DaVita Q3 2026 Earnings: China Impairment Pressures Operating Margin

DaVita (NYSE: DVA) reported Q3 2026 revenue of $3.578 billion, up 4.6% from $3.420 billion a year earlier, while diluted EPS rose to $3.40 from $2.04. A $62 million noncash impairment related to China reduced GAAP operating income to $499 million and operating margin to 14.0%, while adjusted operating income was $561 million and adjusted diluted EPS was $3.82. Operating and free cash flow declined year over year, although DaVita raised the lower ends of two 2026 guidance ranges.

Core Results

Revenue growth came from both major categories. Dialysis patient service revenue increased 3.3% to $3.408 billion, while other revenue rose to $170 million from $122 million. Patient care costs increased by approximately 5.1% to $2.451 billion, and the China impairment added $62 million of operating expense, causing GAAP operating income to decline slightly despite higher revenue.

Excluding the impairment, adjusted operating income was $561 million with a 15.7% margin. Both measures were below Q2 2026 levels of $579 million and 16.3%, respectively, indicating some underlying sequential pressure beyond the impairment.

Business and Segment Performance

U.S. dialysis remained DaVita’s principal earnings source. Segment revenue increased sequentially to $3.050 billion, while operating income rose to $544 million. The business delivered 7.33 million treatments, with average daily treatments up 0.1% from Q2 and normalized non-acquired treatment growth of 0.4% from a year earlier.

Unit economics were less favorable. Revenue per treatment declined $0.62 sequentially to $415.25, as normal fluctuations more than offset higher average reimbursement rates and improved payor mix. Patient care costs per treatment increased $2.82 to $280.22, primarily because of higher medical supply expenses. U.S. dialysis general and administrative expense fell by $15 million to $316 million due mainly to lower professional fees.

Ancillary services weakened sequentially, led by lower Integrated Kidney Care profitability and the reported international loss. The following comparison uses Q2 2026 as the prior period because comparable quarterly segment figures for Q3 2025 were not provided.

The international result included the $62 million China impairment. Excluding that item, adjusted international operating income was $46 million. Integrated Kidney Care’s risk-based patient count increased to approximately 80,800 from 64,900 in Q2, and associated annualized medical spend rose to $6.4 billion from $5.8 billion, even as quarterly revenue and operating income declined.

Cash Flow and Balance Sheet

Quarterly operating cash flow improved sequentially to $519 million from $490 million, and free cash flow rose to $276 million from $256 million. Both remained substantially below the unusually higher prior-year quarter. On a trailing-12-month basis, operating cash flow was $1.870 billion versus $1.893 billion a year earlier, while free cash flow was $980 million versus $996 million.

DaVita ended the quarter with $496 million of cash and cash equivalents, down from $676 million at the end of 2025. Total debt was $10.832 billion, net debt was $10.337 billion, and the leverage ratio was 3.38 times, compared with 3.37 times in Q2. The weighted average effective interest rate increased to 5.54% from 5.43%.

The company spent $111 million to repurchase approximately 0.6 million shares during Q3 at an average price of $186.21. It spent another $87 million on 0.5 million shares between quarter-end and October 27. Repurchases during the first nine months of 2026 totaled $863 million for 5.837 million shares.

China Impairment Weighed on Operations, but a Lower Share Count Amplified EPS Growth

The quarter produced sharply different trends across reported operating income, attributable net income, and EPS. GAAP operating income declined 1.3%, largely reflecting the $62 million China impairment. However, the impairment’s net effect on income attributable to DaVita was only $27 million after a $34 million noncontrolling-interest credit and a $1 million tax benefit.

Other factors then supported bottom-line growth. Other income improved to $9 million from a $41 million loss a year earlier, while the amount of net income allocated to noncontrolling interests declined to $46 million from $90 million. As a result, net income attributable to DaVita rose 48.3% even though consolidated net income increased by a more moderate 12.1%.

Diluted weighted-average shares also declined approximately 11.2% to 65.5 million from 73.8 million. The combination of higher attributable income and fewer shares drove diluted EPS up 66.7%, materially faster than the underlying change in operating profit.

2026 Guidance

DaVita raised the lower ends of its adjusted operating income and adjusted EPS ranges while leaving their upper ends unchanged. This narrowed both ranges upward. Free cash flow guidance was reaffirmed.

Recent Insider Transactions

The supplied six-month insider summary showed 15,046 shares purchased across 18 transactions and 1,577,352 shares sold across eight transactions, resulting in net sales of 1,562,306 shares. Total insider holdings were listed at 29.93 million shares, with net sales representing 5.00% of that amount.

Eight of the latest 10 reported entries were zero-price director stock grants dated August 14, 2026; the supplied data did not include share quantities for those grants. The other two entries were reported sales, shown without drawing conclusions about the insiders’ outlook.

Risks Investors Need to Watch

• Limited treatment growth: Normalized non-acquired treatment growth was only 0.4% year over year, leaving limited volume contribution to offset reimbursement or cost pressure.
• Pressure on per-treatment economics: Revenue per treatment declined by $0.62 sequentially while patient care costs increased by $2.82, reducing the spread by approximately $3.44 per treatment.
• Integrated Kidney Care divergence: Risk-based patient count and annualized medical spend increased, but quarterly IKC revenue and operating income declined. The company did not provide a specific explanation for this divergence.
• International execution: The $62 million China impairment and the international segment’s reported operating loss show continued uncertainty outside the core U.S. dialysis business.
• Cash generation and leverage: Quarterly operating and free cash flow were materially below the prior-year period, while net debt exceeded $10 billion and the effective interest rate increased sequentially.

Conclusion

DaVita delivered higher Q3 2026 revenue and substantially higher EPS, but the underlying picture was mixed. The core U.S. dialysis segment produced modest sequential growth, while higher treatment costs, weaker ancillary profitability, and the China impairment pressured margins. The higher guidance floors provide a firmer full-year range, but treatment economics, IKC profitability, international performance, and cash generation remain the main areas to monitor.