DaVita outlines $2.175B-$2.25B 2026 adjusted operating income outlook as IKC target rises to at least $65M

• “Once again, our teammates have delivered excellent care for our patients and solid results for our shareholders... Our maturing Integrated Kidney Care business is a prime example, as it continues to deliver clinical performance for our patients while starting to demonstrate its economic potential.” (CEO & Executive Director Javier Rodriguez)

• “We have completed pilots in 150 centers for more than 10,000 patients... approximately 75% of total patient census is clinically eligible for expanded HD... Adoption amongst those clinically eligible patients in the pilot was greater than 90%, exceeding our expectations.” (CEO & Executive Director Javier Rodriguez)

• “We will begin our national rollout next week and expect a swift network-wide transition, bringing expanded HD to the vast majority of eligible patients in November... we do not expect any material net impact on adjusted operating income for 2026 or 2027.” (CEO & Executive Director Javier Rodriguez)

• “We now expect IKC to deliver at least $65 million of adjusted operating income in 2026, an increase of at least $25 million over the prior guidance.” (CEO & Executive Director Javier Rodriguez)

• “For the third quarter, adjusted operating income was $561 million. Adjusted earnings per share was $3.82, and free cash flow was $276 million.” (CFO & Treasurer Joel Ackerman)

Outlook

• “We now expect adjusted operating income within a range of $2.175 billion to $2.25 billion and adjusted earnings per share within a range of $14.30 to $15.20.” (CEO & Executive Director Javier Rodriguez)

• “This reflects the increased guidance for IKC, offset by higher U.S. dialysis costs, particularly higher technology investments.” (CEO & Executive Director Rodriguez)

• “We still anticipate full year free cash flow between $1 billion and $1.25 billion.” (CFO & Treasurer Ackerman)

• Compared with Q2, management moved from “reconfirming our full year 2026 guidance ranges” (CEO & Executive Director Rodriguez, Q2) to “narrowing our full year 2026 guidance ranges” (CEO & Executive Director Rodriguez, Q3), while raising the 2026 IKC profit target.

Financial Results

• “Overall treatment volume grew 1.2% over the third quarter of 2025... Patient census increases drove the year-over-year growth, primarily as a result of improving mortality... The census gain was offset in the quarter by an uptick in missed treatments.” (CFO & Treasurer Joel Ackerman)

• “Revenue per treatment was up approximately 1.1% versus the third quarter of last year and roughly flat sequentially... offset by lower commercial mix and lower phosphate binder reimbursement as expected.” (CFO & Treasurer Ackerman)

• “Patient care cost per treatment were up 2.4% in Q3 compared to last year... Medical supply costs and professional liability expenses were higher than anticipated in the quarter. We expect these costs to revert to typical levels over time.” (CFO & Treasurer Ackerman)

• “Third quarter adjusted operating income was $46 million, a $20 million increase year-over-year... The full year continues to track in line with our expectations for approximately $135 million of international adjusted operating income.” (CFO & Treasurer Ackerman)

• “We repurchased approximately 600,000 shares in Q3, and we've repurchased an additional 500,000 shares since the end of the quarter, including shares from Berkshire Hathaway... We finished September with a leverage ratio of 3.38x consolidated EBITDA.” (CFO & Treasurer Ackerman)

Q&A

• Albert Rice, UBS: asked how the ESRD final rule math (including phosphate binders) compares with expectations and how adequate the rest of the rate is; CFO Ackerman: “our estimate right now... is that the net impact for us for the full year '27 will be 1.5% to 2%... the published number is really only the number for Q1... we expect that number to come down significantly in Q2.”

• Albert Rice, UBS: asked how aggressively DaVita may “lean into growth” in IKC now that it appears consistently profitable; CEO Rodriguez: “Our confidence... has now reached a point that we want to pursue more business... what you want is healthy contracts... and you need integrated tech, which we now have.”

• Andrew Mok, Barclays: asked if holding full-year treatment guidance implies a Q4 acceleration and whether missed treatments are a risk; CFO Ackerman: “your math is about right... we're assuming... missed treatment rate reverting to a normal year-over-year pattern.”

• Andrew Mok, Barclays: asked about ACA exchange headwind and commercial mix; CFO Ackerman: “we think we're on track for that $40 million year-over-year headwind for '26.”

• Pito Chickering, Deutsche Bank: asked for early 2027 modeling puts/takes; CFO Ackerman: “we expect volume growth in 2027 to be higher than volume growth in 2026... we expect a headwind from commercial mix... pharmaceutical costs... will come down in 2027... IT spend will not come down next year... it will decelerate.”

