How CVS (CVS Health) Makes Money in 2025: A Deep-Dive With Income Statement

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Understanding how a healthcare and retail pharmacy giant like CVS (formerly CVS Health) makes money is essential for investors and anyone interested in the business of healthcare and retail pharmacy. In this post, we break down CVS's quarterly income statement (Q3 2025) using a Sankey chart to visualize the financial flows — what comes in, where it goes, and what's left as profit.

Quick CVS Overview

CVS operates as a leading integrated healthcare company, combining retail pharmacy, pharmacy benefit management (PBM), and health insurance services. Revenue comes from prescription drug sales, health services, insurance premiums, and consumer wellness products. The company’s business segments include Health Services, Pharmacy & Consumer Wellness, and Health Care Benefits, each contributing significantly to overall revenue.

Revenue Breakdown

• Total Revenue (Q3 2025): $102.9B (+7.8% YoY)
  • Health Services Revenue: $49.3B (47.9% of total, +11.6% YoY)
  • Pharmacy & Consumer Wellness: $36.2B (35.2% of total, +11.7% YoY)
  • Health Care Benefits Revenue: $36.0B (35.0% of total, +9.1% YoY)
  • Other Revenue by Product: -$18.6B (18.1% of total, +31.7% YoY)
• Growth is powered by expansion in health services, strong pharmacy sales, and increased insurance enrollments.

Gross Profit and Margins

• Gross Profit: $13.8B (13.4% gross margin)
  • Cost of Revenue: $89.1B (+7.5% YoY)
  • CVS maintains moderate margins due to its scale, integrated healthcare model, and operational efficiencies.
• Most costs come from pharmaceutical procurement, insurance claims, and retail operations.

Operating Income and Expenses

• Operating Expenses: $17.0B (+45.1% YoY)
  • R&D: Not separately disclosed for Q3 2025
  • SG&A: Not separately disclosed for Q3 2025
  • CVS continues to invest in growth and innovation, focusing on expanding health services and digital transformation, while maintaining efficiency in core operations.

Net Income

• Net Income: $3.98B (flat YoY, 3.9% net margin)
• CVS converts a moderate portion of sales into profit due to its scalable healthcare platform and pricing power in pharmacy and insurance segments.

What Drives CVS's Money Machine?

• Health Services Revenue: 47.9% of revenue, driven by PBM contracts, specialty pharmacy, and clinical services.
• Pharmacy & Consumer Wellness: Strong prescription volumes and consumer health product sales.
• Strategic Investments: Expansion of health clinics, digital health platforms, and insurance offerings.
• Future Growth Areas: Telehealth, integrated care delivery, and value-based insurance models, though not yet profitable at scale.

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Visualizing CVS's Financial Flows

The Sankey chart below visualizes how each dollar flows from gross revenue, through costs and expenses, down to net income. This helps investors spot where value is created, what areas weigh on profits, and how efficiently the company operates.

• Most revenue flows into gross profit, with operating expenses (especially pharmaceutical procurement and insurance claims) taking the largest chunk.
• Even after significant costs and investments, 3.9% of revenue drops to the bottom line.

Key Takeaways

• CVS's money comes overwhelmingly from health services and pharmacy sales
• High gross and net margins illustrate the power of CVS's integrated healthcare business model
• Heavy investment in health services expansion, balanced by efficiency in operating costs
• Ongoing growth is driven by insurance enrollments, pharmacy volume, and health services innovation

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FAQ About CVS's Income Statement

1. What is the main source of CVS's revenue in 2025?

CVS generates over 47.9% of its revenue from Health Services, including pharmacy benefit management and specialty pharmacy. Pharmacy & Consumer Wellness and Health Care Benefits are also significant contributors.

2. How profitable is CVS in Q3 2025?

CVS reported net income of $3.98B in Q3 2025, with a net margin of approximately 3.9%, reflecting moderate profitability driven by scale and integration across healthcare segments.

3. What are the largest expense categories for CVS?

The biggest expenses on CVS's income statement are cost of revenue (pharmaceutical procurement, insurance claims) and operating expenses. R&D and SG&A are not separately disclosed for Q3 2025, but CVS prioritizes investments in health services and digital transformation.

4. Why does Health Care Benefits operate at a loss?

Health Care Benefits, despite generating $36.0B in revenue, can post operating losses due to aggressive investment in expanding insurance offerings, integrated care models, and member acquisition, aiming for long-term growth even if the division is unprofitable today.

5. How does CVS's effective tax rate compare to previous years?

CVS's effective tax rate for Q3 2025 is not disclosed in the latest statement. Historically, CVS has maintained a moderate tax rate due to benefits from share-based compensation and international structuring.