ASTH — Q2 2026 Financial Report Analysis

Overview

Astrana Health's revenue rose 49% to $972.5 million in the second quarter of 2026 and net income attributable to the company more than doubled to $19.7 million ($0.40 per diluted share, from $0.19). Nearly all of that growth was bought rather than grown: the acquisition of Prospect Medical's businesses, which closed on July 1, 2025, contributed $281.5 million of the $317.7 million revenue increase. On a like-for-like basis the business was roughly flat. The 10-Q's own pro forma figures, which treat Prospect as owned since January 1, 2025, put combined Q2 2025 revenue at $983.2 million, about 1% above this quarter.

Astrana is a "value-based care" company. Health insurers (Medicare Advantage, Medicaid and commercial plans) pay its affiliated doctor groups a fixed monthly fee per patient, called capitation, and Astrana keeps whatever is left after paying for those patients' care. It coordinated care for about 1.5 million such patients through more than 20,000 contracted physicians at June 30, 2026. Its results therefore depend on two things: how many patients it is paid for, and how much their care ends up costing.

At a glance

• $972.5M revenue, +49% reported but about -1% on a pro forma basis. The Prospect deal explains almost all of the reported growth; the existing business added roughly $45 million in capitation, mainly from patients moving into full-risk contracts.
• 89.3% of revenue went on the cost of services, up from 88.1%. Astrana's largest segment, Care Partners, earned less operating profit ($42.9M vs $49.7M) despite 48% more revenue, which management put down to "higher claims expense reflecting typical quarterly utilization patterns."
• $100.8M operating cash flow in the first half, 3.2x net income. Cash generation is strong relative to reported profit, though it slipped from $107.5M a year earlier, and receivables grew far faster than sales.

Results at a glance

The cost-of-services ratio is the closest thing in Astrana's filing to the medical loss ratio that insurers report: the share of revenue paid out for patients' care. Astrana's line also includes the cost of running its own clinics, so it is not an exact match, but the direction matters. A 1.2-point rise on nearly $1 billion of quarterly revenue is about $12 million of profit.

Where the growth and the profit came from

Astrana reports three segments, and they moved in different directions:

(Segment revenue includes $120.6 million of sales between segments that is removed in the consolidated total.)

• Care Partners took in $252.3 million from Prospect, plus revenue from members moving to full risk, where Astrana is responsible for all of a patient's medical costs, hospital stays included, rather than only doctor visits. Astrana does this through its "Restricted Knox-Keene" plans, a California license that lets a provider organisation take on that risk. Full risk raises revenue per patient, but it also puts more cost volatility on Astrana's books, and this quarter that showed up as lower segment profit.
• Care Delivery almost doubled revenue ($36.0 million from Prospect) but swung to a $3.0 million operating loss "driven by increased costs to support the growth" of the clinics.
• Care Enablement went from $1.8 million to $16.4 million of operating income, helped by Prospect ($36.7 million of revenue) and higher management fees as Care Partners grew, plus new external contracts. This fee-based unit is now where most of the profit growth sits.

Below the operating line, the debt that funded Prospect is a real cost. Interest expense more than doubled to $16.0 million from $7.4 million, on $906.3 million of term loans and $42.0 million drawn on the revolving credit line at quarter-end. Depreciation and amortization rose to $15.6 million from $6.9 million, mostly amortization of Prospect's acquired intangible assets. That is an accounting charge for the deal's purchase price, not a cash cost.

