HealthEquity, Inc. (NASDAQ:HQY) is the largest independent custodian of Health Savings Accounts (HSAs) in the United States, playing a pivotal role in helping millions of Americans save and invest for healthcare expenses in a tax-advantaged way. Founded in 2002 and headquartered in Draper, Utah, the company has grown from a niche fintech startup into the nation’s leading HSA provider, administering more than 17 million accounts and over $33 billion in HSA assets. Its rise to prominence has been fueled by the growing importance of consumer-directed healthcare, as individuals and families increasingly take control of their medical spending and long-term healthcare planning.
From the very beginning, HealthEquity’s mission has been centered on simplifying healthcare finance. As a non-bank HSA trustee designated by the IRS, the company offers a full suite of services, including custodial management of HSA funds, investment options for members, and personalized tools to maximize the value of their healthcare dollars. Its custodial services allow individuals to contribute pre-tax funds to HSAs, withdraw funds tax-free for qualified medical expenses, and invest unspent balances for future growth. This triple tax advantage has made HSAs one of the most powerful savings vehicles available, and HealthEquity has positioned itself at the heart of this rapidly expanding market.
A key part of HealthEquity’s growth strategy has been its ability to leverage acquisitions to scale its presence and enhance its service offerings. Over the years, the company has acquired major HSA platforms such as WageWorks and BenefitWallet, consolidating its dominance in the space and expanding its network of employer and health plan partnerships. These integrations have allowed HealthEquity to serve a broader client base, deepen its relationships with large organizations, and create more efficient economies of scale. Its national footprint now reaches millions of employees through partnerships with some of the largest employers and health insurance carriers in the country.
In addition to account growth, HealthEquity has demonstrated a strong commitment to innovation. The company has invested heavily in digital transformation, introducing AI-driven tools such as its HSAnswers chatbot to simplify complex benefits information for members. It has also enhanced mobile applications with secure authentication features to combat fraud, underscoring its dual focus on security and user experience. By blending cutting-edge technology with financial expertise, HealthEquity continues to position itself as not just an HSA custodian but as a comprehensive benefits technology provider.
Financially, HealthEquity has built a strong and resilient business model that generates recurring revenue from custodial fees, interchange revenue from transactions, and service fees from employer clients. Rising interest rates in recent years have provided an additional tailwind, boosting custodial revenue as the company earns more from investing member cash balances. This diverse set of revenue streams, combined with disciplined cost management and high margins, has allowed HealthEquity to deliver consistent earnings growth and robust cash flow.
The company’s influence extends beyond finance and technology, as it also plays an important role in shaping healthcare policy. HealthEquity has been an active advocate for expanding HSA eligibility, recently securing the largest legislative expansion in decades, which could open access for millions of additional families. By working closely with policymakers, the company not only strengthens its growth prospects but also reinforces its identity as a leader in advancing consumer-directed healthcare nationwide.
With its unmatched scale, strong financial performance, continuous innovation, and policy leadership, HealthEquity has established itself as the clear leader in the HSA market. The company is well-positioned to benefit from long-term trends in healthcare, retirement planning, and financial wellness, offering investors exposure to a unique blend of fintech and healthcare growth. Its trajectory reflects both its ability to capitalize on current opportunities and its potential to shape the future of healthcare savings for millions of Americans.
Financial Results Reflect Strong Momentum
The company’s most recent quarterly report, released September 2, 2025, demonstrates why investors are increasingly bullish. Revenue grew 9% year-over-year, reaching $325.8 million. Net income surged 67% to $59.9 million, reflecting disciplined expense management and expanding margins. Adjusted EBITDA climbed 18% to $151.1 million, representing an impressive margin of 46%. The record gross margin of 71% illustrates how HealthEquity’s scale, operating leverage, and product mix are driving profitability to new highs.
Equally important, cash flow from operations reached $200 million in the first half of fiscal 2026, providing ample liquidity to fund growth initiatives, reduce debt, and return capital to shareholders. During the quarter, the company paid down $50 million on its revolver and repurchased approximately $66 million in stock, signaling both confidence in its trajectory and a shareholder-friendly capital allocation strategy.
