Health insurance company Alignment Healthcare (NASDAQ: ALHC) reported revenue ahead of Wall Street’s expectations in Q2 CY2025, with sales up 49% year on year to $1.02 billion. Guidance for next quarter’s revenue was optimistic at $977.5 million at the midpoint, 2.1% above analysts’ estimates. Its GAAP profit of $0.07 per share was significantly above analysts’ consensus estimates.

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“In today's Medicare Advantage environment, Alignment Healthcare's second quarter performance proves that strong financial results and high-quality care can go hand in hand – with the right model,” said John Kao, founder and CEO.

Company Overview

Founded in 2013 with a mission to transform healthcare for seniors, Alignment Healthcare (NASDAQ: ALHC) provides Medicare Advantage health plans for seniors with features like concierge services, transportation benefits, and technology-driven care coordination.

Revenue Growth

Examining a company’s long-term performance can provide clues about its quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Thankfully, Alignment Healthcare’s 31.6% annualized revenue growth over the last five years was incredible. Its growth surpassed the average healthcare company and shows its offerings resonate with customers, a great starting point for our analysis.

Long-term growth is the most important, but within healthcare, a half-decade historical view may miss new innovations or demand cycles. Alignment Healthcare’s annualized revenue growth of 43.3% over the last two years is above its five-year trend, suggesting its demand was strong and recently accelerated.

Alignment Healthcare also reports its number of customers, which reached 223,700 in the latest quarter. Over the last two years, Alignment Healthcare’s customer base averaged 40.2% year-on-year growth. Because this number is lower than its revenue growth, we can see the average customer spent more money each year on the company’s products and services.

This quarter, Alignment Healthcare reported magnificent year-on-year revenue growth of 49%, and its $1.02 billion of revenue beat Wall Street’s estimates by 5.7%. Company management is currently guiding for a 41.2% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 28.6% over the next 12 months, a deceleration versus the last two years. Despite the slowdown, this projection is noteworthy and implies the market is forecasting success for its products and services.

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Operating Margin

Although Alignment Healthcare was profitable this quarter from an operational perspective, it’s generally struggled over a longer time period. Its expensive cost structure has contributed to an average operating margin of negative 5.5% over the last five years. Unprofitable healthcare companies require extra attention because they could get caught swimming naked when the tide goes out.

On the plus side, Alignment Healthcare’s operating margin rose by 9 percentage points over the last five years, as its sales growth gave it operating leverage. The company’s two-year trajectory shows its performance was mostly driven by its recent improvements. These data points are very encouraging and shows momentum is on its side.

In Q2, Alignment Healthcare generated an operating margin profit margin of 2.2%, up 4.9 percentage points year on year. This increase was a welcome development and shows it was more efficient.

Earnings Per Share

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Alignment Healthcare’s earnings losses deepened over the last five years as its EPS dropped 8.7% annually. However, it’s bucked its trend as of late, increasing its EPS over the last three years. We’ll see if it can maintain its growth.

In Q2, Alignment Healthcare reported EPS at $0.07, up from negative $0.13 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street is optimistic. Analysts forecast Alignment Healthcare’s full-year EPS of negative $0.28 will reach break even.

Key Takeaways from Alignment Healthcare’s Q2 Results

We were impressed by how significantly Alignment Healthcare blew past analysts’ EPS expectations this quarter. We were also excited its revenue outperformed Wall Street’s estimates by a wide margin. Looking ahead, the company raised its full-year revenue guidance, which is always a good sign. Zooming out, we think this was a good print with some key areas of upside. The stock traded up 15.7% to $15.10 immediately following the results.

Indeed, Alignment Healthcare had a rock-solid quarterly earnings result, but is this stock a good investment here? If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here, it’s free.