HealthEquity, Inc. HQY has been benefiting from its business model and strategy. The optimism, led by a solid second-quarter fiscal 2027 performance and strength in Health Savings Accounts (HSAs), is expected to contribute further. However, data security threats are major concerns.
In the year-to-date period, this Zacks Rank #3 (Hold) company’s shares have gained 7.8% compared with 3.1% growth of the industry. The S&P 500 has increased 11.4% during the said time frame.
The renowned provider of technology-enabled services platforms for healthcare savings and spending decisions has a market capitalization of $8.15 billion. The company projects 23.8% growth over the next five years and expects to witness continued improvements in its business. HealthEquity’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 8.7%.
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Reasons Favoring HQY’s Growth
AI & Digital Innovation Drive Scalable Efficiency: In second-quarter fiscal 2027, AI resolved 85% of routine chat inquiries and contained 55% of card-related phone contacts. Human-handled calls decreased 25% year over year, while card-related calls declined 30%. Management said that the next phase will focus more heavily on client service and back-office workflows, including onboarding, file transparency and claims automation. These efforts contributed to lower service costs per account and a 48% adjusted EBITDA margin in the quarter. Fiscal 2027 adjusted EBITDA guidance was raised to $628-$636 million, reinforcing continued investment alongside operating leverage.
Expansion of Health Savings Accounts: HealthEquity has experienced significant growth in its HSA offerings. HealthEquity reported 939,000 HSAs with investments as of July 31, 2026, up 20% year over year. Total accounts were 17.8 million, up 4% year over year. This included 10.7 million HSAs and 7.0 million Consumer Directed Benefits (CDBs).
Total HSA assets were $37.9 billion as of July 31, 2026. This included $17.4 billion of HSA cash, up 2%, and $20.6 billion of HSA investments, up 28%. The increase in HSA investments reflected higher market values and transfers from HSA cash, while HSA cash growth was supported by net contributions from new and existing members.
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 $931 million as of July 31, 2026, up 14% year over year.
Strong Fiscal Q2 Results: HealthEquity reported adjusted earnings of $1.24 per share for second-quarter fiscal 2027, beating the Zacks Consensus Estimate by 4.2% and rising 14.8% year over year. Revenues increased 7.6% to $350.7 million, driven by double-digit custodial revenue growth, a 14% rise in HSA assets to $37.9 billion and 24% growth in new HSA sales. Margin expansion remained a highlight, with gross margin improving 220 basis points to 73.5% and operating margin expanding to 28.1%.
HealthEquity also strengthened its financial position, with operating cash flow improving and debt declining sequentially. The company raised its fiscal 2027 revenue guidance to $1.411-$1.421 billion while reaffirming adjusted earnings guidance of $4.66-$4.73 per share, reflecting confidence in sustained HSA growth and disciplined execution.
Factor That May Offset HQY’s Gains
Data Security Threats: HealthEquity manages sensitive personal data and large custodial balances, which keeps cybersecurity risk elevated despite recent progress in fraud reduction. The company remains subject to a consolidated putative class action related to a fiscal 2025 cybersecurity incident involving a business partner’s user account and is also subject to regulatory inquiries connected to that incident.
In May 2026, the company filed a renewed motion to compel arbitration, and the potential loss associated with the lawsuit and any regulatory action was not reasonably estimable based on available information. Any adverse outcome could increase costs, create operational distraction and impact member and client confidence, which can weigh on the long-term margin and growth profile.
Estimate Trend
HealthEquity has been witnessing a positive estimate revision trend for fiscal 2027. Over the past 30 days, the Zacks Consensus Estimate for earnings per share (EPS) has moved a cent up to $4.72.
The Zacks Consensus Estimate for third-quarter fiscal 2027 revenues is pegged at $347.4 million, implying a 7.5% rise from the year-ago reported number. The consensus mark for fiscal third-quarter EPS is pinned at $1.16, implying a 14.9% improvement year over year.
Key Picks
Some better-ranked stocks from the broader medical space are Globus Medical GMED, West Pharmaceutical WST and The Cooper Companies COO.
Globus Medical, currently sporting a Zacks Rank #1 (Strong Buy), reported a second-quarter 2026 adjusted EPS of $1.34, which surpassed the Zacks Consensus Estimate by 19.6%. Revenues of $789.6 million beat the Zacks Consensus Estimate by 0.4%. You can see the complete list of today’s Zacks #1 Rank stocks here.
GMED has an estimated long-term earnings growth rate of 12.4%. The company’s earnings beat estimates in each of the trailing four quarters, the average surprise being 27.9%.
West Pharmaceutical, carrying a Zacks Rank #2 (Buy) at present, reported second-quarter 2026 adjusted EPS of $2.37, which beat the Zacks Consensus Estimate by 13.9%. Revenues of $872.3 million surpassed the Zacks Consensus Estimate by 4.2%.
WST has an estimated long-term earnings growth rate of 16%. WST’s earnings surpassed estimates in the trailing four quarters, the average surprise being 17.4%.
The Cooper Companies, carrying a Zacks Rank #2 at present, reported a second-quarter fiscal 2026 adjusted EPS of $1.21, which beat the Zacks Consensus Estimate by 10%. Revenues of $1.08 billion beat the Zacks Consensus Estimate by 2.6%.
COO has an estimated long-term earnings growth rate of 8.3%. COO’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 5.8%.
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HealthEquity, Inc. (HQY): Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).