HealthEquity (HQY 0.43%), a leading provider of Health Savings Account (HSA) custodial services in the United States, reported fiscal 2026 second-quarter earnings on Sept. 2. The release noted solid profit growth and improved margins, despite some deceleration in organic account expansion. GAAP revenue reached $325.8 million, up 9% year over year, and net income jumped to $59.9 million, up 67%. Adjusted earnings per share came in at $1.08, a 26% jump over the prior year's quarter.
Management modestly raised full-year revenue and earnings guidance for fiscal 2026 following these results. The period was marked by robust asset growth, cost improvements, and a strategic emphasis on digital adoption and security, though certain core growth areas, such as new HSA sales, showed signs of slowing in the first quarter of fiscal 2026.
| Metric | Q2 2026 | Q2 2025 | Y/Y Change |
|---|---|---|---|
| Adjusted EPS | $1.08 | $0.86 | 26% |
| Revenue | $325.8 million | $299.9 million | 9% |
| Adjusted EBITDA | $151.1 million | $128.3 million | 18% |
| Net income | $59.9 million | $35.8 million | 67% |
| HSAs (accounts) | 10.0 million | 9.4 million | 6% |
| Total HSA assets | $33.1 billion | $29.5 billion | 12% |
Source: HealthEquity. Note: The second quarter of fiscal 2026 ended July 31, 2025.
Overview of HealthEquity’s Business and Focus Areas
HealthEquity operates at the intersection of healthcare and financial services, focusing on administering and servicing HSA accounts and related benefit products for individuals and employers. Its core offering, the HSA, is a tax-advantaged savings vehicle designed to help consumers pay for qualified medical expenses. The company also manages complementary accounts, including Health Reimbursement Arrangements (HRAs) and Flexible Spending Arrangements (FSAs).
Recent strategies center on deepening market leadership in the HSA space, technology-driven service differentiation, and regulatory compliance. Efficiency improvements, platform innovation, and security measures are central to business performance, as is the ability to attract and retain new accounts either organically or through strategic acquisitions. Key variables for success include managing operating expenses, expanding HSA assets under custody, and adapting to a dynamic policy environment.
Quarterly Performance: Key Developments and Segment Data
The period saw solid revenue momentum, but at a slower rate than in previous quarters. GAAP revenue grew 9% year over year to $325.8 million. Supported by growth in HSA balances and steady average yields on HSA cash, which management reported at approximately 3.5% in the first quarter of fiscal 2026. Service revenue, which covers administrative and account management fees, was nearly flat, up just 1% year over year in the first quarter of fiscal 2026 (GAAP). Interchange revenue, a fee earned from payment card transactions, rose 8% (GAAP) in Q2 fiscal 2026.
Net income jumped 67%, with adjusted EBITDA up 18% to $151.1 million, representing 46% of revenue. The period achieved a record gross margin of 71%. Operating expenses, including technology and development, sales and marketing, and general administration, were kept largely in check, helping expand margins despite increased investment in security and digital initiatives.
The company ended the period with 10 million HSA accounts and $33.1 billion in total HSA assets, marking increases of 6% and 12% year over year, respectively, as of July 31. However, organic growth in new HSA accounts slowed in the first quarter of fiscal 2026, and no new acquisition-driven account additions were reported in the period. Complementary Consumer Directed Benefits (CDB) accounts, including FSAs, HRAs, COBRA, and commuter benefits, grew 4% year over year to 7.15 million as of July 31, 2025.
Member use of technology remains central to HealthEquity’s operating approach. The company continued rolling out artificial intelligence (AI) tools and mobile security enhancements, aiming to increase efficiency and reduce fraud. For example, only about 1.2 million HSA members have downloaded the mobile app, a figure the company plans to boost. The push for greater mobile adoption is also intended to mitigate the risk of fraud, which had been elevated in prior fiscal periods but has since declined closer to targeted levels. A $66.0 million share buyback was completed during the period.
Financial Outlook and What to Watch
Following the quarter, management raised full-year guidance for all major metrics for fiscal 2026. Revenue guidance is $1.290 billion–$1.310 billion for fiscal 2026. Projected GAAP net income is now $185 million–$200 million for fiscal 2026. Associated non-GAAP net income is projected to rise to $329 million–$344 million for fiscal 2026. Adjusted EBITDA guidance was raised to a range of $540 million–$560 million for fiscal 2026. Management’s outlook for fiscal 2026 assumes ongoing investments in digital security, continued gradual expansion in HSA assets, and a relatively stable yield on custodial cash balances.
Going forward, investors and industry watchers should monitor growth in new HSA accounts and service revenue, as both showed slower momentum compared to the prior year period. Key questions include whether further regulatory action will boost eligibility for HSAs, how future interest rate moves could affect custodial yields, and whether digital adoption gains can keep fraud costs low. HQY does not currently pay a dividend.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
