Digital health came roaring into 2025 with its strongest quarter since mid-2022, raising a remarkable $5.3 billion in Q1 alone, according to The State of Digital Health Q1’25 Report from CB Insights.

Despite a 9% decline in deal volume, investor confidence soared—particularly for later-stage companies with clear regulatory traction and scalable AI platforms. The median deal size jumped to $6.4 million, signaling a preference for quality over quantity in a consolidating market.

A major driver of this funding spike? Mega-rounds. Deals over $100 million accounted for nearly half (46%) of all digital health capital this quarter, totaling $2.5 billion across just 11 transactions. AI-powered companies dominated these mega-deals, with 8 of the 11 featuring companies like Isomorphic Labs, Truveta, and Innovaccer. In total, 60% of all funding went to AI startups—up from 41% in 2024—underscoring the sector’s continued focus on automation, clinical documentation, and drug discovery.

M&A activity also picked up sharply, with exits rising 27% quarter-over-quarter to reach 51 deals—the highest since Q1 2023. The resurgence was largely U.S.-driven, with international M&A slowing in Europe and Asia. Notably, CentralReach ($1.6B) and Alto Pharmacy ($1.5B) led the way in billion-dollar acquisitions, reflecting strong buyer demand for platforms with proprietary data and high renewal rates.

Finally, Q1 brought six new digital health unicorns to the market—more than all of 2024 combined. Many of these, like Hippocratic AI and Abridge, are building AI-first solutions for provider workflows. OpenEvidence, which achieved unicorn status with only 21 employees, exemplifies the capital efficiency and innovation defining the current wave of healthtech success stories.