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HealthEquity Stock Gains as Q1 Earnings Beat Estimates, Revenues Up Y/Y
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Key Takeaways
HQY posted first quarter adjusted EPS of 97 cents, beating estimates by 19.8% and rising 21.3% year over year.
HQY's revenues rose 15% to $330.8M, led by 28.6% growth in custodial revenues and a 14.4% gain in interchange.
HQY's gross margin rose 270 bps to 67.8% as fraud costs fell and operating margin more than doubled to 25.1%.
HealthEquity, Inc. (HQY - Free Report) reported adjusted earnings per share (EPS) of 97 cents for first-quarter fiscal 2026, surpassing the Zacks Consensus Estimate by 19.8%. The bottom line improved 21.3% on a year-over-year basis. (Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.)
GAAP EPS in the fiscal first quarter was 61 cents, up 84.8% compared with the year-ago quarter’s EPS.
Shares of HQY were up 5.8% in after-market trading following the earnings call.
HealthEquity Revenues in Detail
In the fiscal first quarter, the company generated revenues of $330.8 million, which beat the Zacks Consensus Estimate by 3%. The top line improved 15% from the prior-year quarter.
HSA Details of HQY
As of April 30, 2025, the total number of Health Savings Accounts (HSAs) for which HealthEquity served as a non-bank custodian was 9.9 million, up 9% year over year.
HealthEquity reported 770,000 HSAs with investments as of April 30, 2025, up 16% year over year. Total accounts, as of April 30, 2025, were 17.1 million, up 6.9% year over year. This uptick included total HSAs and 7.2 million Consumer Direct Benefits (CDBs), up 4.3% year over year.
Total HSA assets were $31.3 billion at the end of April 30, 2025, up 15% year over year. This included $17.1 billion of HSA cash (up 7.5% year over year) and $14.2 billion of HSA investments (up 24.6% year over year). This figure compares to our fiscal first-quarter HSA cash and HSA investments projection of $18.3 billion and $13.5 billion, respectively. We had projected total HSA assets of $31.9 billion for the fiscal first quarter.
Client-held funds, which are deposits held on behalf of HealthEquity’s clients to facilitate the administration of its CDBs and from which the company generates custodial revenues, were $0.9 billion as of April 30, 2025.
Revenue Sources of HealthEquity
HealthEquity derives revenues from three sources: Service revenues, Custodial revenues, and Interchange revenues.
Service revenues totaled $119.8 million in the quarter, up 1.3% year over year. This reflected a higher number of HSAs and invested HSA Assets. This figure compares favorably with our first-quarter projection of $121.9 million.
Custodial revenues totaled $156.5 million, up 28.6% from the year-ago period. Our projection for the fiscal first-quarter Custodial revenues was $140.4 million.
Interchange revenues totaled $54.6 million, up 14.4% year over year. This figure compares favorably with our fiscal first-quarter projection of $52 million.
HealthEquity, Inc. Price, Consensus and EPS Surprise
In the quarter under review, HealthEquity’s gross profit rose 19.9% to $224.3 million. The gross margin expanded 270 basis points (bps) to 67.8%. We had projected the gross margin to be 63.2% in the fiscal first quarter.
Sales and marketing expenses rose 10.6% to $25.9 million year over year, whereas technology and development expenses climbed 9.5% year over year to $61.4 million. General and administrative expenses decreased 33.2% year over year to $25.5 million. Total operating expenses of $141.2 million decreased 2.9% year over year.
Operating profit totaled $83.1 million, improving significantly by 99.6% from the prior-year quarter. The operating margin in the quarter expanded by a huge 1060 bps to 25.1% compared with the prior-year quarter.
Financial Position of HQY
The company exited the first quarter of fiscal 2026 with cash and cash equivalents of $287.9 million compared with $295.9 million at the end of the fourth quarter of fiscal 2025. Total debt (net of issuance costs) at the end of first-quarter fiscal 2026 was $1.06 billion, flat compared with that at the end of fourth-quarter fiscal 2025.
Net cash provided by operating activities at the end of first-quarter fiscal 2026 totaled $64.7 million compared with $65.4 million a year ago.
HealthEquity FY26 Guidance
HealthEquity has reiterated its revenue and updated its EPS projections for fiscal 2026.
For fiscal 2026, revenues are projected to be between $1.285 billion and $1.305 billion. The Zacks Consensus Estimate is currently pegged at $1.30 billion.
Adjusted EPS is now expected to be in the range of $3.61-$3.78 as compared with the previous guidance of $3.57-$3.74. The Zacks Consensus Estimate currently stands at $3.60.
