Exchange: NASDAQ | Sector: Healthcare | Industry: Medical Healthcare Information Services
Q2 2026
Published: Sep 2, 2025
Earnings Highlights
Revenue of $325.84M up 8.6% year-over-year
EPS of $0.68 increased by 68.3% from previous year
Gross margin of 71.4%
Net income of 59.85M
""The team again delivered strong year-over-year growth and margin expansion across our key metrics in Q2, including revenue up 9%, net income up 67%, Adjusted EBITDA, up 18% to an all-time quarterly company high that also included record gross margin of 71%."" - Scott Cutler
HealthEquity delivered a robust QQ2 2026 showing continued scale in HSAs and meaningful margin improvements. Revenue rose 9% year over year to $325.8 million, with gross margin expanding to a record 71% and Adjusted EBITDA at 46% of revenue, signaling strong operating leverage. Net income surged 67% YoY to $59.9 million, supported by disciplined cost management (9% fewer teammates) and ongoing efficiency initiatives, including AI-driven service modernization. The quarter also highlighted the strategic opportunity created by the July budget bill expanding HSA eligibility—most notably broader access to bronze and catastrophic ACA plans—together with a multi-year program to redesign enrollment and onboarding for new HSA-eligible populations. HealthEquity ended Q2 with substantial HSA scale: over 17 million total accounts, more than $33 billion in HSA assets, $16.1 billion in invested assets, and $17 billion in HSA cash, underpinning both growth and optionality.
Key Performance Indicators
Revenue
325.84M
QoQ: -1.51% | YoY:8.64%
Gross Profit
232.60M
71.38% margin
QoQ: 3.69% | YoY:34.39%
Operating Income
89.61M
QoQ: 7.86% | YoY:47.62%
Net Income
59.85M
QoQ: 11.02% | YoY:67.09%
EPS
0.69
QoQ: 11.29% | YoY:68.29%
Revenue Trend
Margin Analysis
Key Insights
Revenue: $325.8 million, up 9% YoY; QoQ not disclosed in the press release.
Gross Margin: 71.0% (record), up from 68.0% YoY; benefit from higher contribution, operational leverage, and fraud-control cost normalization.
Operating Income: $89.6 million; margin 27.5%.
EBITDA and Adj EBITDA: EBITDA $131.5 million; Adj EBITDA $151.1 million, up 18% YoY; Adj EBITDA margin 46%.
Net Income and EPS: Net income $59.9 million; GAAP EPS $0.68; Non-GAAP net income $94.6 million; Non-GAAP EPS $1.08.
Financial Highlights
HQY QQ2 2026: key metrics and trends
- Revenue: $325.8 million, up 9% YoY; QoQ not disclosed in the press release.
- Gross Margin: 71.0% (record), up from 68.0% YoY; benefit from higher contribution, operational leverage, and fraud-control cost normalization.
- Operating Income: $89.6 million; margin 27.5%.
- EBITDA and Adj EBITDA: EBITDA $131.5 million; Adj EBITDA $151.1 million, up 18% YoY; Adj EBITDA margin 46%.
- Net Income and EPS: Net income $59.9 million; GAAP EPS $0.68; Non-GAAP net income $94.6 million; Non-GAAP EPS $1.08.
- HSA metrics: >17 million total accounts; HSA assets >$33 billion; HSA cash ~$17 billion; Invested assets ~$16.1 billion (up 23% YoY); HSA members investing up 10% YoY.
- Growth drivers: 163,000 new HSAs in Q2; higher HSA adoption with ACA-related expansions; enterprise wins and retention; increased use of AI-powered claims expediting and secure mobile experiences.
- Cash flow and liquidity: Net cash from operations $135.9 million in Q2; cash balance ~$304.5 million; net debt ~$750.6 million; repurchased ~$66 million of shares in the quarter; revolver debt repaid by $50 million.
