Summary
Health Catalyst's second quarter of fiscal 2026 showed a business still shrinking at the top line while cost cuts held the bottom line roughly steady. Total revenue fell to $70.49 million for the quarter ended June 30, 2026, down 12.7% from $80.72 million in the prior-year quarter. Year to date, revenue was $141.24 million, down 11.8% from $160.13 million. Management attributed the decline to the exit from certain lower-margin Tech-Enabled Managed Services arrangements and churn tied to the migration from DOS to Health Catalyst Ignite. Technology revenue represented 69% of the quarter's total revenue and professional services 31%.
The GAAP loss picture was mixed. The operating loss for the quarter was $36.48 million, a 1.7% narrowing from $37.09 million a year earlier. Net loss narrowed 1.1% to $40.54 million from $40.98 million, and diluted loss per share narrowed to -$0.55 from -$0.59. The year-to-date numbers are far worse because of a $122.5 million goodwill impairment recorded in the first half of 2026. Operating loss for the six months widened 149.6% to $142.96 million from $57.26 million, net loss widened 134.2% to $151.56 million from $64.72 million, and diluted loss per share widened to -$2.07 from -$0.94. Operating margin was -51.8% for the quarter, down 5.8 percentage points from -46.0%.
Cash generation was the bright spot. Operating cash flow was $0.28 million in the quarter, up from negative $9.00 million a year earlier, and $18.79 million for the six months, up from negative $8.72 million. Capital expenditures were $0.34 million in the quarter. The balance sheet carries the marks of the restructuring. Deferred revenue fell 36.1% to $43.00 million from $67.30 million, and remaining performance obligations fell 29.0% to $179.10 million from $252.30 million. Cash, cash equivalents and short-term investments stood at $103.4 million as of June 30, 2026.
The July 31, 2026 close of the Vitalware sale to Med-Metrix brought $147 million in total cash consideration. Health Catalyst used the proceeds plus cash on hand to repay all obligations under its credit facility, which the company says eliminates roughly $19 million in annual interest expense on a GAAP basis. Management expects the divestiture of that high-margin business to weigh on future revenue, gross profit, net income and Adjusted EBITDA.
Guidance points to a sharp sequential step down. Health Catalyst guides on total revenue, a GAAP measure, and Adjusted EBITDA, a non-GAAP measure. For the third quarter of 2026, it guides to Adjusted EBITDA of $0 to $0.5 million. For the full year 2026, it guides to Adjusted EBITDA of $18 million to $18.5 million. The company did not provide forward-looking guidance for net loss, the most directly comparable GAAP measure to Adjusted EBITDA. Adjusted EBITDA was $9.9 million in the quarter, up from $9.3 million a year earlier, and $19.1 million for the six months versus $15.6 million.
The risk list is long. As of May 11, 2026, the company had been notified of $12.5 million of DOS-to-Ignite migration downsell and churn and estimated roughly $52 million of potentially at-risk ARR across 2026 and 2027. The One Big Beautiful Bill Act, signed July 4, 2025, is projected to reduce federal Medicaid spending by nearly $1 trillion over 10 years, adding strain to health system clients. Management also flagged elongated sales cycles, tariff uncertainty, and the possibility that the Vitalware divestiture fails to deliver its expected benefits. The company expects additional costs from the ongoing migrations to Ignite and Ninja Universe to pressure margins in the near term.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2026 | Q1 FY2026 | QoQ | Q2 FY2025 | YoY |
|---|---|---|---|---|---|
| Revenue | $70.5M | $70.8M | -0.4% | $80.7M | -12.7% |
| Research & development | $11.0M | $9.8M | +12.8% | $12.4M | -11.0% |
| Sales & marketing | $10.4M | $10.6M | -2.1% | $13.2M | -21.6% |
| General & administrative | $11.9M | $14.0M | -14.6% | $8.3M | +44.0% |
| Total operating expenses | $71.3M | $141.9M | -49.7% | $75.3M | -5.3% |
| Operating income (loss) | -$36.5M | -$106.5M | +65.7% | -$37.1M | +1.7% |
| Operating margin | -51.8% | -150.5% | +98.7 pp | -46.0% | -5.8 pp |
| Net income (loss) | -$40.5M | -$111.0M | +63.5% | -$41.0M | +1.1% |
| Net margin | -57.5% | -156.9% | +99.4 pp | -50.8% | -6.8 pp |
| Diluted EPS | -$0.55 | -$1.53 | +$0.98 | -$0.59 | +$0.04 |
Risks
The One Big Beautiful Bill Act signed July 4, 2025 is projected to reduce federal Medicaid spending by nearly $1 trillion over 10 years, creating additional financial strain for the company's health system clients and prospective clients. Management states that certain sales cycles have elongated and some opportunities, such as in Life Sciences, have pushed, negatively impacting 2025 bookings achievement and expectations for 2026 revenue.