Our Take on HQY
HealthEquity exited first-quarter fiscal 2026 with better-than-expected results. The company witnessed solid top-line and bottom-line performances in the reported quarter. Solid growth in HSAs also drove the top line. The solid uptick in total HSA assets in the reported quarter is promising. Significant improvement in the operating and gross margins also bodes well.
The company added 150,000 new HSAs during the quarter and maintained strong enterprise pipeline momentum despite macroeconomic pressures. Per management, fraud-related costs dropped significantly from $11 million in the fourth quarter of fiscal 2025 to $3 million in the reported quarter, thanks to AI-powered tools and enhanced mobile security, boosting margins and member trust. Management raised full-year guidance and reiterated confidence in further margin normalization, growth from legislative tailwinds, and strong client retention, positioning HQY for sustained growth and operational strength.
However, fraud-related costs, though significantly reduced, still stood at $3 million, which management acknowledged as still elevated. While this reflects major improvement from the prior quarter's $11 million, it highlights that fraud remains a lingering operational risk. Management is targeting to bring fraud costs down to 1 basis point of total HSA assets.
Zacks Rank & Other Key Picks
Currently, HealthEquity carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks in the broader medical space that have announced quarterly results are CVS Health Corporation (CVS - Free Report) , Integer Holdings Corporation (ITGR - Free Report) and AngioDynamics (ANGO - Free Report) .
Revenues of $94.59 billion outpaced the consensus mark by 1.8%. CVS Health has a long-term estimated growth rate of 11.4%. Its earnings surpassed estimates in each of the trailing four quarters, with an average surprise of 18.1%.
Integer Holdings reported first-quarter 2025 adjusted EPS of $1.31, beating the Zacks Consensus Estimate by 3.2%. Revenues of $437.4 million surpassed the Zacks Consensus Estimate by 1.3%. It currently sports a Zacks Rank of 1.
Integer Holdings has a long-term estimated growth rate of 18.4%. ITGR’s earnings surpassed estimates in three of the trailing four quarters and missed once, the average surprise being 2.8%.
AngioDynamics, currently sporting a Zacks Rank #1, reported a third-quarter fiscal 2025 adjusted EPS of 3 cents against the Zacks Consensus Estimate of a 13-cent loss. Revenues of $72 million beat the Zacks Consensus Estimate by 2%.
ANGO has an estimated fiscal 2026 earnings growth rate of 27.8% compared with the S&P 500 Composite’s 10.5% growth. AngioDynamics’ earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 70.9%.
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HealthEquity Stock Gains as Q1 Earnings Beat Estimates, Revenues Up Y/Y
Key Takeaways
HealthEquity, Inc. (HQY - Free Report) reported adjusted earnings per share (EPS) of 97 cents for first-quarter fiscal 2026, surpassing the Zacks Consensus Estimate by 19.8%. The bottom line improved 21.3% on a year-over-year basis. (Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.)
GAAP EPS in the fiscal first quarter was 61 cents, up 84.8% compared with the year-ago quarter’s EPS.
Shares of HQY were up 5.8% in after-market trading following the earnings call.
HealthEquity Revenues in Detail
In the fiscal first quarter, the company generated revenues of $330.8 million, which beat the Zacks Consensus Estimate by 3%. The top line improved 15% from the prior-year quarter.
HSA Details of HQY
As of April 30, 2025, the total number of Health Savings Accounts (HSAs) for which HealthEquity served as a non-bank custodian was 9.9 million, up 9% year over year.
HealthEquity reported 770,000 HSAs with investments as of April 30, 2025, up 16% year over year. Total accounts, as of April 30, 2025, were 17.1 million, up 6.9% year over year. This uptick included total HSAs and 7.2 million Consumer Direct Benefits (CDBs), up 4.3% year over year.
Total HSA assets were $31.3 billion at the end of April 30, 2025, up 15% year over year. This included $17.1 billion of HSA cash (up 7.5% year over year) and $14.2 billion of HSA investments (up 24.6% year over year). This figure compares to our fiscal first-quarter HSA cash and HSA investments projection of $18.3 billion and $13.5 billion, respectively. We had projected total HSA assets of $31.9 billion for the fiscal first quarter.
Client-held funds, which are deposits held on behalf of HealthEquity’s clients to facilitate the administration of its CDBs and from which the company generates custodial revenues, were $0.9 billion as of April 30, 2025.
Revenue Sources of HealthEquity
HealthEquity derives revenues from three sources: Service revenues, Custodial revenues, and Interchange revenues.
Service revenues totaled $119.8 million in the quarter, up 1.3% year over year. This reflected a higher number of HSAs and invested HSA Assets. This figure compares favorably with our first-quarter projection of $121.9 million.
Custodial revenues totaled $156.5 million, up 28.6% from the year-ago period. Our projection for the fiscal first-quarter Custodial revenues was $140.4 million.
