UnitedHealth Slashes 2025 Outlook as Soaring Medical Costs Drag on Profits

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UnitedHealth’s Q2 earnings fell short of expectations, prompting a cautious 2025 forecast as rising medical costs continue to weigh on the insurer’s results.

The Minnesota-based healthcare giant reported that expenses exceeded the assumptions used in setting premiums, pressuring profits. CEO Stephen Hemsley told analysts the company anticipates a return to “steady but moderate earnings growth” in 2026.

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UnitedHealth now projects adjusted earnings of at least $16 per share for 2025, a significant downgrade from earlier in the year when forecasts reached as high as $30 per share. Analysts currently expect earnings around $20.64 per share, according to FactSet.

The company operates one of the largest health insurance businesses in the U.S., along with its Optum division, which offers healthcare and technology services.

After retracting its 2025 forecast in May amid rising medical costs, CEO Andrew Witty abruptly left the company. Former CEO Stephen Hemsley, who led UnitedHealth until 2017, stepped in as chairman and CEO.

The company’s earnings warning in April caused shares to plunge $130 in their steepest single-day decline in over 25 years.

Hemsley acknowledged operational missteps and pricing errors for 2025 but said the company is addressing these challenges. For example, costs in the Medicare Advantage segment have risen more than 7%, exceeding the expected 5% growth.

Other insurers have similarly reported faster-than-expected medical cost increases, fueled by more frequent and costly emergency room visits, as well as higher billing for tests and procedures.

Prescription drug expenses, especially for cancer, obesity treatments, and gene therapies, continue to climb sharply.

In Q2, UnitedHealth posted adjusted earnings of $4.08 per share on $111.6 billion in revenue, missing analyst estimates of $4.48 per share on $111.5 billion. Net profit dropped 19% to $3.41 billion, despite a 13% revenue increase. Medical costs soared 20% to $78.6 billion.

Shares fell 4% to $270 following the report. The stock, which hit a record $630 last November, has declined steadily since December, partly due to the tragic death of UnitedHealthcare CEO Brian Thompson. The stock is down 44% year-to-date, while the Dow Jones Industrial Average has risen 5%.