• Pito Chickering, Deutsche Bank: asked whether pilots show fewer missed treatments and whether expanded HD changes home modality; CEO Rodriguez: “it's too soon to tell... I doubt that... there will be shifts in modality selection.”

• Kevin Fischbeck, BofA: asked if Fresenius site closures helped Q3 volumes; CFO Ackerman: “that played out pretty much in Q1.”

• Kevin Fischbeck, BofA: asked whether dialyzer-driven longevity skews incremental treatments toward Medicare; CFO Ackerman: “The early results are that is not the pure dynamic... too early to tell... I don't think we're ready to conclude it's 100% additional Medicare treatments.”

• Kevin Fischbeck, BofA: asked about charitable premium assistance and AKF scrutiny; CEO Rodriguez: “we disclosed the numbers roughly 8 years ago, the numbers have stayed completely flat. So that range still applies today.”

• Ryan Langston, TD Cowen: asked about capacity utilization initiatives and whether clinic closures are planned; CFO Ackerman: “We do not have any plans right now to close clinics.”

• William Westerfield (for Justin Lake), Wolfe Research: asked for more detail on TDAPA drivers (binders vs. DefenCath) and how investors can track utilization; CFO Ackerman: “Binders, very much in line with our expectation... We think it's largely about DefenCath... it will get recalculated every quarter...”; on tracking, “the short answer is no.”

Sentiment Analysis

• Analyst tone: neutral to slightly negative on policy uncertainty and modeling visibility, pressing on ESRD rule mechanics and tracking tools, including “is there an ability to comment?” (Albert Rice, UBS) and “can we track script trends?” (William Westerfield)

• Management tone: slightly positive in prepared remarks and more forceful on policy positioning in Q&A, including “we do not expect any material net impact on adjusted operating income for 2026 or 2027” (CEO & Executive Director Rodriguez) and “I really took a little to heart that we are part of the solution, not the problem.” (CEO & Executive Director Rodriguez)

• Versus Q2, management kept an innovation-forward posture but shifted to more explicit timing and economics around expanded HD, and introduced sharper frustration with dialysis portrayal in the HHS plan.

Quarter-over-Quarter Comparison

• Guidance posture shifted from “reconfirming” full-year ranges in Q2 (CEO & Executive Director Rodriguez, Q2) to “narrowing” ranges in Q3 (CEO & Executive Director Rodriguez, Q3), while also lifting the 2026 IKC profit expectation to “at least $65 million.” (CEO & Executive Director Rodriguez)

• Expanded HD moved from Q2’s “begin deploying... in the coming quarters” (CEO & Executive Director Rodriguez, Q2) to Q3’s immediate execution: “begin our national rollout next week... in November.” (CEO & Executive Director Rodriguez)

• Analyst focus rotated from Q2 cost leverage and dialysis segment profitability questions toward Q3 policy mechanics (ESRD final rule, TDAPA quarterly resets) and 2027 modeling puts/takes.

Risks and Concerns

• “The headline rate increase for large dialysis organizations is 3.5%... this will be subject to downward quarterly adjustments after Q1.” (CEO & Executive Director Javier Rodriguez)

• “Medical supply costs and professional liability expenses were higher than anticipated in the quarter.” (CFO & Treasurer Joel Ackerman)

• “We expect a headwind from commercial mix, with ACA being the big component of that.” (CFO & Treasurer Ackerman)

• On reimbursement visibility, CFO Ackerman indicated limited ability to monitor certain drivers: “We don't have a lot of visibility into what's happening with the industry on that.” (CFO & Treasurer Ackerman)

Final Takeaway

DaVita management emphasized a near-term operational milestone—expanded HD rolling out nationally “next week” with a “swift network-wide transition” in November—while reiterating that it expects “no material net impact” to adjusted operating income in 2026 or 2027 and placing the volume and earnings benefit in “the back half of 2028” and beyond. For 2026, management narrowed guidance to $2.175B-$2.25B of adjusted operating income and $14.30-$15.20 of adjusted EPS, citing higher IKC expectations (at least $65M of adjusted operating income) offset by higher U.S. dialysis costs, particularly technology spend. In Q&A, analysts concentrated on ESRD final rule mechanics and 2027 modeling, with management characterizing the estimated net 2027 Medicare impact as “1.5% to 2%” and repeatedly highlighting quarterly recalculations as a key source of variability.

Read the full Earnings Call Transcript

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