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

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Understanding how a healthcare and retail giant like CVS (formerly CVS Health) makes money is essential for investors and anyone interested in the business of integrated healthcare and pharmacy services. 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 pharmacy retail, health services, and insurance products. Its business model spans retail pharmacy chains, pharmacy benefit management (PBM), health insurance, and consumer wellness services.
Revenue comes primarily from: - Health services (including PBM and provider services) - Pharmacy retail and consumer wellness products - Health care benefits (insurance premiums and related services)

CVS’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 model, and operational efficiencies in pharmacy and health services.
• Most costs come from pharmaceutical procurement, claims expenses, and service delivery.

Operating Income and Expenses

• Operating Income: Data not disclosed for Q3 2025
• Operating Expenses: $17.0B (+45.1% YoY)
  • R&D: Not disclosed for Q3 2025
  • SG&A: Not disclosed for Q3 2025
  • CVS continues to invest in growth and innovation, particularly in digital health and expanding healthcare services, while managing costs across its retail and insurance operations.

Net Income

• Pre-Tax Income: Not disclosed for Q3 2025
• Income Tax: Not disclosed for Q3 2025
• Net Income: $3.98B (+0.0% YoY, 3.9% net margin)
• CVS converts a moderate portion of sales into profit due to its scale, diversified revenue streams, and efficiency in managing cost of revenue.

What Drives CVS's Money Machine?

• Health Services Revenue: 47.9% of total revenue — CVS’s PBM and provider services are the largest contributors, reflecting the company’s strategic focus on integrated healthcare.
• Pharmacy & Consumer Wellness: 35.2% of revenue — Retail pharmacy sales and wellness products remain core profit drivers.
• Health Care Benefits: 35.0% of revenue — Insurance premiums and related services provide stable, recurring income.
• Strategic Investments: CVS invests heavily in digital health, telemedicine, and expanding its provider network.
• Future Growth Areas: Expansion into value-based care and digital health platforms, though these segments are not yet major profit centers.

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 claims) taking the largest chunk.
• Even after significant costs, 3.9% of revenue drops to the bottom line.

Key Takeaways

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

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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 provider services. Other significant sources include Pharmacy & Consumer Wellness 35.2% and Health Care Benefits 35.0%.

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, operational efficiency, and diversified revenue streams.

3. What are the largest expense categories for CVS?

The biggest expenses on CVS’s income statement are cost of revenue (pharmaceutical procurement, claims, and service delivery) and operating expenses. Specific R&D and SG&A figures were not disclosed for Q3 2025, but investment continues in digital health and provider expansion.

4. Why does [segment/division] operate at a loss?

Certain segments, such as digital health expansion, despite generating revenue, posted operating losses in Q3 2025. This is because CVS aggressively invests in new healthcare platforms and provider networks, believing these will drive 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 was not disclosed. Historically, CVS’s tax rate has been moderate, often influenced by tax benefits from share-based compensation and international structuring.