UHS revenue climbs 5.3% while third-quarter profit slides (NYSE: UHS)

What happened

Universal Health Services, Inc. (NYSE: UHS) grew third-quarter revenue 5.3% to $4.73 billion, but net income attributable to the company fell to $308.7 million.

That compares with $373.0 million in the third quarter of 2025, when revenue was $4.50 billion. Diluted earnings per share were $5.22, down from $5.86.

Over the first nine months, revenue rose 7.7% to $13.87 billion from $12.88 billion. Net income attributable to UHS slipped to $1.02 billion from $1.04 billion. Diluted earnings per share still rose to $16.86 from $16.07. The weighted diluted share count fell to 60.241 million from 64.897 million.

Key numbers

Metric	Latest	Change	Source
Q3 net revenues	$4.73 billion	from $4.50 billion, +5.3%	SEC 8-K
Q3 net income attributable to UHS	$308.7 million	from $373.0 million, -17.2%	Calculated from SEC 8-K
Q3 Adjusted EBITDA net of NCI	$624.6 million	from $670.6 million, -6.9%	Calculated from SEC 8-K
Nine-month diluted EPS	$16.86	from $16.07, +4.9%	Calculated from SEC 8-K
Nine-month operating cash flow	$1.48 billion	from $1.29 billion, +14.9%	SEC 8-K
Nine-month share repurchases	$689.6 million		SEC 8-K

Read more: Universal Health Services (UHS) company research

Where costs outran revenue

Costs grew faster than sales in the quarter. By OptimistFi's calculation, salaries, wages and benefits rose 6.7% to $2.21 billion. Other operating expenses rose 10.1% to $1.43 billion. Income from operations fell to $454.4 million from $521.7 million.

Adjusted EBITDA net of NCI, which excludes other income and expense, was $624.6 million against $670.6 million. Its margin on net revenues slipped to 13.2% from 14.9%.

The nine-month figures show the same gap. Revenue rose by about $987.8 million, OptimistFi calculates. Adjusted EBITDA net of NCI rose by only about $39.1 million, to $1.95 billion from $1.91 billion. Its margin was 14.1%, down from 14.8%.

Demand was not the weak spot. At same-facility acute care hospitals, adjusted admissions rose 4.9% in the quarter, but net revenue per adjusted admission fell 1.7%. In behavioral health, adjusted admissions rose 2.5% and revenue per adjusted admission rose 1.7%.

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Items that moved the quarter

Two items outside the company's 2026 forecast partly offset each other. A $47 million pre-tax gain, net of provider taxes, came from higher Medicaid supplemental payments, mainly in Washington, D.C. and California. A $26 million pre-tax charge raised reserves for self-insured professional and general liability claims, mostly because of the tentative Cumberland Litigation settlement.

Together they added about $21 million before tax. A year earlier, similar items added about $55 million. That included $90 million of Washington, D.C. reimbursements and a $35 million reserve charge. So profit fell even with a net benefit from these items, though a smaller one than in 2025.

UHS reached the tentative Cumberland settlement in August 2026. It would resolve all outstanding claims by current claimants. Terms are confidential, and final releases and court approvals are pending. UHS believes its commercial excess insurance covers much of the amount and its reserves cover the rest.

Cash, buybacks and debt

Cash generation was the stronger side. Net cash from operating activities rose 14.9% to $1.48 billion over nine months from $1.29 billion. The filing lists a favorable $178 million change in accounts receivable. It was offset by an unfavorable $179 million in other working capital, which the filing ties to timing of payments.

UHS repurchased 3.915 million shares over nine months for about $689.6 million, an average of about $176 a share. In the third quarter alone it bought 1.35 million shares for about $242.1 million, about $179 a share. About $735.4 million of authorization remained on Sept. 30.

Spending and borrowing rose as well. Cash paid for acquisitions of businesses and property was $1.00 billion, against $47.8 million a year earlier. The Talkspace, Inc. acquisition closed in August 2026. Total debt was $5.71 billion on Sept. 30. Third-quarter net interest expense was $56.3 million against $38.4 million. The $1.5 billion revolver had $1.19 billion of available capacity.

Why it matters

OptimistFi has argued that UHS creates value if essential local demand keeps turning into reimbursement, operating leverage and cash despite payer and labor pressure. The quarter backs the demand and cash parts. It does not show operating leverage, because margins fell in both the quarter and the nine months.

The Medicaid gain comes with a caveat. It came from supplemental payment programs. The filing warns that failure to renew such programs beyond their scheduled end dates could push 2026 results away from the company's forecast. It also says legislation adopted July 4, 2025 may reduce revenues and raise uncompensated care as its provisions take effect.

Higher interest expense and debt leave less room for error if costs keep growing faster than sales. The result for the case is mixed.

What's next

UHS holds its investor conference call at 8:00 a.m. Eastern on Oct. 28. The test is how management explains wage and other operating costs growing faster than revenue, and whether it addresses the margin decline.

The next quarterly report will show whether the adjusted EBITDA margin stops falling and whether buybacks continue under the remaining authorization. Final release agreements and court approvals are still needed to complete the Cumberland settlement.

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