RadNet (RDNT) Q3 2026 earnings review
RadNet's scan clinics beat targets, but software sales barely budge
RadNet's outpatient scan clinics are outperforming its own plans while its software division faces a steep fourth-quarter test. Total revenue rose 22% and profit per share excluding one-offs climbed 25%, as patients booked more complex MRI, CT and PET/CT scans. Chief executive Dr. Howard Berger raised the full-year profit outlook for both divisions, but by our math the unchanged software revenue plan leaves a 38% single-quarter jump for the fourth quarter.
| Same-center scan volume | +3.2% advanced scans +8.9% from a year ago |
|---|---|
| Total revenue | $638.3M +22.1% from a year ago |
| Profit per share, excluding one-offs | $0.30 +25% from a year ago |
| Full-year outlook | Raised Imaging revenue +$15M, software profit +$1M |
⚖️ Verdict: 🟢 Bullish
The story got better because the main clinic business raised its full-year revenue and cash flow targets for a third straight quarter, and faster integration of acquired businesses allowed a $1 million raise to the software profit plan. One caution: Digital Health revenue grew less than 2% from the second quarter, so holding the full-year software sales target makes the year-end hurdle much steeper.
The question now is whether the software division is building genuine outside customer demand or relying on acquisitions and sales to RadNet's own clinics. If signed customer contracts go live on schedule, fourth-quarter software revenue will jump past $40 million; if they lag, the division will miss its full-year sales range. The third-quarter recurring revenue figure on the conference call and fourth-quarter software sales will settle it.
🐂 Bull Case
Imaging Centers Raise Their Full-Year Plan Again
RadNet runs outpatient centers that perform medical scans, and this main business keeps beating its own targets. Chief executive Dr. Howard Berger said "The Imaging Center segment has outperformed projections in each of the first three quarters of this year." He credited "the expansion of our health system joint ventures" and higher commercial insurance rates.
- Imaging Center Q3 Adjusted EBITDA (operating profit before one-offs): $102.0 million, up 25.3% from a year ago
- Full-year Imaging Center revenue plan: raised $15 million at the middle of the range, the third raise this year
- Hospital partnership activity: a $7.5 million gain from contributing imaging centers into joint ventures
The outpatient group generated more profit in the third quarter alone than the prior full-year outlook implied for an average second-half quarter ($92.9–$99.4 million by our math). That beat shows the prior plan was cautious, so the company raised its full-year targets even while adding $5 million to its equipment spending plan.
What to watch: fourth-quarter Imaging Center Adjusted EBITDA against the $95.4 million implied by the new full-year outlook. Another beat above that implied level would show that hospital partnerships and center openings are still running ahead of management's budgeting.
High-Value Scans Take Over 30% of Volume
RadNet wants more of its patients to come in for complex, higher-priced exams — MRI, CT and PET/CT scans, which it calls advanced imaging — rather than basic X-rays. In the third quarter, advanced imaging passed three-tenths of all procedures for the first time, rising 2.3 percentage points from a year ago to 30.6%.
At centers open at least a year, advanced scan volume grew 8.9% while total scan volume including routine exams grew 3.2%. Because the comparison quarter last year was already strong at 9.9% growth, holding near 9% proves that patient demand for complex scans is durable and not just the result of buying new clinics.
What to watch: same-center advanced imaging volume growth in the fourth quarter. Holding the 8% to 10% range would confirm that existing clinics can keep shifting toward higher-paying exams as acquisition comparisons get tougher next year.
Faster Integration Lifts Software Profit Outlook
Digital Health, RadNet's division that sells radiology software and artificial intelligence tools under the DeepHealth brand, has suffered lower margins this year after buying money-losing businesses like Gleamer. This quarter, Berger raised the division's full-year Adjusted EBITDA plan by $1 million, citing "effective expense management and faster-than-projected integration of acquired operations".
Segment Adjusted EBITDA rose 22.9% from the second quarter to $3.05 million, though it still sat 11.8% below last year's third quarter. Raising the outlook argues against the concern that integrating Gleamer would drag down software profits all year, but one quarter and a $1 million raise only fade that concern rather than settling it.
