Oscar Health shares fall after missing second quarter expectations

Oscar Health, Inc. (OSCR) reported second-quarter financial results that significantly missed analyst expectations, causing shares to drop 3.1%. The company posted a wider-than-expected loss of $0.89 per share and revenue of $2.86 billion, both below consensus, while its medical loss ratio worsened to 91.1% and adjusted EBITDA turned negative at -$199.4 million. Despite these challenges, attributed to higher market morbidity, Oscar Health reaffirmed its full-year 2025 revenue guidance of $12 billion to $12.2 billion and anticipates market stabilization in 2025 with a return to profitability by 2026, supported by substantial membership growth.

Analysis

Oscar Health, Inc. (OSCR) reported second-quarter results that missed analyst expectations, reflecting significant operational challenges. The company posted a loss of $0.89 per share against estimates of an $0.84 loss, with revenue of $2.86 billion falling short of the $2.92 billion consensus. The core issue driving underperformance is a sharp deterioration in profitability, evidenced by the medical loss ratio (MLR) surging to 91.1% from 79.0% in the prior-year quarter, which the company attributes to higher market morbidity. This cost pressure directly resulted in a negative adjusted EBITDA of $199.4 million, a stark reversal from a positive $104.1 million in the same period last year. Despite these headwinds, the company's outlook contains offsetting positive signals. Management reaffirmed its full-year 2025 revenue guidance of $12.0 billion to $12.2 billion, which sits slightly above consensus, suggesting confidence in top-line momentum. This is supported by substantial membership growth to over 2 million, a significant increase from 1.58 million year-over-year. CEO Mark Bertolini has framed the current issues as a near-term problem, forecasting a market stabilization in 2025 and a return to profitability in 2026.

Key Decisions for Investors

• Investors should weigh the significant near-term risk from deteriorating profitability, highlighted by the ballooning medical loss ratio and negative adjusted EBITDA, against the company's strong top-line momentum.
• The reaffirmed full-year revenue guidance and robust membership growth provide a potential long-term bull case, but this thesis is entirely dependent on management's ability to control medical costs and navigate the anticipated 'market reset' in 2025.
• Monitor the medical loss ratio in subsequent quarters as the primary indicator of a potential turnaround; any failure to stabilize this key metric would undermine the company's 2026 profitability target.
• Given the conflicting signals of poor current profitability versus a confident long-term outlook, it may be prudent to await tangible evidence of cost stabilization before initiating or adding to a position.