Churn and down-sell from the migration of DOS platform clients to Health Catalyst Ignite continues: as of May 11, 2026 the company had been notified of $12.5 million of DOS-to-Ignite migration downsell and churn and estimated approximately $52 million of potentially at-risk ARR across 2026 and 2027. Deferred revenue was down 36.1% and remaining performance obligations were down 29.0% in the current quarter versus the prior-year quarter.
The Vitalware Transaction closed July 31, 2026 with an aggregate base purchase price of $147 million, and the company expects future total revenue, gross profit, net income (loss), Adjusted Gross Profit and Adjusted EBITDA to be negatively impacted due to the disposition of this high margin business. The divestiture also reduces the scope and diversification of the business and the functionality offered to clients.
The company recorded $122.5 million of non-cash goodwill impairment in the six months ended June 30, 2026, versus $28.8 million in the prior-year period, driven by overall declines in stock price and market capitalization, a downward revision of future revenue forecasts, and the Vitalware held-for-sale accounting. Net loss widened to $151.6 million year to date from $64.7 million in the prior-year year-to-date period.
Total revenue was down 12.7% to $70.5 million in the current quarter and down 11.8% to $141.2 million year to date, with technology revenue down 8% and professional services revenue down 22% in the quarter. The decline was driven by elevated churn and down-sell related to DOS to Ignite migrations, the exit of certain lower margin TEMS arrangements, and churn of some FTE-based arrangements.
Project Nexus, the third separate global workforce reduction since January 2025, reduced headcount by approximately 7% as of the second quarter of 2026, primarily impacting research and development and professional services. The company warns these efforts may disrupt operations, reduce morale, and cause attrition, and that it cannot assure realization of the expected cost savings.
The company faces competition from large, well-financed entities including Epic Systems, Oracle Health, Optum Analytics and IBM, and is increasing its reliance on AI and machine learning technologies with significant development, deployment and third-party dependency risks. It states that increased investment in AI Technologies will be required in the future and that failure to successfully develop and apply them could impair its ability to compete.
The regulatory framework for AI Technologies is rapidly evolving, with states such as California, Colorado, Texas and Utah enacting or considering AI laws, including Colorado's Artificial Intelligence Act requiring safeguards against algorithmic discrimination for high-risk AI systems. Compliance costs could be significant and increase operating expenses, and the company may need to change how it uses AI Technologies.
The sales cycle for a new platform client is estimated at approximately one year and in some cases has exceeded two years, and the company states it could lengthen as it experienced in 2022 and 2023. A longer cycle creates a delay between increasing operating expenses and the generation of corresponding revenue.
SaaS KPIs
All quarters →Adjusted EBITDA
Adjusted Gross Margin
Adjusted Gross Profit
Recurring Revenue (% of total revenue)
Summary, forecast, risks and KPIs are extracted from Health Catalyst, Inc.'s SEC filings for Q2 FY2026 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 1, 2026.