What to watch: fourth-quarter Digital Health Adjusted EBITDA, which by our math must reach $5.17 million to hit the middle of the new $11–$13 million plan. Delivering that step-up would prove the acquired software teams can generate profit at scale.
Positives this quarter didn't test
Two standing growth drivers in the software division got no new numbers in the earnings release because RadNet discloses them on its conference call and in its quarterly filing.
- Digital Health annual recurring revenue (ARR, the yearly value of subscription contracts) and contract pipeline: $105.5 million and over $224 million last quarter; the quarterly filing will show whether ARR is on track for the $140 million year-end target.
- AI automated report drafting across RadNet centers: targeted to reach 15% of scan volumes by year-end after July's breast ultrasound clearance; the conference call will update deployment progress.
🐻 Bear Case
Software Sales Need a Steep Fourth-Quarter Jump
Berger highlighted 32.6% year-over-year revenue growth in Digital Health as a key driver of the quarter's record results. That annual comparison includes acquired businesses that were not in the base for the full period last year, and sequential progress was much slower.
Digital Health revenue edged up just 1.5% from the second quarter, from $32.4 million to $32.9 million, while year-over-year growth stepped down from 56.5% as the division lapped last July's iCAD acquisition. Nine-month revenue stands at $94.5 million, yet the company kept its full-year target at $135–$145 million.
By our math, reaching the middle of that full-year plan requires $45.5 million of fourth-quarter revenue — a 38.3% jump in a single quarter after a 1.5% move in the third. Because the release does not separate underlying software sales from acquired revenue, the small sequential gain leaves open how fast the software business is growing on its own.
What to watch: fourth-quarter Digital Health revenue against the $40.5 million needed just to reach the bottom of the full-year outlook. A shortfall would show that customer installations are converting into revenue more slowly than management budgeted.
Operating Costs and Partner Shares Cut Net Profit
While Adjusted EBITDA — which leaves out stock compensation, equipment losses, acquisition fees, and $5.6 million of DeepHealth software research — rose 23.8%, net income attributable to RadNet stockholders fell 23.3% to $4.2 million ($0.05 per share). For the first nine months, the net loss widened to $21.8 million from $18.1 million.
- Cost of operations (clinic staff, radiologist fees, and supplies): 86.5% of revenue, up 0.4 percentage points from a year ago
- Profit paid to joint-venture partners (noncontrolling interests): $15.0 million, up from $8.5 million a year ago
- Deal and legal charges: $8.3 million for acquisition earn-out adjustments, $2.7 million in transaction costs, and $2.8 million for legal settlements
Excluding one-offs, adjusted net income rose 27.1% to $23.8 million ($0.30 per share). Still, day-to-day clinic operating costs grew slightly faster than revenue, and expanding hospital joint ventures means hospital partners take a larger slice of the bottom line.
What to watch: cost of operations as a share of revenue in the quarterly filing's same-center breakdown. It will show whether radiologist reading fees and technologist wages are still absorbing the margin gain from higher-priced scans.
Risks this quarter didn't answer
Three standing regulatory and reimbursement concerns could not be read from the third-quarter earnings release.
- 2027 Medicare reimbursement rates: management previously said it hoped to give more certainty on the November call after the government's final rule.
- Commercial insurance payment for AI billing codes (T-codes): no collection or volume figures appeared in the release.
- FDA clearances for new AI tools (spine MRI, chest X-ray, lung CT, vascular ultrasound): needed to reach 50% automated reporting by mid-2027, with no regulatory update in the release.
👓 Other Themes
Pending ONRAD Acquisition Adds Teleradiology
On October 26, RadNet agreed to acquire ONRAD, a provider of remote radiology reading services. Berger said "The inbound interest from current joint venture partners and potential new partners and customers has exceeded our expectations." Because the deal has not closed yet, the release did not disclose the purchase price, revenue contribution, or effect on the 2026 outlook.
💲 Other KPIs
Leverage stepped down from 1.80x at the end of the second quarter, though it remains above the 1.0x level from a year ago after $315.7 million of acquisitions in the first nine months. RadNet finished the quarter with $750.6 million in cash against $1.33 billion of total debt and finance leases ($580.0 million of net debt by our math).
