HealthEquity Crushes Expectations: Strong Q3 Earnings Drive Stock Rally, HSA Growth Accelerates

HealthEquity (HQY) delivered a solid third-quarter fiscal 2026 performance that beat Wall Street’s expectations on both earnings and revenue fronts. The fintech company reported adjusted earnings per share of $1.01, surpassing analyst forecasts by 12.2%, while quarterly revenues reached $322.2 million, topping the consensus estimate by 0.7%. Post-earnings, HQY shares jumped 2.4% in after-hours trading, reflecting investor confidence in the company’s trajectory.

The Numbers That Matter

What really caught investors’ attention was the bottom-line momentum. Adjusted EPS grew 29.5% year-over-year, while GAAP EPS hit 59 cents compared to just 6 cents in the prior-year quarter—a 883% improvement. On the revenue side, the top line expanded 7.2% YoY, demonstrating steady growth momentum.

The real story, however, lies in HealthEquity’s core business metrics. As of October 31, 2025, the company custodied 10.1 million Health Savings Accounts (HSAs), up 6% annually. More impressively, HSAs with active investments reached 802,000 accounts, growing 10% year-over-year. Total accounts across all product lines hit 17.3 million, including 7.2 million Consumer Direct Benefits (CDBs) accounts.

Assets on the Rise

Total HSA assets climbed to $34.4 billion—a 15% year-over-year surge—comprised of $16.9 billion in cash and $17.5 billion in invested assets. This outpaced management’s prior guidance of $31.9 billion, signaling stronger asset accumulation than anticipated. Client-held funds supporting CDB administration reached $0.8 billion.

Revenue Breakdown: Where the Growth Is Coming From

HealthEquity’s revenue streams told a nuanced story. Service revenues came in at $120.3 million, essentially flat year-over-year (+0.1%), driven by higher HSA counts and invested assets. Custodial revenues—the crown jewel—surged 12.9% to $159.1 million, significantly outpacing the $140.4 million projection. Perhaps most notably, interchange revenue totaled $42.8 million, up 0.6% YoY, demonstrating steady monetization of transaction activity across the platform.

Profitability Expansion

HealthEquity’s margin expansion was remarkable. Gross profit jumped 15.8% to $228.1 million, with gross margin expanding 520 basis points to 70.8%—well above the 63.2% forecast. Operating expenses fell 1.5% year-over-year to $149.4 million despite investments in technology and development (+9.5% to $65.9 million), while G&A expenses actually declined 2.9% to $30.9 million.

The operating profit result was particularly impressive: $89.6 million, up a staggering 300% from the year-ago quarter. The operating margin expanded by 1,790 basis points to 24.4%, driven primarily by lower service costs and completion of merger integration expenses.

Balance Sheet Strength

HealthEquity exited Q3 with $309.3 million in cash, compared to $304.5 million at the prior quarter-end. Total debt decreased to $982.1 million from $1.01 billion sequentially. Operating cash flow totaled $339.2 million year-to-date, up from $264.1 million in the comparable prior-year period—a sign of improving cash generation.

Management’s Outlook: Cautiously Optimistic

HealthEquity raised fiscal 2026 guidance, now projecting revenues between $1.302 billion and $1.312 billion (versus prior guidance of $1.290-$1.310 billion). Adjusted EPS guidance moved higher to $3.87-$3.95, compared to the previous $3.74-$3.91 range.

During the quarter, the company opened approximately 175,000 new HSAs, reflecting strong employer partnerships and increased adoption of HSA-qualified healthcare plans. Management credited technology enhancements—including mobile app improvements, enhanced analytics, and streamlined onboarding—with driving better member engagement and account growth.

However, executives acknowledged macro headwinds. Employment softness and reduced job mobility are naturally constraining new HSA formation rates. To combat this, HealthEquity is intensifying targeted marketing, deepening employer relationships, and improving enrollment tools to maintain momentum despite the softer labor market backdrop.

What This Means Going Forward

HealthEquity’s Q3 results showcase a company firing on multiple cylinders: expanding gross margins, surging custodial revenue streams including steady interchange revenue performance, accelerating HSA asset accumulation, and improving operational efficiency. The company’s technology investments are paying dividends in user engagement and retention. While near-term macroeconomic headwinds on employment persist, HealthEquity’s execution suggests it’s well-positioned to sustain growth through client wins, technology differentiation, and deepening employer partnerships. The stock’s positive reaction reflects investor recognition of both current results and future potential.