- Guidance (FY2026): Revenue $1.29–$1.31 billion; GAAP net income $185–$200 million; Non-GAAP net income $329–$344 million; Adjusted EBITDA $540–$560 million; tax rate penciled at 25%; shares ~88 million.
- Capital allocation and risk: Ongoing buyback authorization of $352 million; hedging program to derisk HSA cash placements (~$1.2 billion notional) with average yield ~4% on treasuries plus a spread; fraud costs expected to normalize toward one basis point of total HSA assets per year.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
325.84M
8.64%
-1.51%
Gross Profit
232.60M
34.39%
3.69%
Operating Income
89.61M
47.62%
7.86%
Net Income
59.85M
67.09%
11.02%
EPS
0.69
68.29%
11.29%
Key Financial Ratios
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Key management insights from the QQ2 2026 earnings call:
- Strategy and execution: Scott Cutler highlighted the quarter as a strong start to fiscal 2026 with margin expansion and record gross margins, noting, “the team again delivered strong year-over-year growth and margin expansion across our key metrics in Q2, including revenue up 9%, net income up 67%, Adjusted EBITDA, up 18% to an all-time quarterly company high that also included record gross margin of 71%.”
- ACA/HSA expansion and enrollment redesign: Steve Neeleman outlined the July budget bill provisions expanding HSA use (DPC, telehealth before deductible, and ACA Bronze/catastrophic plans eligible for HSAs starting 2026) and the company’s plan to redesign enrollment/onboarding for these new consumers. He stated, “All individual bronze and catastrophic plans will be allowed to be coupled with HSAs beginning 01/01/2026.”
- AI and security as a growth and cost-efficiency driver: The team emphasized AI-enabled service modernization, with claims expediting and passkey authentication to improve security, reduce fraud, and lower costs, reinforcing the strategic shift to a mobile-first consumer experience. Scott noted, “This is just the beginning of our AI journey and a new phase to our service modernization.”
"The team again delivered strong year-over-year growth and margin expansion across our key metrics in Q2, including revenue up 9%, net income up 67%, Adjusted EBITDA, up 18% to an all-time quarterly company high that also included record gross margin of 71%."
— Scott Cutler
"All individual bronze and catastrophic plans will be allowed to be coupled with HSAs beginning 01/01/2026."
— Steve Neeleman
Forward Guidance
Outlook and achievability: HealthEquity reaffirmed FY2026 guidance, projecting revenue of $1.29–$1.31 billion, GAAP net income of $185–$200 million, non-GAAP net income of $329–$344 million, and adjusted EBITDA of $540–$560 million. The company emphasizes ongoing investments in technology, security, and an expanded sales/marketing push tied to HSA expansion under the ACA exchanges, while lapping last year’s fraud impact in the second half. Management also highlighted a balance sheet and cash flow framework that supports aggressive repurchases (remaining $352 million authorization) and potential revolver reductions, with a target average HSA cash yield of ~3.5% for 2026, supported by treasury forward hedges in the ~$1.2 billion notional space. Risks include macro interest-rate volatility, regulatory/policy execution risk around HSA expansions (notably Medicare expansions were not included in the bill), and competitive dynamics in the HSA ecosystem.