What the headline numbers hide

• The organic picture is flat, not 49%. Pro forma Q2 2025 revenue of $983.2 million versus $972.5 million this quarter means the combined business shrank slightly. On the same pro forma basis, net income attributable to Astrana was $10.2 million a year ago, so earnings growth of roughly 94% does hold up after adjusting for the deal. Revenue growth does not.
• Below-the-line items and tax flattered EPS. Pre-tax income rose $10.4 million. Of that, $4.7 million came from an unrealised gain on the fair value of an interest-rate swap and a financing obligation, against almost nothing a year ago. A $2.3 million accrual for a "non-routine legal matter" pulled the other way. The effective tax rate also fell to 32.4% from 39.3%. Minority partners absorbed a $1.3 million loss, against $0.8 million of profit a year ago, which lifted the share attributable to Astrana's stockholders. Buybacks played no part: diluted shares rose slightly, to 49.8 million from 49.5 million.
• The gap between GAAP and adjusted earnings is wide. Adjusted EPS of $0.80 is double GAAP EPS of $0.40. The biggest exclusions are $13.8 million of acquisition-intangible amortization, $11.8 million of stock-based compensation and $4.8 million of "other" items (integration costs, the legal accrual, severance and a fair-value update). Stock compensation is a recurring cost to shareholders, so we treat the adjusted figure as generous.
• Cash conversion is strong, but receivables are outrunning sales. First-half operating cash flow of $100.8 million was more than three times net income of $31.6 million. Free cash flow (operating cash flow minus capital spending) was $92.9 million, down from $103.0 million, because of what management calls "unfavorable changes in working capital." Net receivables rose 24% in six months, to $465.1 million from $374.5 million, while quarterly revenue was only slightly above its second-half-2025 run rate. Medical liabilities (claims owed to providers) rose by a similar 24%, to $415.8 million, which offsets part of the cash effect. In the first quarter Astrana also booked a non-routine allowance against receivables it "plans to recover from the payer". That makes collections from health plans worth watching.
• Controls are still flagged as ineffective. Management again concluded that disclosure controls were "not effective" because a material weakness in accounting for business combinations, first disclosed in the 2025 10-K, has not been fixed. Prospect's operations are also excluded from the internal-control assessment while Astrana evaluates them.
• Guidance versus the prior guidance. In May, Astrana guided Q2 to $965-1,000 million of revenue and $65-70 million of adjusted EBITDA. It delivered $972.5 million, in the lower half of the revenue range, and $68.9 million, near the top of the EBITDA range. That is a profit beat on revenue that was merely in range. Full-year adjusted EBITDA guidance moved to $255-280 million from $250-280 million: the bottom of the range rose and the top did not.

Takeaway: Astrana's doubled EPS is mostly the Prospect deal plus a lower tax rate and non-operating gains. The combined business is not growing revenue, and its largest segment earned less this quarter as more patients moved into full-risk contracts. The investment case now depends on whether full risk can lift margins rather than just revenue, and on receivables that are growing much faster than sales.

Events since the quarter

On September 23, 2026, Astrana filed a cybersecurity incident report (Form 8-K Item 1.05). Attackers posing as company staff and spoofing its main phone number tricked employees into giving access to systems at its subsidiary Astrana Health Management. The company believes "certain private and/or confidential information" was "accessed and/or acquired without authorization." It is still assessing whether patient data was involved and intends to notify affected patients as required. It deemed the incident material as of September 22 because of the sensitivity of the data. It says it cannot yet estimate the full impact, has cyber insurance, and "currently does not expect" a material effect on its financial condition. Remediation, notification and possible legal costs could fall into the third and fourth quarters. None of this is in the Q2 numbers.

Outlook

Management's guidance, as of August 6, 2026:

First-half revenue was $1,937.6 million, so the full-year range implies $1.86-2.16 billion in the second half, and Q3 is guided to $1.00-1.03 billion of it. The free-cash-flow range is notable: $92.9 million has already come in, so the full-year guide implies only $12-40 million more in the second half. Management may be expecting working-capital outflows or year-end settlement timing to absorb cash. The GAAP net income range of $59-74 million against $31.6 million in the first half implies a second half of $27-42 million, close to the first half's pace and well short of the adjusted EBITDA growth story.

Our view: the reported growth rates will collapse once Prospect is in both periods. Q3 2026 is the first quarter compared against a year-ago period that already includes Prospect, so headline revenue growth should drop to single digits. From then on, the questions are whether full-risk conversions and Medicare Advantage expansion (new Hawaii and Texas agreements, with Texas adding about 3,000 lives) can grow revenue on their own, whether Care Partners' cost ratio stabilises, and whether Care Enablement keeps compounding. The debt of roughly $948 million gross, against $400.8 million of cash, means the interest bill keeps taking a meaningful slice of operating profit. The cyber incident adds an unquantified cost and reputational risk heading into the Q3 report.