Tenet Healthcare (THC -10.70%), the healthcare operator with a large network of hospitals and ambulatory surgery centers, reported earnings for Q2 2025 on July 22, 2025. The most notable result: adjusted earnings per share (EPS) soared to $4.02 (non-GAAP) -- well above Wall Street expectations of $2.87 (non-GAAP). Revenue reached $5.27 billion, topping GAAP forecasts of $5.16 billion. The quarter marks strong operational improvement, particularly in its Ambulatory Care business, and prompted the company to raise its full-year FY2025 financial outlook. The results show solid progress on margin and cash generation, even as some core hospital and surgery center volumes softened.
| Metric | Q2 2025 | Q2 2025 Estimate | Q2 2024 | Y/Y Change |
|---|---|---|---|---|
| EPS (Adjusted, Non-GAAP) | $4.02 | $2.87 | $2.31 | 74.0% |
| Revenue (GAAP) | $5.27 billion | $5.16 billion | $5.11 billion | 3.2% |
| Adjusted EBITDA (Non-GAAP) | $1.12 billion | n/a | $945 million | 18.6% |
| Free Cash Flow (Non-GAAP) | $743 million | n/a | $602 million | 23.4% |
| Adjusted EBITDA – Ambulatory Care (Non-GAAP) | $498 million | n/a | $447 million | 11.4% |
Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.
About Tenet Healthcare: Business Model and Strategic Focuses
Tenet Healthcare runs hospitals and ambulatory surgery centers across the United States, offering both inpatient and outpatient medical services. Its portfolio is split between traditional hospital operations and Ambulatory Care, with a major focus on expanding its United Surgical Partners International (USPI) ambulatory platform. USPI operates hundreds of outpatient surgery centers and surgical hospitals in over 30 states.
The company's overarching strategy centers on optimizing its portfolio for growth and profitability. Divesting underperforming hospitals and shifting care toward less expensive, more convenient outpatient settings are key elements. Success depends on strict regulatory compliance, efficient labor and financial management, and ongoing adaptation to changing healthcare policy. Maintaining strong payer relationships and expanding advanced care services, such as orthopedic surgeries, are also key drivers.
Quarter Highlights: Outperformance, Segment Trends, and Margin Drivers
Tenet’s financial results exceeded expectations on both the top (non-GAAP EPS) and bottom (GAAP revenue) lines. Adjusted EPS reached $4.02, a 74 % increase from the prior year. Revenue (GAAP) of $5.27 billion grew 3.2%, beating analyst GAAP revenue targets by $110 million, while adjusted EBITDA -- an operating metric reflecting earnings before interest, tax, depreciation, and amortization -- rose 18.6%.
This beat was driven primarily by the Ambulatory Care segment, where net operating revenue jumped 11.3%. Net operating revenues hit $1.27 billion, and Adjusted EBITDA in this segment rose 11.4% compared to Q2 2024. However, total surgical case volumes within USPI dipped slightly by 0.6%, meaning that nearly all of the revenue increase came from higher revenue per case. This reflects a shift to higher-acuity (more complex and often higher-cost) procedures, with the company highlighting growth in areas like joint replacements and other advanced surgeries. Acquisitions also contributed to revenue, as Tenet continued building its outpatient network.
Hospital Operations saw more modest revenue growth of 0.9% to $4.00 billion, and Adjusted EBITDA in Hospital Operations was up 25% compared to Q2 2024. Same-hospital admissions grew 1.6%, and revenue per adjusted admission climbed by 5.2%. However, Outpatient visits fell 3.2% compared to Q2 2024. Emergency room visits declined 4.7%, and Hospital surgeries dropped 1.7%. The hospital business benefitted from improved payer and acuity mix, allowing for margin improvement -- rising from 12.6% to 15.6% (Adjusted EBITDA margin, non-GAAP, Q2 2025 vs. Q2 2024). Notably, the segment recorded a one-time $79 million retroactive Medicaid payment, which contributed to the strong margin but may not recur in future quarters.
Free cash flow, important for covering investments and returning capital to shareholders, was $743 million -- a 23.4% increase from Q2 2024. On a year-to-date basis, free cash flow was $1.39 billion, helped by margin gains and disciplined capital spending. Operating cost control was evident in improved salary, wage, and benefit expenses (down to 41.0% of revenue from 42.4%), reflecting efforts to manage labor pressures through recruitment and retention programs. The company also returned significant capital via share buybacks, repurchasing 4.6 million shares ($747 million) and authorizing a $1.5 billion expansion to its buyback program as of July 22, 2025.
Tenet continued to shift its portfolio toward high-return outpatient assets, adding new ambulatory centers. The strategic focus in the quarter remained on integrating new acquisitions, expanding specialized service lines into ASCs, and managing costs through efficiency initiatives. The company maintained $2.6 billion in cash as of June 30, 2025.
Looking Ahead: Guidance, Risks, and What to Watch For
Taken together, the company’s operational improvements and margin strength led management to raise its full-year FY2025 guidance. Adjusted EBITDA for FY2025 is now expected to land between $4.40 and $4.54 billion, an increase of $395 million at the midpoint versus the prior outlook. Full-year adjusted EPS is now projected at $15.55 to $16.21, and free cash flow is guided to $2.025 to $2.275 billion. Revenue (GAAP) is expected to reach $20.95 to $21.25 billion. Segment outlooks forecast ambulatory net operating revenues between $5.0 and $5.15 billion and hospital net operating revenues of $15.95 to $16.10 billion, with related EBITDA improvements to match.
Several factors will affect Tenet’s ability to hit these ambitious targets. The sustainability of recent margin gains is a key risk, especially since a significant portion of hospital profit improvement stemmed from a large, nonrecurring Medicaid supplemental payment. With surgical cases and outpatient visits seeing small declines, labor costs and regulatory policy changes, especially around Medicaid funding, remain persistent risks for all healthcare providers. As the company continues to shift its business mix and expand outpatient care, investors will watch how well revenue per case trends hold up versus more modest growth in the number of procedures performed.
THC does not currently pay a dividend.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
