Analysis: growth is now coming from price and seats, not from the same places

Set the second quarter of 2026 beside the second quarter of 2025 and the shape of the business changes. A year ago revenue grew 13.5% and the adjusted EBITDA margin expanded 110 basis points to 43.6%. This year revenue grew 5.7% and the margin contracted 180 basis points to 41.8%. The first quarter of 2026 sat between them, with revenue up 8.2% and the margin down to 50.5%. Two consecutive quarters of margin compression alongside decelerating revenue is a pattern, and the company attributes it to an investment cycle rather than to price or competition.

Where the growth comes from is the more useful question. The medical school net average ticket rose 3.9% over the year, to R$9,443 a month. Twelve month IPCA inflation was 4.64% in June 2026 on the central bank’s series, so the ticket rose slightly slower than consumer prices. That leaves volume as the driver, and the volume numbers diverge: operating seats grew 6.4% while the medical student base grew only 2.7%. Seats are approved capacity and students are enrolments, so a gap of that size means recently opened seats are still filling. Afya says as much when it describes the ongoing maturation of operating medical school seats. That maturation is a known quantity of future revenue at a known ticket, which is why the company can reaffirm full year guidance on a decelerating half.

The fastest growing lines are the smallest and the cheapest. Health sciences enrolments grew 18.0% and continuing education students grew 23.6%, but continuing education revenue grew only 4.6%, and the company explains the gap directly: the intake came in short term programmes that carry a lower average ticket per student. Medical practice solutions grew 20.4% in active payers and 1.5% in revenue. Both segments are adding users much faster than reais. Against R$1,499.4 million of medical school revenue in the half, neither changes the group’s revenue trajectory yet.

The capital return is the line that carries a condition. Distributing 105.8% of free cash flow to equity means the payout exceeded the period’s own generation: Afya paid out R$447.9 million against R$423.4 million generated, with the difference drawn from the cash position. The company frames this as a choice: capital goes to acquisitions when they clear its return thresholds and to shareholders when they do not. The Yduqs discussion, disclosed eleven days after the results, tests that framing, because a combination of that size would compete for the same capital.

Two disclosures qualify what the numbers establish. The first is a footnote to the seat table stating that reported medical school seats do not reflect any potential reductions resulting from ENAMED, the national medical examination. Seats are the asset behind the tuition line, and the company has flagged that the reported count may not be the final one. The second is the guidance assumption, stated plainly, that new students are successfully accepted for the second semester of 2026. Both conditions sit on the same variable.

A careful reader would look next at three things: the third quarter enrolment intake against that guidance assumption, whether the medical school ticket keeps rising more slowly than inflation, and whether the payout ratio stays above 100% now that a potentially large transaction is under discussion.

What the documents say

Afya Limited (NASDAQ: AFYA) reported second quarter net income of R$201.3 million, up 14.0% year on year, on revenue of R$972.1 million, up 5.7%. The Belo Horizonte medical education group published the results on 13 August 2026 and furnished them to the U.S. Securities and Exchange Commission on Form 6-K. Eleven days later it confirmed that it is in early stage discussions with Yduqs Participacoes S.A. about a possible business combination.

The quarter and the half

Adjusted EBITDA reached R$406.5 million, an increase of 1.4%, at a margin of 41.8%, which is 180 basis points below the same quarter of 2025. Basic earnings per share grew 16.7%. Stripping out acquisitions, revenue was R$969.3 million and adjusted EBITDA R$405.6 million at the same margin.

For the six months to 30 June 2026, revenue was R$1,984.8 million, up 7.0%, and adjusted EBITDA R$918.0 million, up 2.8%, at a margin of 46.2%, down 190 basis points. First half net income was R$463.1 million, up 6.8%, with basic earnings per share up 8.6%. Afya reported an operating cash conversion ratio of 87.8%, cash flow from operating activities of R$805.5 million and a cash position of R$1,006.5 million.

Shareholder distributions ran ahead of cash generation. The company returned R$447.9 million in the half, of which R$314.9 million was dividends, equivalent to 40% of its 2025 consolidated net income, and R$133.0 million was share repurchases covering 2.7 million shares, about 3% of shares outstanding under the current buyback programme. That total was 105.8% of free cash flow to equity of R$423.4 million. Afya said net debt excluding IFRS 16 was broadly stable against December 2025.

Undergraduate revenue was R$1,762.2 million in the half, up 7.4%. Medical school revenue was R$1,499.4 million, up 6.5%, on a 3.9% rise in the medical school net average monthly ticket, to R$9,443 from R$9,089, and a medical student base up 2.7% to 26,421 from 25,733. Operating medical school seats rose 6.4% to 3,768 from 3,543. Health sciences students grew 18.0% to 30,350 from 25,718. Continuing education revenue was R$143.9 million, up 4.6%, on a base of 56,237 students, up 23.6%. Medical practice solutions revenue was R$85.3 million, up 1.5%, with clinical management active payers up 20.4% to 50,499. The ecosystem counted 294,816 users.

Afya reaffirmed 2026 guidance of R$3,950 million to R$4,100 million in revenue, R$1,700 million to R$1,800 million in adjusted EBITDA and R$340 million to R$380 million in capital expenditure, on the assumption that new students are successfully accepted for the second semester of 2026. It also noted that Moody’s reaffirmed its AAA.br national scale rating with a stable outlook on 5 May 2026.

The Yduqs approach

On 24 August 2026 Afya said that discussions with Yduqs regarding a potential business combination are at an early stage, following a material fact disclosed by Yduqs that day under Article 157, Paragraph 4 of Brazilian Law No. 6,404/1976 and CVM Resolution No. 44/2021. Afya said no binding agreement, contract or commitment has been entered into and no obligation assumed by either company or their shareholders or management teams, that there is no assurance any transaction will result, and that it does not intend to comment further unless disclosure is required or its board decides otherwise.