HealthEquity Stock Gains as Q2 Earnings Beat Estimates, Revenues Up Y/Y

HealthEquity, Inc. HQY reported adjusted earnings per share (EPS) of $1.08 for second-quarter fiscal 2026, surpassing the Zacks Consensus Estimate by 17.4%. The bottom line improved 25.6% on a year-over-year basis.GAAP EPS in the fiscal second quarter was 68 cents, up 70% compared with the year-ago quarter’s EPS.Shares of HQY were up 3.7% in after-market trading following the earnings call.HealthEquity Revenues in DetailIn the fiscal second quarter, the company generated revenues of $325.8 million, which beat the Zacks Consensus Estimate by 2.2%. The top line improved 8.6% from the prior-year quarter.HSA Details of HQYAs of July 31, 2025, the total number of Health Savings Accounts (HSAs) for which HealthEquity served as a non-bank custodian was 10 million, up 6% year over year.HealthEquity reported 782,000 HSAs with investments as of July 31, 2025, up 10% year over year. Total accounts, as of July 31, 2025, were 17.1 million. This uptick included total HSAs and 7.2 million Consumer Direct Benefits (CDBs).Total HSA assets were $33.1 billion at the end of July 31, 2025, up 12% year over year. This included $17 billion of HSA cash and $16.1 billion of HSA investments. This figure compares to our fiscal second-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 second 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 $0.8 billion as of July 31, 2025.Revenue Sources of HealthEquityHealthEquity derives revenues from three sources: Service revenues, Custodial revenues, and Interchange revenues.Service revenues totaled $117.9 million in the quarter, up 0.9% year over year. This reflected a higher number of HSAs and invested HSA Assets. This figure compares favorably with our second-quarter projection of $121.9 million.Custodial revenues totaled $159.9 million, up 15.3% from the year-ago period. Our projection for the fiscal second-quarter Custodial revenues was $140.4 million.Interchange revenues totaled $48.1 million, up 8% year over year. This figure compares favorably with our fiscal second-quarter projection of $52 million.HQY Margin DetailsIn the quarter under review, HealthEquity’s gross profit rose 13.9% year over year to $232.6 million. The gross margin expanded 340 basis points (bps) to 71.4%. We had projected the gross margin to be 63.2% in the fiscal second quarter.Sales and marketing expenses declined 7.5% to $19.9 million year over year, whereas technology and development expenses climbed 10.6% year over year to $64.8 million. General and administrative expenses decreased 7% year over year to $29.9 million. Total operating expenses of $142.9 million decreased 1.5% year over year.Operating profit totaled $89.6 million, improving significantly by 52.1% from the prior-year quarter. The operating margin in the quarter expanded by a huge 790 bps to 27.5% compared with the prior-year quarter.HealthEquity, Inc. Price, Consensus and EPS Surprise HealthEquity, Inc. price-consensus-eps-surprise-chart | HealthEquity, Inc. QuoteFinancial Position of HQYThe company exited the second quarter of fiscal 2026 with cash and cash equivalents of $304.5 million compared with $287.9 million at the first quarter of fiscal 2026-end. Total debt (net of issuance costs) at the end of second-quarter fiscal 2026 was $1.01 billion compared with $1.06 billion at the end of first-quarter fiscal 2026.Cumulative net cash provided by operating activities at the end of second-quarter fiscal 2026 totaled $200.6 million compared with $173.6 million a year ago.HealthEquity FY26 GuidanceHealthEquity has updated its revenue and EPS projections for fiscal 2026.For fiscal 2026, revenues are now projected to be between $1.290 billion and $1.310 billion compared with the previous guidance of $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 $3.74-$3.91 compared with the previous guidance of $3.61-$3.78. The Zacks Consensus Estimate currently stands at $3.73.Our Take on HQYHealthEquity exited second-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 improvements in operating and gross margins also bode well.Management emphasized that HealthEquity opened 163,000 new HSAs in the quarter, supported by strong new enterprise wins, client retention and growing adoption of HSA-qualified health plans among SMBs. They also pointed to momentum from upsell and cross-sell opportunities, improved data analytics, and increased member engagement through tools like the analyzer platform. In addition, expanded use of the secure mobile app and AI-driven expedited claims processing contributed to better member experience, higher satisfaction, and reduced costs, all factors that are helping drive revenue growth.On the other hand, management also acknowledged that the broader labor market remains under pressure, with job growth down 40% year to date compared to last year. Since HSA growth is closely tied to employment trends and workforce mobility, this macro softness has limited the pace of new account openings. While the company is leaning into its sales pipeline and marketing efforts to offset these headwinds, it acknowledged that HSA openings remain more muted than it would prefer, given the current environment.Zacks Rank & Key PicksCurrently, HealthEquity carries a Zacks Rank #3 (Hold).Some better-ranked stocks in the broader medical space that have announced quarterly results are Medpace Holdings, Inc. MEDP, West Pharmaceutical Services, Inc. WST and Boston Scientific Corporation BSX.Medpace Holdings, sporting a Zacks Rank of 1 (Strong Buy), reported second-quarter 2025 EPS of $3.10, beating the Zacks Consensus Estimate by 3.3%. Revenues of $603.3 million outpaced the consensus mark by 11.5%. You can see the complete list of today’s Zacks #1 Rank stocks here.Medpace Holdings has a long-term estimated growth rate of 11.4%. MEDP’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 13.9%.West Pharmaceutical reported second-quarter 2025 adjusted EPS of $1.84, beating the Zacks Consensus Estimate by 21.9%. Revenues of $766.5 million surpassed the Zacks Consensus Estimate by 5.4%. It currently flaunts a Zacks Rank #1.West Pharmaceutical has a long-term estimated growth rate of 8.5%. WST’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 16.8%.Boston Scientific reported second-quarter 2025 adjusted EPS of 75 cents, beating the Zacks Consensus Estimate by 4.2%. Revenues of $5.06 billion surpassed the Zacks Consensus Estimate by 3.5%. It currently carries a Zacks Rank #2 (Buy).Boston Scientific has a long-term estimated growth rate of 14%. BSX’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 8.1%.Higher. Faster. Sooner. Buy These Stocks NowA small number of stocks are primed for a breakout, and you have a chance to get in before they take off.At any given time, there are only 220 Zacks Rank #1 Strong Buys. On average, this list more than doubles the S&P 500. We’ve combed through the latest Strong Buys and selected 7 compelling companies likely to jump sooner and climb higher than any other stock you could buy this month.You'll learn everything you need to know about these exciting trades in our brand-new Special Report, 7 Best Stocks for the Next 30 Days.Download the report free now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Boston Scientific Corporation (BSX): Free Stock Analysis Report West Pharmaceutical Services, Inc. (WST): Free Stock Analysis Report HealthEquity, Inc. (HQY): Free Stock Analysis Report Medpace Holdings, Inc. 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