CVS Proves the Turnaround Is Real—But Can It Last?

A pharmacy chain where you'd expect sticker shock on shampoo and candy just delivered 40% stock returns over 12 months—rivaling Nvidia's performance, at least in percentage terms. The CVS comeback story isn't just Wall Street hype anymore; it's backed by the numbers.

From Problem Child to Market Darling

For years, CVS was the stock investors loved to hate. The company's sprawling healthcare empire—spanning insurance through Aetna, pharmacy services, and retail locations—seemed more like a collection of problems than a coherent strategy.

Rising medical costs at Aetna spooked investors. The pharmacy business faced structural headwinds. Most damning of all, skeptics questioned whether CVS's massive vertical integration model actually worked or just created expensive complexity.

The stock traded at steep discounts, priced as if these problems would only compound. Management promised a turnaround, but the market wasn't buying it—literally.

The Numbers Tell a Different Story

Tuesday's earnings report validated those promises with hard data. Fourth-quarter revenue hit $105.7 billion, up 8.2% year-over-year. Full-year 2025 revenue climbed nearly 8% to top $400 billion—a company record.

The growth wasn't concentrated in one division. All three major segments contributed: insurance, pharmacy services, and retail pharmacy. Adjusted earnings per share rose to $6.75 for the year, up from $5.42 in 2024. Operating cash flow climbed north of $10 billion.

Perhaps most impressive: retail pharmacy volumes surged nearly 20% in the quarter. That suggests CVS's massive scale might actually be a competitive advantage, not the unwieldy burden critics claimed.

The Aetna Challenge Remains

Not everything is smooth sailing. The Aetna insurance unit remains choppy and difficult to predict. Medical cost trends continue running elevated, though broadly in line with Wall Street expectations. Medicare seasonality and regulatory changes add volatility to quarterly results.

But here's the key improvement: Aetna's adjusted operating income increased by nearly $3 billion. The unit got better at pricing medical risk and securing appropriate compensation for services—the fundamental challenge that had plagued it for years.

The Trust Question

CVS's stated goal is ambitious: "be America's most trusted health care company." But that raises an uncomfortable question about the American healthcare system itself.

The U.S. healthcare system is adversarial by design—a maze of opposing interests between insurers, providers, patients, and regulators. In this context, being the "most trusted" player might not mean much if nobody really trusts the system at all.