What Management Said
Read the full Q2 2026 transcript ↗A reconciliation of these non-GAAP financial measures to the most comparable GAAP measures is available in the earnings press release and Form 8-K filed with the SEC today. Against that backdrop, I am pleased to report that agilon exceeded our second quarter guidance across our key financial metrics. With that, I'll turn the call over to Jeff to discuss our financial results and update outlook in greater detail. As Tim mentioned, we're pleased by our second quarter results, which exceeded the high end of our guidance for medical margin and adjusted EBITDA.
As a reminder, the year-over-year decline reflects our disciplined, profitability-focused approach to contracting in 2026 and measured approach to growth. We continue to view these as a long-term risk-adjusted growth opportunity to potentially recontract these members to full risk when appropriate. Revenue for the second quarter was approximately $1.5 billion, compared to $1.4 billion in the second quarter of 2025. Our performance in the second quarter was driven by higher than expected revenue associated with the risk adjustment, which is now estimated at approximately 3% year-over-year net of the V28 impact.
This is above our prior estimate of approximately 1.5% increase at the end of the first quarter. We continue to see the benefit of the enhanced data pipeline, which provided additional visibility from intra-quarter mid-year risk adjustment data from payers, which is validated with mid-year MAO-004 and MMR data. The full year 2025 cost trend is now estimated at 5.8%, down from the 6.2% we estimated when we reported our first quarter results. Medical margin for the second quarter was $197 million, compared to -$53 million in the second quarter of 2025.
What went well
- Exceeded Q2 guidance across key financial metrics, beating the high end for both medical margin and adjusted EBITDA
- Medical margin of $197M vs -$53M in Q2 2025, roughly $74M above the guidance midpoint
- Adjusted EBITDA of $70M vs -$83M in Q2 2025, roughly $50M above the guidance midpoint
- Risk adjustment now estimated at ~3% YoY net of V28, up from the prior ~1.5% estimate, on the enhanced data pipeline and burden-of-illness program
- Cost trends developing favorably: full-year 2025 trend now 5.8% (down from 6.2%) and Q1 2026 now in the low 6% range (down from 7.4%)
- Raised full-year 2026 guidance; CHF program drove inpatient first-diagnosis rates from ~25% to under 5%, and 2024 ACO REACH delivered $229M gross savings at a 96% avg quality score across eight ACOs
What went wrong
- Medicare Advantage membership fell to 437,000 from 498,000 in Q2 2025, reflecting a disciplined, profitability-focused contracting approach
- ACO REACH membership declined to 112,000 from 116,000 in Q2 2025
- Second-quarter cost trend recorded prudently in the low 7% range given limited paid-claims data, still high from a historical perspective
- Guidance implies a second-half step-down: Q3 adjusted EBITDA is guided to break even after a strong first half
- The elevated ~3% risk-adjustment benefit is not expected to repeat at the same level in 2027, and Part D exposure remains a headwind being actively reduced
Guidance Changes
| Metric | Period | Current guidance |
|---|---|---|
| Revenue (FY 2026) | FY 2026 | ~$5.8B |
| Medical margin (FY 2026) | FY 2026 | ~$485M |
| Adjusted EBITDA (FY 2026) | FY 2026 | ~$85M |
| ACO REACH adjusted EBITDA (FY 2026) | FY 2026 | $25M-$30M |
| Risk adjustment YoY (net of V28) | FY 2026 | ~3% |
| Cost trend assumption (remainder of year) | H2 2026 | ~7% range |
| Year-end cash | FY 2026 | at least $125M |
| Revenue (Q3) | Q3 2026 | ~$1.46B |
| Medical margin (Q3) | Q3 2026 | ~$110M |
| Adjusted EBITDA (Q3) | Q3 2026 | break even |
Performance Breakdown
| Metric | YoY | Note |
|---|---|---|
| Revenue | ~$1.5B vs ~$1.4B in Q2 2025 | More constructive 2026 CMS benchmark rates, favorable payer contracting, and higher revenue from improved diagnosis of members' conditions, more than offsetting the membership decline |
| Medical margin | $197M vs -$53M in Q2 2025 | Favorable prior-year development of $22M, $38M year-to-date impact from revised risk-score estimates, and $14M of favorable Q1 cost-trend development |
| Adjusted EBITDA | $70M vs -$83M in Q2 2025 | Favorable prior-year development of $22M, $20M year-to-date impact from the increased risk-adjustment estimate, and $7M of favorable Q1 cost-trend development |
| Medicare Advantage membership | 437,000 vs 498,000 in Q2 2025 | Disciplined, profitability-focused contracting and measured approach to growth in 2026 |
| ACO REACH membership | 112,000 vs 116,000 in Q2 2025 | Measured membership positioning; ACO REACH contributed $7M of adjusted EBITDA in the quarter, in line with guidance |
Earnings Call Themes & Trends
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Enhanced data pipeline | — | Now covers above 80% of payers, starting with the largest; provides intra-quarter mid-year risk-adjustment data validated with MAO-004 and MMR data, improving visibility and forecasting | — |
| Clinical / quality pathways | COPD and dementia targeted for 50%-70% of markets by end of Q2 | CHF deployed across 90% of markets (most mature pathway); dementia pathway expected in a number of markets by year-end and COPD expanding; also advancing lung health and pharmacy-integrated heart-failure medication | — |
| AI investment | — | Viewed as a force multiplier for primary care, not a replacement; used to drive operational/clinical insights, reduce administrative burden, and surface evidence-based interventions | — |
| Growth strategy | — | Measured and disciplined; near-term growth from existing markets, converting care-coordination-fee members to full risk, re-engaging prior partners, and ACO opportunities; new markets carry a 12-18 month implementation, so new-market growth is being evaluated toward 2028 | — |
| 2027 ACO model expansion | — | Medicare Shared Savings Program and future ACO LEAD model seen as important 2027 opportunities and expected to be positive contributors, building on strong ACO REACH performance | — |
| Part D exposure reduction | — | Less than 15% of the book has Part D exposure, with intent to further reduce it; Part D recorded net in revenue so it does not drive seasonality as it does for payers | — |
Q&A Summary
Jefferies (Jack Slevin): Is the $22M prior-year development the only item making the first-half EBITDA not reflective of run-rate?
