AdaptHealth Q2 2026 Earnings: Revenue Rises as Margins Contract

AdaptHealth (NASDAQ: AHCO) reported Q2 2026 net revenue of $740.3 million, up 12.7% from $657.1 million, while diluted EPS from continuing operations fell to a loss of $1.07 from profit of $0.03. Organic revenue grew 15.9%, but adjusted EBITDA declined as costs associated with a West Coast capitated contract and a manufacturer price increase pressured margins. The results cover the quarter ended June 30, 2026, with Diabetes Health classified as discontinued operations.

Core financial results

Revenue growth did not translate into higher operating profit. Adjusted EBITDA decreased 3.2% to $132.0 million, and the adjusted EBITDA margin fell to approximately 17.8% from 20.8% a year earlier.

The GAAP loss primarily reflected a $144.2 million pre-tax goodwill impairment. Because Diabetes Health is now treated as discontinued operations, the company emphasized continuing-operations results; operating and free cash flow figures include both continuing and discontinued operations.

Income from the discontinued Diabetes Health operation reduced the total company loss relative to the continuing-operations loss. Adjusted EBITDA is a non-GAAP measure and excludes items including the goodwill impairment, restructuring expenses and certain other charges.

Business and portfolio performance

AdaptHealth reported growth across each of its three continuing reportable segments: Sleep Health, Respiratory Health and Wellness at Home. The West Coast capitated partnership completed its first full quarter and reached its expected run rate, supporting volume growth but also introducing greater-than-expected transition complexity and costs.

The company also signed a capitated agreement with Humana OneHome in South Florida and Texas and completed the transition of approximately 478,000 members. These contracts broaden AdaptHealth’s capitated business, although their near-term cost impact has become an important profitability consideration.

After quarter-end, AdaptHealth agreed to sell Diabetes Health for $235.0 million in cash, subject to customary adjustments. The transaction is part of its effort to concentrate the portfolio around Sleep Health, Respiratory Health and Wellness at Home. The company also formed a joint venture combining its e-commerce asset with a sleep retailer and home sleep-testing capability.

Digital engagement continued to expand. Registered myAPP users exceeded 512,000, up 56% from the end of 2025, and AdaptHealth launched an AI-powered mask-fitting tool.

Profitability, cash flow and balance sheet

The central operating issue was that costs grew faster than revenue. Cost of net revenue rose approximately 22.0% to $636.1 million, compared with revenue growth of 12.7%. Cost of net revenue therefore represented about 85.9% of revenue, up from 79.3% in the prior-year quarter.

Management attributed the pressure mainly to the complexity of scaling the West Coast capitated contract and an unexpected manufacturer price increase. AdaptHealth completed a workforce restructuring that it said would produce $19 million in annualized savings while maintaining operations.

Cash flow figures were reported for the first six months rather than the quarter alone. Year-to-date operating cash flow declined 7.2% to $239.0 million from $257.5 million, while free cash flow moved to negative $48.4 million from positive $73.3 million. Purchases of equipment and fixed assets increased 56.0% to $287.5 million, exceeding operating cash generation, while acquisition payments rose to $127.4 million from $18.6 million.

Cash declined to $43.3 million at June 30 from $106.1 million at the end of 2025. The carrying amount of current and long-term debt increased by approximately $151.6 million to $1.89 billion. After quarter-end, the company used proceeds from a previously secured $325 million delayed-draw term loan to redeem its 6.125% senior notes due in 2028.

Rapid contract growth lifted revenue but compressed profitability

AdaptHealth’s 15.9% organic growth and lower adjusted EBITDA show that recent volume expansion came with substantial implementation and supply costs. The West Coast contract was already operating at full scale during the quarter, but management said the complexity of the transition affected margins. The manufacturer price increase added a separate cost that the company had not anticipated.

These pressures extend beyond the quarter. AdaptHealth attributed $55 million of its revised full-year EBITDA outlook to the West Coast contract and another $30 million to the manufacturer price increase. The completed workforce restructuring provides a partial offset, but the timing and magnitude of further cost reductions will determine whether higher contract volumes translate into better profitability.

2026 guidance

AdaptHealth revised its fiscal 2026 outlook on a continuing-operations basis, except that free cash flow guidance continues to include both continuing and discontinued operations. The release provided a prior comparison only for adjusted EBITDA.

The approximately $200 million midpoint reduction in adjusted EBITDA consists of a $100 million impact from classifying Diabetes Health as discontinued operations, a $55 million impact from the West Coast contract, a $30 million manufacturer price impact and $15 million from other portfolio actions.

The Diabetes Health adjustment includes $60 million of previously allocated corporate overhead that will remain in continuing operations. AdaptHealth expects to eliminate roughly half of that overhead within 12 months after the divestiture.

Recent insider transactions

The supplied transaction data records several purchases in February and March 2026, followed by two sales by officer Russell E. Schuster III in June and July. The matching Cashin and OEP entries are recorded separately in the source and should not automatically be added together as independent economic purchases.

These transactions are presented as reported and do not, by themselves, establish insiders’ views of the company’s outlook.

Risks investors should monitor

• Capitated contract economics: The West Coast contract is at full run rate, but its transition and operating complexity account for a $55 million impact in the revised EBITDA outlook. Continued cost pressure could limit the benefit of higher volumes.
• Supplier pricing: The unexpected manufacturer price increase has a stated $30 million full-year EBITDA impact, creating additional pressure on adjusted margins.
• Cash conversion and capital intensity: First-half free cash flow was negative as equipment purchases increased substantially. Continued investment at this level could keep cash conversion below operating earnings.
• Portfolio separation costs: The Diabetes Health divestiture leaves $60 million of allocated corporate overhead in continuing operations. AdaptHealth expects to remove roughly half within 12 months, making execution and timing important.
• Balance-sheet capacity: Cash declined and debt increased during the first half, while the company continued acquisition and equipment spending. The planned $235 million cash proceeds from the Diabetes Health sale remain subject to closing and customary adjustments.

Summary

AdaptHealth produced double-digit reported and organic revenue growth in Q2 2026, but the costs of scaling its capitated contracts, higher manufacturer pricing and a goodwill impairment outweighed that growth. The revised outlook places the focus on contract-level profitability, overhead reduction following the Diabetes Health sale and a recovery in free cash flow as the company narrows its portfolio around its three continuing businesses.