UnitedHealth forecasts first revenue drop in nearly four decades; shares plunge

By Sriparna Roy and Sneha S K

Jan 27 (Reuters) – UnitedHealth Group on Tuesday said revenue this year would decline for the first time in decades, which follows Monday’s lower‑than‑expected 2027 Medicare reimbursement proposal from the government, and its shares tumbled 19% as investors reset profit expectations.

CEO Steve Hemsley stressed a return to financial rigor and streamlined operations, despite what could be the company’s first decline in revenue since 1989.

“Momentum inside this organization is palpable. We still have work to do over the next several months, but I’m very pleased with the performance and outlook we have,” Hemsley said.

Investors were less pleased, as shares fell as much as 19% to $282.45, the biggest one-day drop since April last year. The company is set to lose some $60 billion in market value, if shares do not rebound.

The U.S. Medicare agency said on Monday that payment rates for government-backed Medicare Advantage health plans will rise by just 0.09% in 2027, well short of Wall Street expectations of an increase of up to 6%. 

The near-flat payment rate sent shares tumbling across the sector. CVS Health fell 10%, with Humana off by 20% at $206.21, a low not seen since 2017.

Analysts said the prospect of lower government revenue from the Medicare plans for people aged 65 and older or with disabilities deepened worries about UnitedHealth’s recovery.

Tim Noel, CEO of the company’s UnitedHealthcare insurance unit, called the rate proposal disappointing and said the company would continue working with the government to push for a more beneficial final rate increase.

“We will need very meaningful benefit reductions and to take a hard look at our geographic and product footprint, likely similar to what played out for 2026,” Noel said.

UnitedHealth missed earnings estimates last year for the first time since 2008, as it dealt with a cyberattack that caused customer losses, unexpected increases in medical fees and use, and fallout from the murder of a top executive that set off an outpouring from Americans resentful of healthcare costs and service denials. 

The company last year fired CEO Andrew Witty and brought back former Chief Executive Hemsley, who has promised a turnaround.

James Harlow, senior vice president at Novare Capital Management, which owns UnitedHealth shares, said the Medicare proposal “starts to bring in worries about 2027 earnings growth” and raises doubts about whether companies can meet Wall Street’s expectations.

UnitedHealth expects 2026 revenue to exceed $439 billion, which would be a 2% decline, reflecting previously announced cuts across its businesses. That is also lower than analysts’ average estimate of $454.6 billion, according to LSEG data.

“The guidance appears to have pushed shares down a bit further,” said Morningstar analyst Julie Utterback. “Investors hoping for a quick turnaround may have to wait longer than hoped.”  

EARNINGS GROWTH IN 2026

Despite the projected revenue decline, UnitedHealth has targeted a return to growth in 2026 and sees annual profit per share of greater than $17.75, slightly above analysts’ average estimate of $17.74. It reported 2025 adjusted earnings of $16.35 per share.

The company sees 2026 medical care ratio – the percentage of premiums spent on medical care – at about 88.8%, higher than analysts’ expectations of 88.64%.

UnitedHealth reported a 2025 adjusted medical care ratio of 88.9%, compared with 85.5% in 2024, and analysts’ expectations of 89.1%.

The company reported an adjusted fourth-quarter profit of $2.11 per share, eking past Wall Street estimates by a penny. 

It took a one-time charge of $1.6 billion after taxes that was excluded from adjusted results, which reflects costs related to the Change Healthcare cyberattack and other restructuring costs.

Patrick Conway, who runs United’s Optum pharmacy benefit manager business, said it is leaning on automation to improve efficiency and plans to utilize artificial intelligence to approve care and process payments at the doctor’s office.

(Reporting by Sriparna Roy and Sneha S K in Bengaluru; Editing by Shinjini Ganguli and Bill Berkrot)