Yes; there was favorable prior-year development in Q1 but it was offset by additional Part D accruals for 2025 dates of service, so over the six months the $22M is the only prior-period piece included in EBITDA.
Jefferies (Jack Slevin): With flat Q3 EBITDA and a strong first half, how are you thinking about back-half cost trend and Part D seasonality, and what's the state of 2027 payer bids/recontracting?
Part D is recorded net in revenue, so seasonality follows the pre-Part-D-change pattern with highest-earning quarters in the first half. On contracting it's early -- bid detail comes late in Q3 and contracts finish by year-end; discussions are productive, the same disciplined/profitability focus applies, Part D exposure is under 15% and shrinking, and about 50% of contracts are open this year after touching 80% last year.
Truist (Jailendra Singh): For a clean 2026 jump-off point into 2027, is medical margin guidance net of PYD the right starting point?
Yes; in the medical margin line PYD is roughly $22M (also $22M on EBITDA), with ~100% flow-through because many partners were in negative positions last year, so improvement accrues fully to agilon this year -- that's the only six-month item to call out.
Truist (Jailendra Singh): How do you view the next phase of growth -- existing markets versus new physician markets, and what thresholds before committing capital to new markets?
Near-term focus is executing and strengthening current markets, converting care-coordination-fee contracts to full risk, re-engaging partners not signed for 2026, and pursuing LEAD/MSSP ACO opportunities; new markets will stay measured and disciplined given a 12-18 month implementation, positioning new-market growth toward 2028, though demand remains strong with continued inbounds.
Deutsche Bank (Max/George): What are you seeing across inpatient, outpatient, pharmacy and supplemental cost trends, and what's assumed in the guide?
Trends are moderating a little in inpatient, surgical and ER -- still high historically but lower year-over-year, consistent with public payers; the guide assumes roughly 7% cost trend, with Q2, Q3 and Q4 all recorded in the low 7% range.
Needham (Matt Shea): What's driving the risk-score uplift, and how much of the ~3% is repeatable versus a one-time catch-up?
It's driven by the 2025 rollout and execution of clinical programs, which were back-end loaded; mid-year data run-out brought the estimate to ~3%. For 2027, RAF is still expected to be a net-positive contributor but not to this year's level. Tim added CHF as proof, with inpatient heart-failure first diagnosis dropping from 25% to under 5%.
Barclays (Andrew Mok): You beat the Q2 guide by ~$57M and raised the full year by ~$60M -- does the higher risk-adjustment revenue flow through to the back half?
Q2 performance was roughly $50M ahead of the prior midpoint; risk adjustment adds a second-half impact of about $19M at the EBITDA line, partly offset by higher incentive compensation and incremental annual wellness visit dollars, bridging to the new ~$85M midpoint.
Barclays (Andrew Mok): Was the trend favorability observed in Q2 itself or from the Q1 trend revision recorded in Q2?
Both: 2025 improved (full-year trend from 6.2% to 5.8%) with favorable 2025 development, and Q1 2026 -- initially recorded at 7.4% -- is now in the low sixes; with limited Q2 paid-claims data it was prudent to record Q2 in the low 7% range.
Citi (Luis/Daniel): How much of the medical-margin improvement and guidance is from clinical programs ramping versus macro benefits?
The prior ~$25M was the 2025 quality-program opportunity, which payers incentivize; that opportunity has since doubled as quality has grown in importance, but the guide assumes a consistent (equal) level of quality performance from 2025 to 2026 rather than an increase.
More on agilon health, inc.
Reported 2026-08-05 · figures from the agilon health, inc. Q2 2026 earnings call.
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