Health insurance company UnitedHealth (NYSE:UNH) met Wall Street’s revenue expectations in Q3 CY2025, with sales up 12.2% year on year to $113.2 billion. Its non-GAAP profit of $2.92 per share was 4% above analysts’ consensus estimates.
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UnitedHealth (UNH) Q3 CY2025 Highlights:
- Revenue: $113.2 billion vs analyst estimates of $113.3 billion (12.2% year-on-year growth, in line)
- Adjusted EPS: $2.92 vs analyst estimates of $2.81 (4% beat)
- Adjusted EBITDA: $5.48 billion vs analyst estimates of $5.18 billion (4.8% margin, 5.8% beat)
- Management raised its full-year Adjusted EPS guidance to $16.25 at the midpoint, a 1.6% increase
- Operating Margin: 3.8%, down from 8.6% in the same quarter last year
- Customers: 54.08 million, similar to the previous quarter
- Market Capitalization: $333.1 billion
StockStory’s Take
UnitedHealth’s third quarter results were shaped by ongoing margin pressure and the company’s efforts to address underperformance in key segments. Management attributed the quarter’s operational challenges primarily to the lingering effects of medical cost trends, especially in Medicare Advantage and Medicaid, as well as ongoing investments to restructure underperforming businesses. CEO Stephen Hemsley acknowledged, “We’re getting at the core of the underperformance issues with fresh perspectives, intent on positioning our organization as a positive and innovative leader helping to advance next era of health care.” The company continues to focus on operational improvements and repricing initiatives to restore profitability.
Looking ahead, UnitedHealth’s updated outlook centers on disciplined cost management, a narrowed focus on high-performing markets, and accelerated integration of its value-based care model within Optum Health. Management believes that repricing and benefit redesigns will drive margin recovery across key insurance segments in 2026, while targeted investments in technology and AI are expected to improve operational efficiency. CFO Wayne DeVeydt stated, “We are optimistic in our ability to execute on our 2026 plans, but there are remaining headwinds we will have to overcome,” referencing ongoing Medicare funding cuts and Medicaid challenges.
Key Insights from Management’s Remarks
Management highlighted decisive actions taken to reposition core businesses for improved margins, while addressing persistent industry headwinds and internal inefficiencies.
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Repricing and benefit redesign: UnitedHealthcare has implemented significant repricing efforts across Medicare Advantage, commercial, and ACA offerings, aligning premiums with elevated medical cost trends and government funding cuts. These moves are expected to support margin recovery in 2026, though management acknowledged that membership contraction—particularly in Medicare Advantage—will likely result from targeted plan exits and network reductions.
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Optum Health strategic reset: Optum Health is refocusing on a narrower, integrated value-based care model. Leadership changes and consolidation of provider networks aim to improve clinical consistency and performance, with a shift away from risk arrangements and markets that do not fit the intended model. Management expects value-based care membership to decline by about 10% in 2026 before returning to growth in 2027.
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Technology and AI investment: The company is accelerating investment in technology and AI-driven platforms, especially within Optum Insight. Management cited the launch of Optum Real—a real-time claims platform—and Integrity One, an AI-powered auto coding tool, as early examples of products improving efficiency and client demand.
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Medicaid funding lag: Medicaid remains a challenge, as state funding has not kept pace with rising member acuity and cost trends. Management is advocating for improved rates but expects margin pressure to persist into 2026, with recovery likely taking 18–24 months.
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International and portfolio rationalization: UnitedHealth is reducing its international footprint and consolidating operations in markets where it can drive sustainable performance. The company is also reviewing underperforming assets for potential exits, aiming to improve strategic focus and long-term profitability.
Drivers of Future Performance
UnitedHealth’s management expects margin recovery and operating discipline to drive improved results in 2026, but acknowledges persistent headwinds from funding and cost trends.
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Margin recovery through repricing: The company’s repricing and targeted benefit redesigns across Medicare Advantage, commercial, and ACA businesses are expected to drive margin improvements in 2026. Management emphasized a conservative approach, accepting lower membership in exchange for sustainable profitability and forecasting further progress in 2027.
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Investment in technology and operational efficiency: Accelerated investment in AI and technology platforms, especially at Optum Insight, is aimed at streamlining operations, improving payment integrity, and modernizing legacy systems. These changes are expected to yield long-term efficiency gains, though upfront costs may limit short-term profit growth.
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Persistent external challenges: Management flagged ongoing Medicare funding cuts, Medicaid rate inadequacy, and elevated medical cost trends as key risks. The company’s outlook assumes continued pressure from these sources, with recovery in Medicaid projected to lag other segments and a full return to target margins not expected until 2027 or later.
Catalysts in Upcoming Quarters
Looking ahead, the StockStory team will focus on (1) execution of repricing and benefit redesign to achieve sustained margin improvement, (2) progress in narrowing and integrating provider networks within Optum Health and returning that segment to growth, and (3) evidence that technology and AI investments are translating to operational efficiencies and client adoption. The pace of Medicaid margin recovery and outcomes from portfolio rationalization will also be important markers for long-term success.
UnitedHealth currently trades at $367.55, in line with $366.02 just before the earnings. In the wake of this quarter, is it a buy or sell? See for yourself in our full research report (it’s free for active Edge members).
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