HealthEquity Q3 Results Shine: EPS Crushes Estimates, HSA Assets Hit Record High

HealthEquity, Inc. HQY delivered a strong third-quarter fiscal 2026 performance, with adjusted earnings per share coming in at $1.01—a solid 12.2% beat over Wall Street’s consensus estimate. The bottom line surged 29.5% compared to the same quarter last year, signaling robust business momentum. GAAP EPS came to 59 cents versus just 6 cents in the prior-year period. Market reaction was immediate, with HQY shares climbing 2.4% in after-hours trading.

Revenue Beat and Top-Line Strength

The company pulled in $322.2 million in quarterly revenue, slightly edging past the Zacks Consensus Estimate by 0.7%. More importantly, the top line expanded 7.2% year-over-year, demonstrating resilience in a competitive landscape. This growth was anchored by expansion across all three revenue channels: service revenues, custodial revenues, and interchange revenues.

HSA Equity Building Accelerates

The real story lies in HealthEquity’s expanding HSA ecosystem. As of October 31, 2025, the company served 10.1 million Health Savings Accounts as a non-bank custodian—a 6% year-over-year increase. More impressively, 802,000 of these accounts now feature investment components, up 10% annually. Total accounts reached 17.3 million when including Consumer Direct Benefits (CDBs).

From an HSA equity standpoint, the total asset base expanded significantly. HSA assets climbed to $34.4 billion, up 15% year-over-year, comprising $16.9 billion in cash and $17.5 billion in investments. This outpaced internal projections of $31.9 billion, underscoring strong user participation and growing wealth accumulation within the platform.

New HSA openings continued their upward trajectory. Management disclosed approximately 175,000 new accounts launched during the quarter, powered by robust new-client activity and strong retention rates. Enhanced mobile capabilities, improved analytics tools, and streamlined onboarding experiences are driving deeper member engagement and increased savings velocity.

Profitability Expansion Across the Board

HealthEquity’s margin story strengthened considerably. Gross profit surged 15.8% year-over-year to $228.1 million, with gross margins expanding 520 basis points to 70.8%—well ahead of the 63.2% projection. Operating profit hit $89.6 million, representing an extraordinary 300.1% improvement from the prior-year quarter, largely due to declining service costs and completion of merger integration activities.

Operating margins expanded dramatically by 1,790 basis points to 24.4%, reflecting operational leverage and scale benefits. Custodial revenues, a key profit driver, totaled $159.1 million and jumped 12.9% annually, exceeding internal guidance by nearly $19 million.

Balance Sheet and Cash Position

HealthEquity ended the quarter with $309.3 million in cash and equivalents, up from $304.5 million in Q2. Total debt declined to $982.1 million from $1.01 billion, signaling disciplined capital management. Operating cash flow generation accelerated to $339.2 million cumulatively, compared to $264.1 million in the prior-year period.

Guidance Raised on Momentum

The company lifted its full-year fiscal 2026 guidance. Revenue expectations now range from $1.302 billion to $1.312 billion, up from the prior guidance band of $1.290 billion to $1.310 billion. Adjusted EPS guidance expanded to $3.87-$3.95 from $3.74-$3.91, reflecting confidence in sustained execution.

Headwinds and Strategic Response

Management acknowledged macro employment softness as a near-term constraint on HSA formation rates. Slower job creation naturally dampens new account openings. To offset this, HealthEquity is doubling down on targeted marketing campaigns, deeper employer partnerships, and enhanced enrollment technology designed to maximize new-account penetration during enrollment seasons.

Despite labor market headwinds, the company remains bullish on long-term growth. Technology investments continue to drive user adoption, member satisfaction is climbing, and the durability of HSA equity accumulation—particularly through invested assets—positions the business well for sustained expansion beyond the current employment cycle.

Market Perspective

HealthEquity currently holds a Zacks Rank #3 (Hold), reflecting solid fundamentals balanced against current valuation. The third-quarter performance underscores the company’s ability to grow HSA equity while expanding profitability, a dual achievement that validates management’s strategic direction and offers institutional investors visibility into a structural growth narrative tied to employee benefits evolution.