How does iPad battery health remain 99% after 134 cycles?

I don't doubt your observation at all - and, as already explained, you are simply lucky to have one of the better batteries with a higher than expected initial capacity. Your iPad doesn't have a fault; it is working exactly as designed, but with a better than expected battery.

The displayed Battery Health value is not an absolute, but is a calculated estimate based upon a number of factors. The value that you see is an integer number, that despite the initial capacity being higher than expected, will remain at 100% until the actual capacity falls below the battery's design specification.

My own iPhone 17 Pro is very similar to your iPad - in that it still shows 100% Battery Health, albeit with fewer full charge cycles, after 11 months of use.

While battery health can be influenced by a variety of factors, you might reasonably anticipate that the indicated health will reduce by 1% for each 50 full charge cycles - one cycle being any combination of charging that together sums to a 100% charge. As stated above, the indicated battery health is reported as an integer value, rounded down, starting at 100% health - even though the initial capacity is slightly higher.

Beyond the "as new" battery capacity, which will vary by a few percent between devices, many factors can influence the overall battery health. High ambient temperatures can permanently reduce the battery's ability to retain full charge - as can maintaining the battery at 100% charge for very long periods of time that leads to chemical aging of the battery. Limiting the battery charge to ~80% of maximum may, in some circumstances, reduce the chemical aging effect.

You should note that the iPad will periodically fully charge the battery - regardless of iPad settings - in order to maintain battery charge calibration.

An iPad battery is rated to retain 80% of its original capacity (when new) after 1000 full recharge cycles. Any combination of charging that together sums to 100% equates to one full charge cycle (e.g., 50% + 20% + 20% + 10% = 100% = 1 full charge cycle). As such, simple math suggests that Battery Health will decline at 1% for each 50 full charge cycles.

For 134 charge cycles, you might reasonably anticipate a ~3% reduction in Battery Health - but this is offset by the initially higher battery capacity of the battery installed in your iPad. When the actual capacity falls below the expected design capacity, you might expect to see the estimated battery health fall in line with expectations.

LotusPilot is entirely correct. Another way to look at it:

A battery is a chemical device, and chemistry is generally pretty variable and uncertain, as well as being messy analog, not predictable digital. Apple specs the battery capacity to remain above 80% for 500 full charge cycles (1,000 for iPhone 15 and newer and iPads), but that is a minimum requirement; there is no published maximum expected capacity. So sometimes batteries will perform much better than that minimum specification, and sometimes the change in maximum capacity won't be linear. There is no way to predict in advance what the real-life performance of any specific battery will be.

All devices have a specification for the battery. As an example, for the iPhone 14 Pro that is 3200 milliampere-hours (MaH). So the battery monitor is calibrated for 100% at that value. But there are variations in manufacturing, so some batteries will have less capacity, and some will have more. Suppose your battery had, say, 3520 MaH capacity (10% over standard). That would still show as 100% (even though it was actually 110%), but as it aged the health would stay at 100% until it fell below 3200 MaH. This would appear to you as if the battery had fabulous life, until suddenly it didn’t.

Not insane - just lucky...

Due to manufacturing tolerances, no two Li-ion batteries are the same. While batteries are manufactured to a specification, their initial maximum capacity will vary by a small degree.

Apple's Battery Health is calculated on the basis of a minimum capacity when new - this minima being used as the 100% baseline. If you are lucky - as you clearly are - the battery installed in your iPad exceeded the initial minimum capacity (when new) by some positive margin, its initial capacity being measured against the baseline (i.e. your battery's initial capacity exceeded the 100% measurement baseline).

As you might reasonably anticipate your battery health being depleted by 1% for each 50 full recharge cycles, this might suggest that your iPad battery had an initial capacity of ~102% (as compared with Apple's "baseline" minima).