Shares of Cigna Group (CI) tumbled 17% on Thursday after the health insurer warned that profit margins in its pharmacy-benefit-services division are expected to decline over the next two years.
The announcement overshadowed stronger-than-expected quarterly earnings and raised concerns that industry-wide pressures are now weighing on one of the sector’s most resilient players.
Earnings beat overshadowed by margin outlook
Cigna’s stock plunged as much as 17% during Thursday’s session, erasing earlier premarket gains that followed the release of its third-quarter results.
The company reported adjusted earnings of $7.83 per share, topping analysts’ consensus estimate of $7.64, according to data compiled by LSEG.
Revenue came in at $69.7 billion, slightly above expectations of $69.6 billion.
Despite the earnings beat, investors reacted sharply to comments made during Cigna’s investor call.
CEO David Cordani said the company expects margin pressure in its pharmacy-benefit-services (PBM) business over the next two years.
He attributed this to “significant financial and affordability pressures” faced by partners, particularly those operating heavily in government programs.
“To address these factors, we have improved the economic terms of the contracts our PBM strikes,” Cordani said, referring to deals with key clients.
The company’s PBM unit, Evernorth Health Services, represents about 40% of Cigna’s overall earnings.
Contract renewals and market pressures weigh on outlook
Cigna executives explained that recent contract renewals with major clients, including Centene and Prime Therapeutics, were completed under less favorable terms, which will affect near-term profitability.
The company also noted that the transition away from a rebate-centered PBM model would further weigh on margins in the short term.
Chief Operating Officer Brian Evanko acknowledged the near-term challenges but emphasized that these strategic adjustments would strengthen the long-term value of Cigna’s PBM platform.
“While these are 2026 headwinds, both of them serve to extend the long-term value and durability of our pharmacy benefit services platform for the future,” he said.
Cigna reaffirmed its 2025 adjusted income forecast of at least $29.60 per share, in line with Wall Street estimates.
The company did not issue full financial guidance for 2026 but said it still expects overall profit growth that year, despite lower operating income in its health services division.
Analysts currently project Cigna’s earnings per share to rise 11.4% in 2026 to $32.98.
Meanwhile, Cigna’s medical loss ratio, the share of premiums spent on patient care, rose to 84.8% from 82.8% a year earlier, exceeding analysts’ forecast of 84.3%.
Industry-wide pressures hit managed care sector
Cigna’s warning reverberated across the health-services sector.
Shares of CVS Health fell 3.8%, while UnitedHealth Group lost 1.8%.
Analysts at Leerink defended CVS, noting that the company’s investor day could bring “positive commentary” around its new PBM model, TrueCost, and its CostVantage pharmacy reimbursement system.
Cigna’s selloff marks a reversal for a stock that had outperformed peers in recent years.
As of Wednesday’s close, Cigna shares were up more than 30% since 2022, while UnitedHealth, Humana, and CVS had fallen between 20% and 35% in the same period.
The broader managed-care industry faces growing uncertainty as federal subsidies for Affordable Care Act plans remain in political limbo and Medicaid enrollment continues to decline following recent policy changes.
While Cigna reaffirmed its near-term guidance, the company’s comments suggest that even the most stable health insurers are now feeling the effects of tighter margins, evolving PBM dynamics, and regulatory headwinds.
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