HCA Healthcare, Inc. (HCA) Income Statement

The acceleration from 4.3% growth in 2026Q1 to 8.7% in 2026Q2 indicates robust same-facility equivalent admissions and a favorable service mix, likely driven by continued expansion of outpatient volumes and high-acuity cases. This trend appears durable given the company's market cluster strategy, which supports patient capture across the continuum of care. However, the sequential revenue increase of $1.1B may also reflect seasonal patterns, and investors should monitor whether this pace persists given management's cautious full-year guidance.

The sudden drop in gross margin coincides with the reappearance of SG&A expenses in 2026Q1 and Q2, which were previously reported as zero in 2025Q3 and Q4. This suggests that certain operating costs previously classified under COGS are now being captured in SG&A, distorting the gross margin comparison. Excluding this accounting shift, underlying gross margins appear stable in the low-40s range, consistent with the capital-intensive nature of hospital operations. Investors should adjust for this classification change to assess true margin trends.

Operating income grew from $3.0B in 2025Q2 to $3.1B in 2026Q2, a modest increase, but net income rose from $1.7B to $1.7B (flat), yet EPS increased due to a lower share count from aggressive buybacks. The company's ability to maintain operating margins while absorbing labor cost pressures suggests disciplined expense management. However, the flat operating income growth relative to revenue growth implies limited operating leverage in the near term, and future margin expansion may depend on reducing contract labor costs.

The increase in SG&A, which includes labor and administrative costs, suggests that HCA continues to face wage inflation and higher staffing needs, particularly for nurses. The company has been transitioning away from expensive contract labor, which may have contributed to the sequential improvement in operating margin from 15.0% in 2026Q1 to 15.2% in 2026Q2. However, the absolute level of SG&A as a percentage of revenue (41.1%) remains elevated, indicating that cost discipline will be critical to margin expansion. Investors should watch for further reductions in contract labor expenses as a key driver of profitability.

In 2024Q1, COGS was reported at $2.7B versus revenues of $17.3B, yielding an unusually high gross profit of $14.7B. This is inconsistent with subsequent quarters where COGS averaged around $10-11B, suggesting a reclassification or a non-recurring benefit. This anomaly distorts year-over-year comparisons for 2025Q1, where gross margin appears lower but is actually stable when adjusted. Analysts should treat 2024Q1 as an outlier and focus on the normalized gross margin trend in the low-40s range.