HealthEquity, Inc. (HQY): BCG Matrix [Dec-2025 Updated]

You're looking at HealthEquity, Inc.'s (HQY) business map, and honestly, it's a clear picture of where the reliable cash is versus where the big bets are being placed as of late 2025. We've broken down their segments using the BCG Matrix, showing how the dominant Cash Cow-holding $17.0 billion in custodial cash-is powering the high-growth Star of $16.1 billion in invested assets, all while significant capital, around $50 million annually, flows into unproven AI initiatives that could define their next decade. Dive in to see exactly which parts of HQY deserve your focus and which are just taking up space.

Background of HealthEquity, Inc. (HQY)

You're looking at HealthEquity, Inc. (HQY), which stands as the nation's largest custodian for Health Savings Accounts (HSAs). Honestly, this company, headquartered in Draper, Utah, is central to how millions of Americans manage their tax-advantaged healthcare savings and other consumer-directed benefits (CDBs). They partner with employers, benefits advisors, and plan providers to administer these accounts.

HealthEquity, Inc. finished its fiscal year 2025, which ended on January 31, 2025, with some impressive top-line numbers. Total revenue for that full year hit $1.20 billion, marking a solid 20% increase compared to the prior fiscal year. This growth was helped along by strategic moves, like completing the acquisition of the BenefitWallet HSA portfolio, which added about 616,000 HSAs and $2.7 billion in assets to their books.

To be fair, understanding where that revenue comes from is key. For the fiscal year ended January 31, 2025, HealthEquity, Inc.'s revenue model was diversified. Custodial revenue, which comes from interest on HSA cash held with their partners, was the largest piece at $545.4 million, representing about 45.5% of the total. Service revenue followed at $478.3 million (39.9%), with interchange revenue making up the final $176.0 million (14.7%).

Looking at scale at the end of FY2025, HealthEquity, Inc. was managing a significant book of business. They administered 9.9 million HSAs, which was a 14% jump year-over-year. Total HSA assets under management grew by 27% to reach $32.1 billion as of January 31, 2025. All told, the company managed 17.0 million total accounts, including HSAs and CDBs.

The momentum definitely carried into the next fiscal year. As of July 31, 2025, which marks the end of the second quarter of fiscal 2026, the number of HSAs grew again to 10.0 million, a 6% increase from the prior year. Total HSA assets also climbed to $33.1 billion, up 12% year-over-year, with total accounts reaching 17.1 million.

The company is actively working to maintain its leadership, especially as the U.S. HSA market itself is expanding rapidly. HealthEquity, Inc. has been pushing hard on AI and digital innovation, like rolling out an AI-powered claims adjudication system to boost efficiency and cut servicing costs. This focus on technology is definitely intended to strengthen their long-term margin potential.

HealthEquity, Inc. (HQY) - BCG Matrix: Stars

You're looking at the engine room of HealthEquity, Inc. (HQY) right now, the segment that demands capital but promises market leadership. As of July 31, 2025, the Invested HSA Assets stood at $16.1 billion. That's a solid base, and the underlying accounts are growing; the number of HSAs with investments increased by 10% year-over-year to reach 782,000 as of that date.

Here's a quick look at the key metrics driving this Star segment as of the end of the second quarter of fiscal year 2026:

This segment operates in a high-growth environment. The broader U.S. HSA market expanded significantly, moving from $65.9 billion in 2019 to $146.6 billion in 2024, which represents a Compound Annual Growth Rate (CAGR) of 17.3%. Projections suggest this market will keep expanding, potentially reaching $199.1 billion by 2027. That rapid market expansion is why this area is a Star; it's leading in a market that's still growing fast, so you defintely need to keep funding it.

The focus here is definitely on growing those 782,000 invested accounts because that's where the high-margin fee income lives. For the full fiscal year ended January 31, 2025, HealthEquity, Inc.'s revenue breakdown shows how important asset management is:

• Custodial revenue was $545.4 million.
• Custodial revenue accounted for 45.5% of total revenue for FY2025.
• Service revenue was $478.3 million.
• Interchange revenue was $176.0 million.

You want to keep pouring capital here because these are the market leaders today, and if you maintain this market share as the overall market growth rate naturally slows down over time, these assets will mature into reliable Cash Cows. This is the future of the business, where investment decisions made now directly impact future, lower-effort cash generation.

HealthEquity, Inc. (HQY) - BCG Matrix: Cash Cows

You're looking at the core engine of HealthEquity, Inc. (HQY) operations, the segment that consistently delivers the necessary capital to fund growth elsewhere in the portfolio. This is the classic Cash Cow quadrant: high market share in a mature, yet essential, service area.

The Custodial HSA Cash Balances represent the bedrock of HealthEquity, Inc.'s financial stability. As of July 31, 2025, the company held $17.0 billion in HSA cash, which is a substantial portion of the total $33.1 billion in Total HSA Assets reported on that date. This cash base generates stable, high-margin custodial revenue.

HealthEquity, Inc. is the largest HSA custodian in the U.S., securing a dominant market position. Its market share expanded to 21% in 2024, reflecting this leadership. This high market share in a relatively mature segment means the segment requires minimal promotional investment to maintain its position, allowing it to operate with high efficiency.

The financial performance of this segment is directly tied to the prevailing interest rate environment. Custodial revenue, which is interest earned on the HSA cash held with depository partners, was the single largest contributor to the top line in the prior fiscal year, accounting for 45.5% of total revenue in FY2025. This provides a significant tailwind when rates are elevated, as seen in the second quarter of fiscal year 2026.

