Afya Limited Signals Strong 2025, Invests for 2026

Afya Limited Class A ((AFYA)) has held its Q4 earnings call. Read on for the main highlights of the call.

Afya Limited’s latest earnings call painted a broadly upbeat picture, with 2025 results delivering double‑digit revenue growth, expanding margins, and strong cash generation. Management balanced this strength with a candid acknowledgment that stepped‑up investment in technology and physician‑lifecycle products will trim margins near term, introducing some execution and timing risk.

Revenue Growth

Afya reported 12‑month revenue of BRL 3.697 billion, up 12% year over year and essentially in line with its 2025 midpoint guidance. The top line is now roughly five times the level at the time of the company’s 2019 IPO, underscoring how its medical education and health‑tech ecosystem has scaled in just a few years.

Strong Adjusted EBITDA and Margin

Adjusted EBITDA reached BRL 1.680 billion, with margin expanding 130 basis points year over year to 45.4%. This performance topped the company’s guidance midpoint and highlights strong operating discipline in the core business, even as Afya begins to redirect resources toward newer, lower‑margin growth segments.

Net Income and EPS Expansion

Net income climbed to BRL 768.4 million, an 18% increase versus the prior year, supported by both revenue growth and margin gains. Basic EPS grew even faster, up 19% to BRL 8.32, signaling that earnings per share are compounding faster than the top line and reinforcing the equity story for shareholders.

Robust Cash Generation

Operating cash flow rose more than 6% year over year to BRL 1.548 billion, translating into a hefty 93.7% operating cash conversion ratio. Free cash flow of BRL 1.056 billion in 2025, with a 32% CAGR since 2021, gives Afya significant flexibility to invest, reduce debt, and return capital without stretching its balance sheet.

Conservative Leverage and Liability Management

Net debt declined to BRL 1.369 billion, a reduction of BRL 445 million from the end of 2024, bringing net debt excluding IFRS 16 to just 0.8 times adjusted EBITDA. The company also extended average debt maturity to 3.6 years through BRL 1.5 billion in debentures and other actions, lowering refinancing risk and stabilizing its capital structure.

Shareholder Returns and Capital Allocation

Afya announced a cash dividend of BRL 307.4 million, or BRL 3.45 per share, equivalent to 40% of 2025 net income, alongside an ongoing share repurchase program with about 60% of its authorization still unused. Management reiterated a goal of distributing up to 50% of consolidated 2025 net income via dividends and buybacks, signaling a clear shareholder‑friendly stance.

Undergraduate Operational Strength

The core undergraduate medical education franchise remains a powerhouse, with leadership cemented by 3,755 approved medical seats and more than 25,000 medical students, up 5% year over year. Undergraduate revenue rose 13% to BRL 2.789 billion, while net average ticket grew 3% to BRL 9,060 and gross margin hit a record 63.9%.

Continuing Education and B2B Growth

Continuing education revenue grew 11% to BRL 284 million, with gross margin expanding by 363 basis points, suggesting operational leverage as the segment scales. The company now serves more than 10,000 graduate journey students, and B2B revenue within continuing education jumped 48%, highlighting attractive enterprise demand.

Medical Practice Solutions Traction

Medical practice solutions revenue increased 6% to BRL 171 million, supported by 196,000 paying users and an ecosystem of 301,000 active physicians and medical students. Physicians generated more than 16.9 million prescriptions through Afya’s tools, indicating the deepening integration of its digital solutions into everyday clinical workflows.

Margin Pressure and Mix Shift

Despite strong annual metrics, fourth‑quarter adjusted EBITDA margin slipped 50 basis points year over year to 42.6%, foreshadowing the impact of higher investment and mix shifts. Management guided investors to expect about a 190‑basis‑point margin headwind in 2026 as faster‑growing, lower‑margin businesses like continuing education and medical practice solutions take a larger share.

Residency Journey Contraction

Afya’s Residency Journey product remains a soft spot, with the student base 21% below 2024 levels, even though it rose more than 30% versus the third quarter of 2025. The portfolio is still in rebuilding mode, and management acknowledged that this creates near‑term drag within its continuing education mix as programs are reshaped and repriced.

Decline in Monthly Active Users

Monthly active users in medical practice solutions fell to 220,000 from 238,000 a year earlier, a drop of roughly 7.6%, revealing some engagement erosion. While the number of paying users held at 196,000, the dip in overall activity suggests Afya must refine user experience and integration to fully capture the segment’s monetization potential.

Regulatory Uncertainty

The evolving ENAMED evaluation framework has led to penalties for some campuses and remains a source of uncertainty, though Afya does not foresee a material impact on 2026. Separately, the ProFMed proposal is still under Senate discussion without resolution, reinforcing that regulatory shifts remain an important medium‑term risk factor.

EBITDA Messaging and Monetization Friction

Management delivered mixed signals on adjusted EBITDA growth, with the CEO referencing growth “over 50%” while the CFO cited a 15% increase, which may confuse some investors. Executives also conceded that B2B revenues in medical practice solutions were soft and that a fragmented platform has limited monetization, prompting a push for multi‑year integration investments.

OpEx and CapEx Timing Uncertainty

Operating expenses increased just 1% year over year, helped by seasonality, but this benign trend may not persist as new projects scale. Intangible CapEx accelerated in the fourth quarter due to new program launches, signaling elevated near‑term investment and some uncertainty around the timing of returns and margin normalization.

2026 Outlook and Investment Plan

For 2026, Afya guided revenue of BRL 3.95–4.10 billion and adjusted EBITDA of BRL 1.70–1.80 billion, implying a midpoint margin near 43.5%, about 190 basis points below 2025. CapEx is expected between BRL 340 million and BRL 380 million, or 8.6%–9.3% of revenue, as the company ramps spending on continuing education, medical practice solutions, and platform integration while assuming no material ENAMED impact.

Afya exits 2025 with strong growth, high margins, robust cash generation, and low leverage, giving it ample room to fund both expansion and generous shareholder returns. While investors must weigh near‑term margin compression, engagement softness, and regulatory noise, the call framed these issues as the cost of building a broader physician‑centric ecosystem that could support durable long‑term value creation.