Interchange revenues totaled $54.6 million, up 14.4% year over year. This figure compares favorably with our fiscal first-quarter projection of $52 million.
HealthEquity, Inc. Price, Consensus and EPS Surprise
HealthEquity, Inc. price-consensus-eps-surprise-chart | HealthEquity, Inc. Quote
HQY Margin Details
In the quarter under review, HealthEquity’s gross profit rose 19.9% to $224.3 million. The gross margin expanded 270 basis points (bps) to 67.8%. We had projected the gross margin to be 63.2% in the fiscal first quarter.
Sales and marketing expenses rose 10.6% to $25.9 million year over year, whereas technology and development expenses climbed 9.5% year over year to $61.4 million. General and administrative expenses decreased 33.2% year over year to $25.5 million. Total operating expenses of $141.2 million decreased 2.9% year over year.
Operating profit totaled $83.1 million, improving significantly by 99.6% from the prior-year quarter. The operating margin in the quarter expanded by a huge 1060 bps to 25.1% compared with the prior-year quarter.
Financial Position of HQY
The company exited the first quarter of fiscal 2026 with cash and cash equivalents of $287.9 million compared with $295.9 million at the end of the fourth quarter of fiscal 2025. Total debt (net of issuance costs) at the end of first-quarter fiscal 2026 was $1.06 billion, flat compared with that at the end of fourth-quarter fiscal 2025.
Net cash provided by operating activities at the end of first-quarter fiscal 2026 totaled $64.7 million compared with $65.4 million a year ago.
HealthEquity FY26 Guidance
HealthEquity has reiterated its revenue and updated its EPS projections for fiscal 2026.
For fiscal 2026, revenues are projected to be between $1.285 billion and $1.305 billion. The Zacks Consensus Estimate is currently pegged at $1.30 billion.
Adjusted EPS is now expected to be in the range of $3.61-$3.78 as compared with the previous guidance of $3.57-$3.74. The Zacks Consensus Estimate currently stands at $3.60.
Our Take on HQY
HealthEquity exited first-quarter fiscal 2026 with better-than-expected results. The company witnessed solid top-line and bottom-line performances in the reported quarter. Solid growth in HSAs also drove the top line. The solid uptick in total HSA assets in the reported quarter is promising. Significant improvement in the operating and gross margins also bodes well.
The company added 150,000 new HSAs during the quarter and maintained strong enterprise pipeline momentum despite macroeconomic pressures. Per management, fraud-related costs dropped significantly from $11 million in the fourth quarter of fiscal 2025 to $3 million in the reported quarter, thanks to AI-powered tools and enhanced mobile security, boosting margins and member trust. Management raised full-year guidance and reiterated confidence in further margin normalization, growth from legislative tailwinds, and strong client retention, positioning HQY for sustained growth and operational strength.
However, fraud-related costs, though significantly reduced, still stood at $3 million, which management acknowledged as still elevated. While this reflects major improvement from the prior quarter's $11 million, it highlights that fraud remains a lingering operational risk. Management is targeting to bring fraud costs down to 1 basis point of total HSA assets.
Zacks Rank & Other Key Picks
Currently, HealthEquity carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks in the broader medical space that have announced quarterly results are CVS Health Corporation (CVS - Free Report) , Integer Holdings Corporation (ITGR - Free Report) and AngioDynamics (ANGO - Free Report) .
CVS Health, carrying a Zacks Rank of 2, reported first-quarter 2025 adjusted earnings per share (EPS) of $2.25, beating the Zacks Consensus Estimate by 31.6%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Revenues of $94.59 billion outpaced the consensus mark by 1.8%. CVS Health has a long-term estimated growth rate of 11.4%. Its earnings surpassed estimates in each of the trailing four quarters, with an average surprise of 18.1%.
Integer Holdings reported first-quarter 2025 adjusted EPS of $1.31, beating the Zacks Consensus Estimate by 3.2%. Revenues of $437.4 million surpassed the Zacks Consensus Estimate by 1.3%. It currently sports a Zacks Rank of 1.
Integer Holdings has a long-term estimated growth rate of 18.4%. ITGR’s earnings surpassed estimates in three of the trailing four quarters and missed once, the average surprise being 2.8%.
AngioDynamics, currently sporting a Zacks Rank #1, reported a third-quarter fiscal 2025 adjusted EPS of 3 cents against the Zacks Consensus Estimate of a 13-cent loss. Revenues of $72 million beat the Zacks Consensus Estimate by 2%.
ANGO has an estimated fiscal 2026 earnings growth rate of 27.8% compared with the S&P 500 Composite’s 10.5% growth. AngioDynamics’ earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 70.9%.