Dexcom (DXCM) Q3 2026 earnings review
Dexcom's US sales speed up, but overseas growth slows sharply
Dexcom, the maker of continuous glucose monitors, sped up in the United States and expanded its profit margins while overseas sales slowed down. Revenue grew 11% to $1.34 billion as US growth picked up to 14%, and gross margin excluding one-offs reached 65.1% on the shift to longer-lasting 15-day sensors. Chief executive Jake Leach lifted the full-year revenue and operating profit outlook again and announced a new $1 billion share buyback.
| Sales from businesses owned a year ago | +11% $1.345B reported (+11.2% from a year ago) |
|---|---|
| Gross margin, excluding one-offs | 65.1% +3.8 percentage points from a year ago |
| Profit per share, excluding one-offs | $0.73 +20% from a year ago |
| Full-year revenue outlook | Raised $10M middle of the range: 12.1% growth |
⚖️ Verdict: 🟢 Bullish
The story got better because domestic sales accelerated and the 15-day sensor lifted gross margin almost a percentage point above what the prior second-half plan pointed to. The caution: international underlying sales growth dropped from 16% last quarter to 5%, and keeping the full-year gross margin target at 64% means fourth-quarter margin steps down to about 63% by our math as the new Ireland factory turns on.
The question now is whether the slowdown to 5% overseas growth and 10% implied fourth-quarter company growth is just a hard comparison against last year's insurance wins or a lasting cooldown. One view is that expanding US insurance coverage for Type 2 diabetes is building a wave of demand; the other is that total growth keeps stepping down each quarter. A Medicare coverage decision due before year-end and fourth-quarter overseas sales will settle it.
🐂 Bull Case
Longer-Lasting Sensors Lifted Profit Margins
Dexcom is moving customers to its G7 15 Day system, a continuous glucose monitor (CGM) sensor worn for 15 days instead of 10. Because monthly insurance payments stay the same while patients use fewer sensors, manufacturing costs drop. Chief executive Jake Leach said the medical device maker delivered "strong revenue growth and margin progression", and it also "secured first two G7 15 Day international regulatory clearances".
- Gross margin, excluding one-offs: 65.1%, up 3.8 percentage points from a year ago
- Cost of making the products: 35.7% of sales, down 3.8 percentage points
- Research and development costs: 12.0% of sales, down 1.0 percentage point
- Selling and administrative overhead: 27.9% of sales, up 0.5 percentage points
Operating profit margin, excluding one-offs, rose 2.7 percentage points to 25.3% because factory savings outweighed slightly higher overhead. That allowed the California group to raise its full-year operating profit outlook for a third straight quarter.
What to watch: the share of US customers on the 15-day sensor by year-end. Reaching the target of nearly half the user base would give 2027 a strong profit boost.
US Sales Accelerated to 14% Growth
The United States makes up nearly three-quarters of Dexcom's business and carries its main growth driver: commercial insurance coverage for people with Type 2 diabetes who do not use insulin. All four of the largest US pharmacy benefit managers now cover the sensors for these patients. US revenue rose 13.8% from a year ago to $969.8 million, picking up speed after three straight quarters of 11% growth.
Sales through US distributors drove the acceleration, rising 14.1% to $933.1 million, while direct sales to consumers grew 8.6% to $36.7 million. Because the domestic business sped up against a tough 21% comparison from a year ago, total company revenue grew 11.2% to $1.345 billion even as overseas growth slowed.
What to watch: fourth-quarter US revenue growth against the 9.6% total company rate implied by the full-year outlook. Keeping US growth in the low teens would show that commercial insurance wins are turning into prescriptions.
Finished One $1 Billion Buyback, Started Another
Dexcom turned share buybacks into a regular programme this year. After spending $600 million in the second quarter under a $1 billion plan approved in May, the sensor maker added $405.4 million to treasury stock in the third quarter, by our math finishing that authorisation. Alongside the results, the board approved a new share repurchase authorisation of up to $1.0 billion.
Those purchases cut the diluted share count, excluding one-offs, by 6.0% from a year ago to 375.8 million shares. Because there were fewer shares, profit per share excluding one-offs rose 19.7% to $0.73, growing much faster than the 13.4% rise in net profit.
What to watch: the pace of purchases under the new $1.0 billion authorisation in the annual filing. Steady buying would keep profit per share growing faster than net income in 2027.
Published Clinical Trial and Updated Stelo App
To win government and private insurance coverage for patients who do not take insulin, Dexcom needs medical proof that its sensors improve health. After the quarter ended, The New England Journal of Medicine published its CONNECT clinical trial, "showcasing outcomes driven by Dexcom G7 that redefine the standard of care for people with Type 2 diabetes not on insulin".
