Afya Limited (AFYA) Income Statement

The sequential revenue trend shows a plateau around $994M in 2026 quarters, with growth decelerating from double-digit rates in 2024 to high-single digits. This likely reflects the maturation of existing medical seats rather than new capacity additions, given the regulatory constraints on seat expansion. Investors should monitor whether the re-introduced Mais Médicos framework translates into new seat approvals, which could either accelerate growth or dilute pricing power.

The gross margin shows a clear seasonal pattern, with Q1 quarters consistently higher (66-70%) and Q2/Q4 lower (61-62%), likely due to semester timing and campus utilization. The 64.5% average gross margin remains well above generalist peers like Cogna, underscoring the premium pricing of medical degrees. However, the recent dip to 61.6% in 2026Q2 warrants attention, as it may indicate rising faculty costs or mix shift toward lower-margin digital services.

The operating margin trajectory shows a clear Q1 peak (38-40%) followed by a decline to ~30% in subsequent quarters, a pattern consistent with fixed cost absorption during enrollment cycles. SG&A has grown steadily from $241M in 2024Q1 to $313M in 2026Q2, outpacing revenue growth, which suggests investments in digital platforms and sales infrastructure. This may indicate that the company is trading near-term margins for long-term ecosystem expansion, but investors should monitor whether SG&A efficiency improves as digital revenues scale.

The cost structure reveals that COGS is the primary swing factor, with quarterly fluctuations of $60-80M, likely tied to faculty payroll and campus maintenance. SG&A has grown consistently, but at a slower pace than revenue in 2026, suggesting some discipline. The lack of R&D line items implies that Afya may be capitalizing software development costs, which could inflate operating income if those investments fail to generate expected returns. Monitoring the split between fixed faculty costs and variable digital costs will be key to assessing margin sustainability.

The 2024Q3 quarter appears to be the operational low point, with both gross and operating margins at cyclical troughs, likely due to campus maturation costs and acquisition integration. Since then, margins have recovered, with 2026Q1 reaching 38.8% operating margin, suggesting that the company has absorbed prior investments and is now benefiting from scale. This inflection underscores the importance of seat maturation as a driver of profitability, as newer campuses move from partial to full enrollment.