following are reconciliations of operating expenses to adjusted operating expenses and total revenues to adjusted total revenues as well as a calculation of the adjusted SG&A ratio for the year ended December 31, 2025: In millions Operating expenses (GAAP measure) $ 44,977 Non-GAAP adjustments: Amortization of intangible assets(1) (1,976 ) Acquisition-related integration costs(3) (117 ) Health Care Delivery clinic closure charge(5) (83 ) Opioid litigation charge(6) (320 ) Office real estate optimization charges(7) (10 ) Legacy litigation charges(8) (1,220 ) Loss on Accountable Care assets(9) (288 ) Adjusted operating expenses $ 40,963 In millions Total revenues (GAAP measure) $ 402,067 Non-GAAP adjustments: Net realized capital losses(2) 44 Adjusted total revenues $ 402,111 In millions (except for adjusted SG&A ratio) Adjusted operating expenses $ 40,963 Adjusted total revenues $ 402,111 Adjusted SG&A Ratio 10.19% A-3 CVS Health Back to Contents End Notes (1) The Company’s acquisition activities have resulted in the recognition of intangible assets as required under the acquisition method of accounting which consist primarily of trademarks, customer contracts/relationships, covenants not to compete, technology, provider networks and value of business acquired.
2025 financial reconciliation: clinic closure, litigation and Accountable Care asset charges · Filed 03/04/2026
CMS pays increased premiums to Medicare Advantage plans and Medicare PDP plans for members who have certain medical conditions identified with specific diagnosis codes.
CMS actions: government determination of increased premiums for specified medical conditions · Filed 05/08/2026
Exhibits 55 Signatures 56 Form 10-Q Table of Contents Part I.Financial Information Item 1.Financial Statements Index to Condensed Consolidated Financial Statements Page Condensed Consolidated Statements of Operations (Unaudited) for the three and six months ended June 30, 2026 and 2025 2 Condensed Consolidated Statements of Comprehensive Income (Unaudited) for the three and six months ended June 30, 2026 and 2025 3 Condensed Consolidated Balance Sheets (Unaudited) as of June 30, 2026 and December 31, 2025 4 Condensed Consolidated Statements of Cash Flows (Unaudited) for the six months ended June 30, 2026 and 2025 5 Condensed Consolidated Statements of Shareholders’ Equity (Unaudited) for the three months ended June 30, 2026 and 2025 and the three months ended March 31, 2026 and 2025 7 Notes to Condensed Consolidated Financial Statements (Unaudited) 9 Report of Independent Registered Public Accounting Firm 35 1 Index to Condensed Consolidated Financial Statements CVS Health Corporation Condensed Consolidated Statements of Operations (Unaudited) Three Months Ended June 30, Six Months Ended June 30, In millions, except per share amounts 2026 2025 2026 2025 Revenues: Products $ 66,219 $ 60,607 $ 128,445 $ 118,276 Premiums 35,117 34,195 68,908 67,015 Services 4,119 3,626 7,954 7,205 Net investment income 641 487 1,215 1,007 Total revenues 106,096 98,915 206,522 193,503 Operating costs: Cost of products sold 58,862 54,005 114,306 105,062 Health care costs 31,485 31,317 60,843 60,452 Operating expenses 11,046 11,212 21,990 22,234 Total operating costs 101,393 96,534 197,139 187,748 Operating income 4,703 2,381 9,383 5,755 Interest expense (757) (763) (1,531) (1,548) Other income 31 29 63 57 Income before income tax provision 3,977 1,647 7,915 4,264 Income tax provision 982 634 1,963 1,469 Net income 2,995 1,013 5,952 2,795 Net (income) loss attributable to noncontrolling interests (16) 8 (30) 5 Net income attributable to CVS Health $ 2,979 $ 1,021 $ 5,922 $ 2,800 Net income per share attributable to CVS Health: Basic $ 2.33 $ 0.81 $ 4.64 $ 2.22 Diluted $ 2.31 $ 0.80 $ 4.61 $ 2.21 Weighted average shares outstanding: Basic 1,279 1,266 1,276 1,264 Diluted 1,287 1,270 1,283 1,267 See accompanying notes to condensed consolidated financial statements (unaudited).
Condensed consolidated operating statements: revenue, earnings and weighted average shares · Filed 05/08/2026
