Diluted shares fell 2.2%. That is the oddest number in Encompass Health's latest report, because it helped earnings per share rise faster than the business itself.
In the three months ended June 30, revenue increased 9.6% to $1.6 billion, and net income rose 8.3% to $153.9 million. EPS climbed 10.8% to $1.54 as the diluted share count fell from 102.3 million to 100.0 million.
The growth came with a small margin squeeze. Net margin moved from 9.7% to 9.6%, so the company kept slightly less of each revenue dollar even as it produced more of them.
Management credits the top-line increase to both volume and pricing, not one magic lever. The latest 10-Q puts it this way:
"Net Operating Revenues Our consolidated Net operating revenues increased during the three months ended June 30, 2026 compared to the same period of 2025 primarily due to increased volumes and favorable pricing."
Encompass Health, 10-Q, Aug. 7, 2026
That gives the quarter a straightforward operating read: more patients and favorable pricing lifted sales. The per-share result adds a second layer, because the denominator shrank while earnings grew.
Costs kept some of that growth from reaching the bottom line. Salaries and benefits increased because of higher employee pay and benefits, more patient volume, and more full-time employees tied to development activities, the company said:
"Salaries and Benefits Salaries and benefits increased during the three and six months ended June 30, 2026 compared to the same periods of 2025 primarily due to salary and benefit cost increases for our employees and increased patient volumes, including an increase in the number of full-time equivalents as a result of our development activities."
Encompass Health, 10-Q, Aug. 7, 2026
The plain-English version is less tidy than the EPS line: growth is arriving with a larger operating workforce and higher employment costs. Other operating expenses also rose as a share of revenue, primarily from higher provider taxes and development costs. General and administrative expenses increased primarily because of higher costs associated with the company's Oracle Fusion enterprise-resource-planning transition in 2025.
Cash ended the period at $107.7 million, up 8.7% from a year earlier. Capital spending rose 19.6% on a comparable basis, so the balance-sheet snapshot includes both a higher cash balance and a faster-growing investment bill. The company does not disclose a cause for the cash change in the supplied figures.
This is not an isolated burst of expansion. Encompass Health's annual results show revenue rising from $4.8 billion in 2023 to $5.9 billion in 2025, while net margin improved from 7.3% to 9.5%. The latest period keeps the revenue-growth pattern intact, but its slight margin decline puts the cost of that expansion back in view.
The company's next quarterly report is the factual checkpoint for whether salaries and benefits continue rising faster than revenue, and whether the net margin remains near the latest 9.6% level.
The tension is simple: Encompass Health is growing, but EPS is getting extra help from fewer diluted shares while margins edge lower.