Money owed by insurers and patients for completed scans rose 18.2% from a year ago by our math, growing more slowly than the 22.1% increase in third-quarter revenue. Slower receivables growth relative to sales helped operating cash flow for the first nine months climb 22.8% to $263.6 million.
The weighted average diluted share count rose 2.3% from 77.4 million a year ago and 0.6% from 78.7 million in the second quarter. The diagnostic imaging group did not buy back stock during the first nine months, issuing shares instead for employee stock compensation ($51.9 million year-to-date) and acquisitions.
🔮 Guidance
Raised. The middle of the range moved up $15 million to $2,410 million, about 23.8% above last year by our math. It is the third raise in three quarters, following increases of $30 million in the first quarter and $15 million in the second.
Raised. Management lifted both ends by $5 million, the third straight $5 million increase this year (+$5M, +$5M, +$5M). By our math, the $356.5 million middle of the range leaves $95.4 million for the fourth quarter — up 15.2% from a year ago, but below the third quarter's $102.0 million.
Raised. The outpatient business added $5 million to its full-year equipment and clinic build-out budget after holding it at $165–$175 million for the first two quarters of the year. Figures are net of equipment sales and New Jersey joint-venture spending.
Unchanged. The full-year net cash interest plan stays at a $50.5 million middle of the range after a $3 million increase last quarter following June's debt borrowing.
Raised. Both ends of the range moved up $5 million, the third raise this year (+$7M, +$3M, +$5M). RadNet defines this measure as segment Adjusted EBITDA minus total capital expenditures and cash interest, so the higher profit target matched the higher equipment budget while leaving extra cash.
Unchanged. The software division's revenue plan has stayed at a $140 million middle of the range all year, or 51.0% growth over 2025 by our math. With $94.5 million delivered in the first nine months, the plan leaves $45.5 million for the fourth quarter — up 63.1% from a year ago and 38.3% above the third quarter.
Raised. Management lifted the software profit target (measured before DeepHealth cloud and AI research costs) by $1 million for the first time this year. With $6.8 million earned through September, the $12 million middle of the range leaves $5.2 million for the fourth quarter by our math, up 4.6% from a year ago.
Unchanged. Spending on DeepHealth cloud and generative AI software development not recorded on the balance sheet remains planned at $18 million at the middle of the range. Nine-month spending reached $15.2 million, leaving $2.8 million for the fourth quarter by our math vs $5.6 million in Q3.
Raised. The software division increased its capital spending plan by $1 million at both ends after keeping it unchanged in the first two quarters.
Unchanged. The $1 million increase in Digital Health Adjusted EBITDA was offset by the $1 million increase in segment capital expenditures, leaving the cash flow outlook before cloud research costs at a $1 million middle of the range.
Unchanged. Including the $17–$19 million of DeepHealth software research expenses, the division still plans for an $18 million cash outflow at the middle of the range for the full year.
❓ Key Questions
Where did Digital Health ARR finish the third quarter?
Recurring revenue was $105.5 million in June, and management targets over $140 million by year-end. Because third-quarter segment revenue grew only 1.5% from the second quarter to $32.9 million, investors need the Q3 ARR figure and organic growth rate to judge the fourth-quarter ramp.
What drives the implied 38% Q4 jump in software revenue?
Reaching the $140 million midpoint of the Digital Health revenue outlook requires $45.5 million in the fourth quarter, up from $32.9 million in the third. How much comes from signed backlog going live versus one-time license sales or intercompany charges to RadNet clinics?
What are the financial terms of the pending ONRAD acquisition?
Management said customer and hospital partner interest in ONRAD has exceeded expectations, but gave no financial figures. What is the purchase price, how much revenue and profit does ONRAD generate today, and when will the deal close?
How did the final 2027 Medicare rule treat imaging centers?
Last quarter, finance chief Mark Stolper said he hoped to provide certainty on 2027 Medicare payment rates on the November call. Investors need the exact dollar impact on RadNet's 2027 revenue and whether hospital outpatient cuts stayed in the final rule.