Amwell (AMWL) Q3 2026 earnings review
Amwell narrows its losses, but software sales keep shrinking
Amwell, which sells online medical-care software and doctor visits, cut its losses again while its core software revenue kept shrinking. Total revenue fell 13% from a year ago to $49 million, beating the company's own plan as paid doctor visits grew 12%, and chief executive Dr. Ido Schoenberg nudged the full-year outlook higher. However, software subscription sales dropped 7% from last quarter, and by our math the company burned $12 million of operating cash in the third quarter.
| Revenue | $49.0M -13% from a year ago; above $46–48M plan |
|---|---|
| Subscription revenue | $23.9M -7% from last quarter; -23% from a year ago |
| Operating cash flow (Q3, by our math) | -$11.7M after +$9.7M in the first half |
| Full-year revenue outlook | Raised $2.5M middle of the range: $205M (-18% from 2025) |
⚖️ Verdict: 🔴 Bearish
The story got worse because subscription revenue failed its clean sequential test and first-half cash gains reversed. Even without last year's military contract cut in the comparison, software revenue and upfront customer cash both fell from the second quarter, while the military contract beyond the third quarter remains listed as an open risk. One bright spot: steep cuts to research and office costs narrowed the operating loss by more than half and lifted gross margin to 53%.
The question now is whether fourth-quarter break-even will be genuine cash generation or an accounting result helped by timing and capitalized software costs. Supporters point to seven straight revenue beats and falling overhead; sceptics note that $3 million a quarter of capitalized software exceeds the entire $0 to $1 million fourth-quarter Adjusted EBITDA target. Fourth-quarter cash flow and the military contract status in the upcoming filing will settle it.
🐂 Bull Case
Cost Cuts Narrowed the Operating Loss by More Than Half
Amwell, which sells software and doctor-visit services for online medical care, has spent the past year shrinking its workforce and leaving its Boston office, a move it calls the "abandonment of our corporate headquarters". Those cuts are carrying the income statement even while revenue shrinks.
- Research and development: 19.6% of revenue, down 13.4 percentage points from a year ago
- General and administrative overhead: 31.6% of revenue, down 7.0 percentage points
- Sales and marketing: 14.9% of revenue, down 1.3 percentage points
- Gross margin: 53.0%, up 0.6 percentage points from a year ago
Total operating expenses fell 29% from a year ago to $60.6 million, so the operating loss shrank from $29.3 million to $11.7 million. Gross margin also edged above last year's level after three straight quarters of declines, because lower service costs matched the drop in revenue.
What to watch: research and overhead spending in the fourth quarter. A further drop would show the cost cuts can hold profit positive without new software accounting benefits.
Paid Doctor Visits Grew 12% From a Year Ago
Amwell runs two main revenue streams: software subscriptions and Amwell Medical Group (AMG), its network of doctors who conduct paid online visits. While software fees kept falling, AMG visit revenue rose 11.8% from a year ago to $23.7 million, up from $21.2 million in the third quarter of 2025.
That medical-visit growth explains why total revenue reached $49.0 million, "exceeding the previously provided financial guidance range for Q3" of $46 million to $48 million. The telehealth provider also kept its full-year target of 1.32 million to 1.37 million AMG visits, which points to a normal winter flu season in the fourth quarter.
What to watch: fourth-quarter AMG visit revenue against last year's $23.7 million. Another double-digit rise would show patient demand is growing even before new government contracts start.
🐻 Bear Case
Subscription Revenue Fell Below Our Stability Check
"Health plans and employers want engagement, outcomes and proof, and Amwell’s single platform is built to deliver all three," chief executive Dr. Ido Schoenberg said, adding that "we believe we are well positioned to be the trusted platform where AI-powered care runs". Schoenberg pitches subscriptions to this platform as the core of the business.
The numbers in the release move the other way. Subscription revenue dropped 7.0% from last quarter to $23.9 million, down from $25.7 million in the second quarter and 22.7% below a year ago. Deferred revenue — cash customers have paid upfront for future service — fell by another $5.8 million this quarter to $21.0 million, down 34.4% from a year ago by our math.
Why this matters: comparing against last year was unfair because the military cut part of its contract in summer 2025, so the third-quarter comparison against the second quarter was the clean test of whether subscriptions had stabilised. Because both subscription sales and upfront customer cash fell again, new customer wins are not yet replacing lost contracts.
What to watch: fourth-quarter subscription revenue and the backlog of signed contracts in the quarterly filing. A second sequential drop in subscription sales would mean the core software business is still shrinking heading into 2027.
Operating Cash Turned Negative and Break-Even Leans on Accounting
Amwell's main financial goal for 2026 is reaching break-even in the fourth quarter, and the company raised the bottom of its full-year Adjusted EBITDA outlook — a profit measure that leaves out stock pay, restructuring and software depreciation — by $1 million. It also issued a fourth-quarter Adjusted EBITDA outlook of $0 million to $1 million and repeated its goal of positive operating cash flow.
- Third-quarter operating cash flow: negative $11.7 million by our math, after generating $9.7 million in the first half
- Third-quarter capitalized software costs: $3.0 million by our math, vs $0 a year ago
- Third-quarter Adjusted EBITDA excluding capitalized software: negative $6.6 million by our math, vs negative $3.6 million reported
The cash swing happened because first-half cash flow rested on unpaid bills that began to reverse, as nine-month accrued expenses rose by $8.7 million compared with $13.8 million at mid-year. In addition, Amwell started recording software development as an investment asset this year rather than an operating expense; that $3.0 million quarterly shift is three times the size of its entire fourth-quarter Adjusted EBITDA target.
