HURN Q2 Deep Dive: Mixed Segment Growth, Margin Compression, and Guidance Lift

Professional services firm Huron Consulting Group (NASDAQ:HURN) missed Wall Street’s revenue expectations in Q2 CY2025, but sales rose 8.1% year on year to $411.8 million. On the other hand, the company’s full-year revenue guidance of $1.66 billion at the midpoint came in 2.2% above analysts’ estimates. Its non-GAAP profit of $1.89 per share was 5.4% above analysts’ consensus estimates.

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StockStory’s Take

Huron Consulting Group’s second quarter results for 2025 were met with a negative market reaction, as revenue fell slightly below Wall Street expectations, despite year-over-year growth across all segments. Management attributed the quarter’s performance to ongoing demand in healthcare, education, and commercial consulting services, while highlighting softness in digital project conversions within healthcare. CEO Mark Hussey acknowledged the impact of recent regulatory legislation on client behavior, noting that the One Big Beautiful Bill Act has driven health systems to prioritize immediate financial stability over longer-term digital transformation initiatives.

Looking ahead, Huron’s updated guidance is rooted in continued momentum in performance improvement and advisory services, with integration of recent acquisitions expected to enhance future capabilities. Management raised its full-year outlook, citing a robust sales pipeline and strengthened visibility, especially in healthcare and education. CFO John Kelly emphasized, “As the pipeline has strengthened to record highs, that does provide additional visibility for us,” while also cautioning that integration costs from recent deals will temporarily offset earnings contributions through year-end.

Key Insights from Management’s Remarks

Management pointed to strong demand in core consulting offerings and successful integration of targeted acquisitions as key drivers of the quarter, while noting near-term margin pressures from regulatory changes and business mix shifts.

• Healthcare consulting demand: The healthcare segment saw ongoing demand for performance improvement, financial advisory, and strategy services, as hospitals and systems responded to regulatory changes and rising costs. However, digital transformation engagements experienced slower sales conversion, which management believes is temporary as clients focus on immediate budget needs.
• Education resilience: The education segment reported record sales conversion, driven by demand for operational strategy, technology infrastructure, and research administration solutions. Universities and research institutes are turning to Huron for help navigating uncertain regulatory and funding environments, leading to increased software and managed services adoption.
• Commercial segment surge: The commercial segment achieved the highest growth rate, fueled by the AXIA acquisition and robust demand for digital offerings. Excluding AXIA, organic digital revenue growth remained strong, underlining Huron’s position in enterprise performance management and data-driven consulting for multinational clients.
• Acquisition activity: Huron completed the Eclipse Insights acquisition (bolstering mid-revenue cycle expertise in healthcare) and announced the Treliant deal (expanding risk management and compliance offerings in financial services). These moves are part of a programmatic M&A strategy to add complementary capabilities and accelerate growth.
• Margin compression and cost headwinds: Despite operating income growth, overall operating margin declined due to higher compensation, legal, and M&A-related expenses, as well as a business mix shift toward lower-margin services and integration costs from recent acquisitions.

Drivers of Future Performance

Huron’s outlook for the balance of 2025 is built on demand for core consulting services, the contribution of recent acquisitions, and anticipated recovery in digital project pipelines.

• Shift toward consulting services: Management expects growth to be led by higher-margin consulting and performance improvement services, particularly in healthcare and education, as clients address regulatory and financial pressures. This trend is expected to persist until digital transformation projects regain momentum.
• Integration of acquisitions: The addition of Eclipse Insights and Treliant is anticipated to broaden Huron’s capabilities in healthcare revenue cycle optimization and financial services risk management. However, integration-related expenses are expected to neutralize earnings contributions for the remainder of the year, with accretive impacts projected for 2026.
• Margin and cost discipline: Ongoing initiatives in pricing and operational efficiency are expected to support sustainable margin expansion. Management acknowledges that near-term margin pressure will remain due to compensation costs, acquisition expenses, and a temporary mix shift, but believes long-term targets remain achievable.

Catalysts in Upcoming Quarters

In the quarters ahead, our analysts will track (1) the pace at which delayed healthcare digital transformation projects resume, (2) successful integration and margin impact of the Eclipse Insights and Treliant acquisitions, and (3) continued record sales conversion in the education segment despite regulatory uncertainty. The sustainability of improved pipeline visibility and margin recovery will be key themes.

Huron currently trades at $132.20, in line with $132.38 just before the earnings. Is there an opportunity in the stock?Find out in our full research report (it’s free).

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