For instance, in the second quarter ended July 31, 2025, custodial revenue hit $159.9 million, marking a 15.3% year-over-year increase. The annualized yield on HSA cash for that quarter stood at 3.51%, demonstrating the direct benefit of the rate environment on this cash pool. This segment is defintely the reliable money maker, funding the Stars and Question Marks.

Here's a quick look at the key metrics underpinning this Cash Cow segment as of the latest available data:

The strategy here is to maintain productivity and 'milk' the gains passively, focusing investments on infrastructure improvements that further boost efficiency and cash flow, rather than aggressive market share expansion.

The core characteristics supporting the Cash Cow status include:

• Dominant market share in the HSA custody space.
• High-margin revenue stream from interest on cash.
• Revenue growth directly benefits from higher interest rates.
• Stable cash generation used for corporate funding needs.

If onboarding takes 14+ days, churn risk rises, but the sheer volume of assets under management provides a strong buffer against minor operational hiccups.

Finance: draft 13-week cash view by Friday.

HealthEquity, Inc. (HQY) - BCG Matrix: Dogs

You're looking at the part of HealthEquity, Inc. (HQY)'s portfolio that isn't driving the growth story, the segment where market share and market expansion are both lagging. These are the Non-HSA Consumer-Directed Benefits (CDBs), which include accounts like FSAs and HRAs. Honestly, these are the classic 'Dogs' in the matrix: mature products in slow-growth areas that just need to be managed, not invested in heavily.

The numbers from the end of the second quarter of fiscal year 2026, as of July 31, 2025, paint a clear picture of this segment's mature status. We see high volume but low per-account value generation, which is exactly what traps cash in a Dog.

Here's a quick breakdown of the key metrics for these low-growth, low-share units:

• Non-HSA CDB accounts totaled 7.2 million as of July 31, 2025.
• The growth rate for total CDB accounts for the full fiscal year 2025 was only 2%.
• Client-held funds, the deposits generating custodial revenue, stood at just $0.8 billion as of July 31, 2025.

When you look at the revenue contribution, the low per-account value becomes apparent. These 7.2 million CDB accounts are holding only $0.8 billion in client-held funds, which is the base for custodial revenue. Compare that to the HSA side, where 10.0 million HSAs held $33.1 billion in total assets as of the same date. That contrast tells you everything you need to know about the margin profile here.

We can lay out the comparison of the asset base for context, showing the relative weight of the Dog segment versus the perceived Cash Cow (HSA):

These products are mature, high-volume, and low-margin. They require minimal new investment because the market isn't expanding quickly, and they are not market share leaders in their specific sub-segments relative to the core HSA business. The strategy here is typically to maintain operations efficiently, perhaps bundling them to drive service revenue slightly, but definitely avoiding expensive turn-around plans. You want these units to break even or generate a small, steady stream of cash without demanding capital that could be better deployed elsewhere. The 2% growth in FY2025 confirms this is a maintenance operation, not a growth engine.

The operational reality for HealthEquity, Inc. (HQY) with these Dogs is:

• Minimize Investment: Capital expenditure should be limited to essential platform maintenance, not feature expansion.
• Focus on Efficiency: Drive down the cost-to-serve for the 7.2 million accounts.
• Cash Generation: Aim for these units to be cash-neutral or slightly cash-positive, acting as a minor funding source.

If onboarding takes 14+ days, churn risk rises, even in mature segments, so keeping the administration simple is key. Finance: draft 13-week cash view by Friday.

HealthEquity, Inc. (HQY) - BCG Matrix: Question Marks

These business units represent HealthEquity, Inc.'s high-growth potential areas where current market share is still being established. They consume cash now, aiming to transition into Stars by capturing significant market adoption.

AI and Digital Transformation Initiatives are central to this quadrant, focusing on the new mobile-first platform experience and the deployment of Agentic AI in voice channels. HealthEquity, Inc. announced the deployment of agentic AI capabilities in partnership with Parloa, beginning with a limited release in November 2025 and expanding access throughout 2026. This initiative builds on existing AI solutions like the Expedited Claims AI tool and the HSAnswers educational resource. The full cloud migration of its V5 platform has also contributed to improved response speed and stability.

The market growth potential is high, evidenced by the company's overall financial trajectory, yet these specific digital investments are in their early adoption phase, representing a currently low revenue segment relative to the core business. For context, as of July 31, 2025, HealthEquity, Inc. administered 10.0 million Health Savings Accounts (HSAs), which was up 6% year over year, with Total Accounts at 17.1 million.

The AI-powered claims adjudication system, known as Expedited Claims AI, is a prime example of a significant investment made to cut servicing costs and boost margins. This tool automates receipt processing and efficiently sorts variables like discounts and taxes, which previously required manual entry.

The performance metrics from the initial rollout of the Expedited Claims AI system demonstrate the potential for efficiency gains:

To aggressively pursue market share gains and realize the potential of these new technologies-including the Agentic AI deployment and mobile enhancements-HealthEquity, Inc. requires substantial, focused capital allocation. The scenario suggests this investment level is around $50 million to $55 million annually, which must be sustained to see if these Question Marks mature into Stars.

• The company's Q2 fiscal 2026 revenue was $325.8 million, up 9% year-over-year.
• Total HSA Assets reached $33.1 billion as of July 31, 2025.
• The company repurchased 0.7 million shares for $66.0 million during Q2 fiscal 2026.
• Fiscal year 2026 revenue guidance is set between $1.290 billion and $1.310 billion.