What to watch: fourth-quarter operating cash flow minus capitalized software costs. If operating cash flow is positive only before that $3 million software bill, the company is still burning cash.
The Military Contract Is Still Listed as an Open Risk
The Defense Health Agency (DHA), which runs healthcare for the US military, is Amwell's largest customer and is moving from a partner pass-through arrangement to a direct contract. Management aims to make government contracts its main growth driver for 2027, after a July 30 target date to finish negotiations passed without a deal.
The third-quarter release mentions no signed contract, and its risk list still flags "the continuation of the DHA relationship beyond Q3 2026 with comparable financial terms". Because the third quarter ended on September 30 and the fourth-quarter revenue plan of $48 million to $50 million is flat with the third quarter, the outlook still includes no step-up from a new military deal.
What to watch: the contract footnote in the third-quarter SEC filing and any fourth-quarter contract announcement. If the filing shows no jump in contracted backlog, 2027 revenue growth remains uncontracted.
Risks this quarter didn't answer
Four standing concerns either worsened slightly or depend on footnote disclosures that only appear in the quarterly SEC filing, not in the earnings release.
- Total platform visits: stayed at 0.8 million, down 27% from 1.1 million a year ago as hospital clients use rival electronic-record software for video visits.
- Bad-debt reserves: the allowance for unpaid customer bills rose to $11.6 million from $9.5 million at year-end, with $2.8 million charged to expense over nine months; the filing will show which customer drove it.
- Remaining performance obligations (signed contract backlog): not in the release; the filing's revenue footnote will show whether it held near $84.3 million.
- Accrued provider and legal bills: not broken out on the release balance sheet; the filing's accrued-expense footnote will show how much of the $24.9 million doctor-pay accrual unwound.
💲 Other KPIs
Total cash fell by $15.2 million from the second quarter's $196.7 million, returning near the $183.1 million level from the end of 2025. The online care provider carries no debt, but third-quarter operating cash burn of $11.7 million and $3.0 million of capitalized software development reversed its first-half cash gain.
Weighted-average shares rose 5.2% from a year ago and 1.8% from the second quarter. The telehealth software maker does not buy back shares, so employee stock grants steadily increase the share count even after stock-based compensation fell 42% from a year ago to $2.3 million.
Uncollected customer bills fell 2.0% from a year ago, a much smaller drop than the 13.0% decline in revenue over the same period. That means customers are taking longer to pay than last year, even after the reserve for unpaid bills rose to $11.6 million.
🔮 Guidance
Raised. The middle of the full-year range moved up by $2.5 million, which still leaves annual sales down 17.8% from 2025. By our math, that full-year plan implies $48.1 million to $50.1 million of fourth-quarter revenue, matching the separate fourth-quarter range. It is the second $2.5 million raise in a row after the $2.0 million third-quarter beat.
New. The fourth-quarter plan calls for $49.0 million at the middle of the range, flat with the third quarter and down 11.4% from a year ago by our math. The narrower drop from last year reflects an easier comparison after military contract cuts in summer 2025; if the pattern holds from its 5.6% four-quarter average beat, revenue would land near $51.7 million.
Raised. The bottom of the loss range improved by $1 million, putting the middle of the range at a $7.5 million loss versus a $39.9 million loss in 2025. By our math, after a $7.8 million loss over the first nine months, the full-year range implies fourth-quarter Adjusted EBITDA of negative $0.2 million to positive $0.8 million. This is the third raise this year, and the smallest: +$7.0M, +$6.0M, +$0.5M.
Unchanged in direction, now given as a dollar range. The plan puts fourth-quarter Adjusted EBITDA at $0.5 million at the middle of the range, or a 1.0% margin, compared with a $3.6 million loss this quarter and a $10.3 million loss a year ago. Moving from the third-quarter loss to break-even depends on internal project costs ending on schedule.
Unchanged. Management kept the full-year paid doctor-visit target where it has sat since the start of the year. The release did not disclose third-quarter AMG paid visits separately from the 0.8 million total platform visits.
Unchanged. The telehealth group still expects to generate cash from operations in the fourth quarter after burning $11.7 million in the third quarter by our math. Hitting that target with only $0 million to $1 million of Adjusted EBITDA requires working-capital outflows to stop.
❓ Key Questions
Has the Defense Health Agency signed a direct contract?
The third quarter ended September 30, yet the release still lists continuation of the military relationship beyond Q3 2026 on comparable terms as a risk. Investors need to know whether the contract is signed and how its pricing compares with the old pass-through deal.
Why did subscription revenue drop 7% from last quarter?
Last year's military scope cut explains the drop from a year ago, but not the $1.8 million drop from the second quarter to $23.9 million. Management should explain whether client churn or lower pricing caused the sequential decline.
What drove the $11.7 million third-quarter operating cash outflow?
Operating cash flow swung from positive $9.7 million in the first half to negative $1.9 million for the nine months. How much of the $24.9 million second-quarter doctor-pay accrual unwound, and will it finish unwinding in the fourth quarter?
Where did remaining performance obligations end the third quarter?
Deferred revenue fell 34% from a year ago to $21.0 million, while signed contract backlog (RPO) is only disclosed in the quarterly filing. That number will show whether multi-year renewals are holding up near $84 million.
Which customer drove the $2.8 million bad-debt provision?
Provisions for credit losses reached $2.8 million over nine months versus $0.15 million a year ago, lifting the allowance on receivables to $11.6 million. Investors need to know if this relates to a single dispute or broader collection trouble.