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Growth in HSA Accounts and Assets
HealthEquity’s growth is deeply tied to the expansion of HSA adoption across the country. Total HSA accounts grew 5% to over 17 million, while HSA accounts with investments grew 10%. This shift toward investment activity is particularly significant because invested assets carry higher yield and longer retention, creating a powerful compounding effect for future revenue. HSA assets climbed 12% year-over-year, surpassing $33 billion, with HSA cash reaching $17 billion. These metrics demonstrate that not only is the company growing accounts, but its members are increasingly engaged in using HSAs as investment and long-term wealth-building vehicles.
Custodial revenue rose 15% to $159.9 million, benefiting from both higher interest rates and asset growth. Interchange revenue increased 8% to $48.1 million, reflecting higher transaction activity and ongoing member engagement. These revenue drivers highlight the diversified ways HealthEquity monetizes its platform while continuing to enhance member value.
Legislative Wins Unlock New Growth Potential
One of the most significant bullish catalysts is the recent expansion of HSA eligibility, the largest in decades. This legislative development potentially opens access to HSAs for an additional three to four million American families, a monumental tailwind for account growth. HealthEquity’s leadership in advocacy and its dominant market position uniquely position it to capture the lion’s share of these new accounts.
The company also continues to push for further expansion of HSA eligibility, including opportunities to extend benefits to Medicare-eligible individuals. This advocacy highlights HealthEquity’s role not only as a financial custodian but also as a thought leader and policy influencer shaping the future of consumer-directed healthcare in the U.S.
Technology and AI Investments Enhance Member Experience
HealthEquity has also invested heavily in digital transformation, ensuring its platform remains secure, efficient, and user-friendly. Its award-winning AI-powered chatbot, HSAnswers, is streamlining member support and reducing service costs. The company has introduced secure app authentication and passkey technology to combat fraud, a persistent challenge in digital finance. These investments are not just about cost savings—they are central to building trust, enhancing user experience, and strengthening member engagement.
While these initiatives require upfront investment and may not immediately reduce costs, they establish a scalable digital infrastructure that can support millions of new accounts in the years ahead. Long-term, these investments will likely enhance margins and reinforce HealthEquity’s competitive moat.
Guidance Reinforces Growth Trajectory
Management’s guidance for fiscal 2026 underscores confidence in continued growth and profitability. The company expects revenue between $1.29 billion and $1.31 billion, GAAP net income between $185 million and $200 million, and adjusted EBITDA between $540 million and $560 million. This guidance represents sustained double-digit growth and margin expansion, offering investors visibility into a strong multi-year growth story.
Technical and Market Positioning
From a market perspective, HQY is benefiting from strong technical signals. The stock has been trading near breakout levels, with its Relative Strength line hitting new highs. Institutional buying has supported the rally, and the company’s Composite Rating of 98 from Investors Business Daily reflects both superior fundamentals and strong technical action. Analysts have been raising price targets, with several firms now projecting the stock could move into the $120–$125 range over the next 12 months, representing significant upside from current levels.
Risks and Considerations
No investment is without risks, and investors should remain aware of potential challenges. The company noted muted growth in new HSA accounts compared to historical quarters due to a slower labor market and weaker job growth. Future declines in interest rates could impact custodial revenue, although HealthEquity has locked in yields on some assets to mitigate this risk. Fraud prevention remains an ongoing challenge, though progress has been made with sequential declines in fraud cases. Heavy investment in AI and technology could also weigh on near-term costs, but these investments are crucial for long-term scalability.
Conclusion: Why HealthEquity Remains a Bullish Opportunity
HealthEquity, Inc. (NASDAQ: HQY) stands at the intersection of healthcare, finance, and technology, uniquely positioned to benefit from macro tailwinds driving HSA adoption. The company continues to deliver strong financial results, with revenue, net income, EBITDA, and cash flow all expanding at impressive rates. HSA account and asset growth remain robust, supported by new legislative opportunities that could add millions of eligible families to the market.
With its focus on innovation, strong balance sheet, growing institutional support, and favorable technical setup, HealthEquity represents a compelling long-term investment. For investors seeking exposure to both the healthcare benefits sector and fintech innovation, HQY offers an attractive opportunity with multiple growth catalysts ahead.
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