Summary
Health Catalyst reported third-quarter 2025 total revenue of $76.3 million, essentially flat versus the prior-year quarter. Gross margin was 52.6%, up 5.1 percentage points from the prior-year quarter. The bottom line deteriorated. Net loss was $22.2 million, wider than the prior-year quarter. Operating loss was $17.5 million, also wider. Diluted EPS was negative $0.32, down from the prior-year quarter. For the first nine months of 2025, total revenue was $236.5 million, up 4.2%. The year-to-date net loss was $86.9 million, wider than the prior-year period. The year-to-date operating loss was $74.8 million, also wider. Diluted EPS for the nine months was negative $1.25. The year-to-date results include a non-cash goodwill impairment charge recognized in the second quarter of 2025.
Non-GAAP results showed better operating momentum. Adjusted EBITDA was $12.0 million, up 64% from the prior-year quarter. Adjusted gross profit was $40.1 million, up 11%. Adjusted gross margin was 53%, up from 48% in the prior-year quarter. Cash flow weakened. Operating cash flow was negative $0.46 million for the quarter, a swing from positive cash generation in the prior-year quarter. Year-to-date operating cash flow was negative $9.18 million, also a swing from positive cash generation in the prior-year period. Capital expenditures were $0.26 million for the quarter, down 63.8%. Year-to-date capital expenditures were $0.70 million, down 42.2%. Deferred revenue was $59.2 million, up 12.8% from the prior-year quarter. Remaining performance obligations were $256.1 million, down 11.8% from the prior-year quarter.
Management provided guidance for the fourth quarter and full year 2025. For the fourth quarter, total revenue is expected to be approximately $73.5 million, down 8% year over year, and Adjusted EBITDA is expected to be approximately $13.4 million, up 69%. For the full year 2025, total revenue is expected to be approximately $310 million, up 1%, and Adjusted EBITDA is expected to be approximately $41 million, up 57%. The company reiterated its full-year bookings commentary. Dollar-Based Retention is expected to be in the low-90s. Net new Platform Clients are expected to be approximately 30, up 43%, with average ARR plus non-recurring revenue expected to be on the lower end of the $300,000 to $700,000 range. The Ignite migration remains on schedule for roughly two-thirds of DOS clients to complete migration by the end of 2025. Management adjusted the timeline to be more client-centric, recognizing that some organizations prefer to remain on DOS for the near to medium term.
Early commentary on 2026 indicates revenue will be a few points lower in 2026 relative to 2025. The drivers include a lower Dollar-Based Retention rate, a lower net new Platform Client count, Ignite migration headwinds, and the exit or restructuring of a few less profitable TEMS relationships. Adjusted EBITDA is expected to improve. The macro backdrop remains difficult. High inflation, high interest rates, tariffs, and cuts in Medicaid and research funding continue to pressure health system clients. The OBBBA, signed into law on July 4, 2025, is projected to reduce federal Medicaid spending by nearly $1 trillion over 10 years. Sales cycles have elongated, and some opportunities, including in Life Sciences, have pushed. Those factors have hurt year-to-date bookings and fourth-quarter revenue expectations. Clients are increasingly opting for price reductions during the Ignite migration, which lowers overall spend. Professional services face churn and the company exited pilot ambulatory operations TEMS. Goodwill remains at risk of further impairment if the stock price continues to decline.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2025 | Q2 FY2025 | QoQ | Q3 FY2024 | YoY |
|---|---|---|---|---|---|
| Revenue | $76.3M | $80.7M | -5.4% | $76.4M | -0.0% |
| Gross profit | $40.1M | — | — | — | — |
| Gross margin | 52.6% | — | — | — | — |
| Research & development | $12.3M | $12.4M | -0.9% | $14.2M | -13.5% |
| Sales & marketing | $14.4M | $13.2M | +8.7% | $11.3M | +26.6% |
| General & administrative | $16.1M | $8.3M | +94.0% | $12.2M | +31.6% |
| Total operating expenses | $55.3M | $75.3M | -26.6% | $47.7M | +15.9% |
| Operating income (loss) | -$17.5M | -$37.1M | +52.8% | -$13.7M | -27.9% |
| Operating margin | -22.9% | -46.0% | +23.0 pp | -17.9% | -5.0 pp |
| Net income (loss) | -$22.2M | -$41.0M | +45.8% | -$14.7M | -51.0% |
| Net margin | -29.1% | -50.8% | +21.6 pp | -19.3% | -9.8 pp |
| Diluted EPS | -$0.32 | -$0.59 | +$0.27 | -$0.24 | -$0.08 |
Risks
The July 2025 OBBBA is projected to reduce federal Medicaid spending by nearly $1 trillion over 10 years, creating financial strain for clients and prospective clients. MD&A states this has elongated certain sales cycles, pushed opportunities including Life Sciences, and negatively impacted year-to-date bookings and fourth quarter 2025 revenue expectations.
Migration of DOS clients to Health Catalyst Ignite has caused churn and is causing an increasing number of clients to opt for price reductions, resulting in lower overall spend. MD&A expects Dollar-Based Retention pressure in 2025 and similar pressure going into 2026, and expects Adjusted Technology Gross Margin to fluctuate and potentially decline near term due to migration costs.
A non-cash goodwill impairment charge of $28.8 million was recognized in the second quarter of 2025 because the fair values of the Technology and Professional Services reporting units fell below their carrying values. MD&A warns that further goodwill impairment is possible if the stock price continues to decline or other adverse events occur.
The sales cycle for a new platform client is estimated at approximately one year and in some cases has exceeded two years, and risk factors note it lengthened in 2022 and 2023. MD&A says Medicaid and research funding uncertainty has caused further delays in client decisions.
High inflation, high interest rates, tariff uncertainty, tight labor market, and market volatility continue to strain healthcare clients and the national healthcare system. MD&A says these factors have negatively impacted the business and could cause further delays in client decisions.
The January 2025 and August 2025 restructuring plans reduced the global workforce by approximately 4% and 9%, respectively, primarily in research and development and sales and marketing. Risk factors cite reduced morale, difficulty hiring, and unintended attrition as risks from these plans.
The market is intensely competitive, including against EHR companies such as Epic Systems and Oracle Health, industry-agnostic analytics companies, and larger competitors including Optum Analytics and IBM with greater resources and distribution. Risk factors state increased competition is likely to result in pricing pressures.
Professional services revenue decreased 12% for the quarter ended September 30, 2025, and professional services gross margin decreased from 14% to 11% for the nine months ended September 30, 2025. MD&A attributes the pressure to lower utilization rates, the exit of pilot ambulatory operations TEMS, and churn of FTE-based service arrangements.
The three largest clients comprised 13.8% of 2024 revenue in the aggregate, and the loss, termination, or renegotiation of any large client contract could negatively affect results. Clients may also seek restructurings as they respond to financial pressures.
Increasing reliance on AI and generative AI exposes the company to rapidly evolving federal and state regulations, including Colorado's Artificial Intelligence Act and California automated decision-making rules. Risk factors also cite potential liability from hallucinatory, biased, or otherwise poor AI outputs.
Use of licensed third-party AI Technologies means availability, pricing, compatibility, and terms are outside the company's control. Loss of access or unfavorable changes could make the Solution less appealing and harm the business.
SaaS KPIs
All quarters →Adjusted EBITDA
Recurring revenue
Adjusted Gross Margin
App Clients
Summary, forecast, risks and KPIs are extracted from Health Catalyst, Inc.'s SEC filings for Q3 FY2025 (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 2, 2026.