Assessment: The guidance appears achievable given robust HSA account growth (163k new HSAs in Q2) and favorable legislation, but execution is contingent on accelerated enrollment in bronze/catastrophic plans and continued enterprise wins. Key monitoring factors for investors include: progression of HSA enrollments under expanded Bronze/ ACA plans, retention and upsell velocity within SMBs, trajectory of fraud costs toward the 1 bp target, and the effectiveness of AI-driven cost reductions in sustaining or expanding adjusted EBITDA margins.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
HQY Focus
71.38%
N/A
N/A
N/A
EVH
11.80%
1.46%
0.15%
330.73%
PINC
71.30%
-38.60%
-5.59%
-5.23%
OMCL
41.30%
1.16%
0.31%
81.97%
PGNY
22.50%
6.80%
3.61%
40.40%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Investment thesis for HQY rests on a multi-year growth trajectory supported by: (1) macro tailwinds from the expanded HSA landscape (bronze/catastrophic ACA, DPC, telehealth) beginning 2026, (2) ongoing monetization through higher investor participation and increased contributions driven by a stronger mobile/app experience, and (3) meaningful cost reductions via AI-enabled automation and fraud-control measures that improve service margins. The company has reinforced a disciplined balance sheet and ample liquidity to fund growth initiatives, including technology investments and share repurchases. Near-term catalysts include the deployment of redesigned onboarding for newly eligible HSA consumers, further entrenchment in enterprise partnerships, and the acceleration of AI-driven operational efficiencies. Risks to monitor include legislative uncertainty, potential slower-than-expected adoption of ACA-related HSA expansions, and external macro headwinds affecting SMB participation. Overall, HQY’s quality of earnings, robust FCF, and raised FY2026 guidance support a constructive long-term view, contingent on execution of the ACA-driven opportunity and continued cost discipline.
Key Investment Factors
Growth Potential
Large, multi-year expansion opportunity from HSA eligibility for bronze and catastrophic ACA plans (starting 2026) and increased enrollment via redesigned onboarding. Management cites a potential impact of 3–4 million additional American families gaining HSAs, supported by marketing campaigns and partner networks. Other growth levers include increased HSA adoption, higher contribution rates (current max-contribution penetration around 4%), and growing investor participation (HSAs with investments up 10% YoY to $16.1B). AI-enabled product and service enhancements (expedited claims, passkey authentication, and mobile app improvements) are expected to reduce cost-to-serve and improve member engagement, potentially driving higher contribution and investment activity.
Profitability Risk
Regulatory and legislative risk around health account expansions (success depends on continued policy support and execution). Macro-driven HSA enrollment variability and the pace of employer adoption could influence growth. Dependence on external tax-advantaged framework and ACA policy dynamics; competition from other HSA platforms (e.g., bank platforms and insurers) could affect share gains. Financial leverage remains meaningful (net debt ~$750.6M) with a capex/AI investment path that could pressure near-term free cash flow, though operating cash flow remains strong.
Financial Position
Solid liquidity and cash generation: cash and equivalents around $304.5M; debt ~ $1,055M; net debt ~ $750.6M; six-month revenue ~$656.7M with 44% Adjusted EBITDA margin; Q2 cash flow from operations $135.9M and free cash flow $151.2M. The company repurchased $66M of shares in the quarter and retains $352M of buyback authorization, indicating a disciplined capital-allocation approach. Hedging activity (~$1.2B notional) aims to derisk HSA cash placements with forward-rate locks averaging just over 4% and projected average HSA cash yield ~3.5% in 2026.
SWOT Analysis
Strengths
Industry-leading HSA platform with scale: >17 million accounts and >$33B in HSA assets
Strong gross margin (71%) and high Adj EBITDA (46% of revenue) reflecting operating leverage
Robust cash flow generation and disciplined capital allocation (share buybacks, debt management)
Mobile-first strategy and AI-enabled service enhancements (expedited claims, passkeys) driving cost efficiency and member experience
Legislative tailwinds from July HSA expansion bill expanding eligibility and adoption
Weaknesses
Reliance on regulatory/tax-advantaged HSAs; macro-driven enrollment sensitivity
Significant intangible assets and goodwill on the balance sheet; high absolute debt level
Sensitivity to interest-rate movements, even with hedging, given large HSA cash placement and funding needs
Opportunities
Largest expansion of HSAs in two decades via bronze/catastrophic plan eligibility and ACA exchanges
Large addressable market conversion: potential 3–4 million more households eligible for HSAs
Enhanced enrollment onboarding and marketing to capture new HSA-eligible consumers
Increased investor participation and higher contribution rates among HSA holders
Threats
Regulatory or legislative shifts that could dampen HSA expansion or alter tax benefits
Competition from other HSA providers and shifts in employer plan design
Operational risk and cybersecurity exposure given the mobile-first strategy and data security investments