For consumers paying out of pocket, the group launched a redesigned app for Stelo, its over-the-counter glucose sensor, with "enhanced glucose insights, simplified meal logging, and more detailed nutritional information". The peer-reviewed study backs the company's application for US Medicare coverage, while the app update supports consumer retention.
What to watch: a response from the Centers for Medicare and Medicaid Services (CMS), the US government health agency, by the end of 2026. Approval would open coverage to millions of older Americans starting in mid-2027.
🐻 Bear Case
International Growth Slowed to 5%
"This quarter, we continued to build momentum across the business," chief executive Jake Leach said. That held true in the US, but international revenue grew just 4.8% to $374.7 million, and underlying sales from businesses owned a year ago also rose 5%. Overseas underlying growth had run at 18% a year ago, 17% in the first quarter, and 16% in the second quarter.
International distributor revenue rose 3.4% to $214.9 million, while international direct sales grew 6.9% to $159.8 million. A hard comparison against last year's insurance wins overseas explains part of the slowdown, and currency moves trimmed $1.7 million from total revenue. However, dropping from 16% underlying growth to 5% in a single quarter challenges the company's long-term ambition to make international larger than the US.
What to watch: international underlying sales growth in the fourth quarter, when the year-ago comparison eases from 22% reported growth to 18.5%. A stay in the single digits would show that overseas demand is cooling beyond the tough comparison.
The Outlook Points to a Fourth-Quarter Margin Drop
Dexcom kept its full-year gross margin outlook, excluding one-offs, at roughly 64% even after delivering 65.1% in the third quarter and 64.3% across the first nine months. By our math, hitting 64% for the year means fourth-quarter gross margin drops to about 63.2%, down nearly 2 percentage points from the third quarter.
The company is opening a new factory in Ireland late this year, and when production lines turn on, fixed factory costs and equipment depreciation move into cost of sales while initial output is still small. By our math, the raised full-year operating margin outlook of roughly 24% also points to 23.3% in the fourth quarter, down from 25.3% in the third.
What to watch: fourth-quarter gross margin in the full-year report. A drop below 63% would show that starting up the Ireland plant costs more than the 15-day sensor saves.
Inventory Keeps Growing Faster Than Sales
Dexcom is managing two product shifts at once: phasing out its older G6 sensor and moving G7 users from 10-day to 15-day wear. In the first half of the year, those transitions led to $84.2 million in charges for excess and obsolete stock. In the third quarter, inventory on the balance sheet rose again to $770.7 million.
Stock on hand is now up 27.6% from a year ago and up 22.5% since the end of December, while third-quarter revenue grew 11.2%. Building stock ahead of the Ireland factory launch and the 15-day rollout ties up cash, and if customers switch products faster or slower than planned, Dexcom faces further write-downs of older sensors.
What to watch: inventory reserve charges in the third-quarter 10-Q filing. Another large write-down on top of the $45.6 million recorded in the second quarter would show that older stock is expiring unsold.
Risks This Quarter Didn't Answer
The earnings release gave no update on five standing concerns and watch items that normally wait for the conference call or the quarterly 10-Q filing.
- Medicare non-insulin coverage decision: no update yet; a response from CMS is due before the end of 2026.
- US commercially covered Type 2 non-insulin lives and new patient starts: not in the release; commentary on the call will show if the pool grew past 7 million lives.
- Stelo consumer revenue: omitted again after reaching $100 million in its first year in the third quarter of 2025; any dollar figure would show if the redesigned app sped up sales.
- March 2025 FDA warning letter and legal disputes: unmentioned in the release; the 10-Q legal and regulatory notes will show if the warning letter has closed.
- Medicare competitive bidding and lower sensor usage among non-insulin patients: long-term pricing and revenue-per-patient risks that remain untested this quarter.
👓 Other Themes
Last Year's Investment Gain Distorts Reported Profit
Reported net income fell 3.1% from a year ago to $275.1 million even though operating profit jumped 34.9% to $327.2 million. That happened because the third quarter of 2025 included an $82.7 million gain on equity investments inside other income. Excluding that one-off gain and minor transition costs, net profit rose 13.4% to $275.0 million.
💲 Other KPIs
Money owed by customers fell 5.7% from last quarter and rose 6.9% from a year ago, growing more slowly than the 11.2% rise in revenue. Collecting bills faster than sales grow brings in cash and offsets part of the cash tied up in higher inventory.
Total cash and short-term investments dipped from $1.95 billion in the second quarter and $2.00 billion at the end of 2025 as the medical device maker funded its $1.0 billion share buyback. After subtracting $1.24 billion of convertible debt, net cash stands at $574.2 million by our math.
Sales through third-party distributors grew 11.9% from a year ago and made up 85.4% of total revenue. Direct sales to patients and clinics grew 7.2% to $196.5 million, held back by slower overseas growth where most direct sales happen.
🔮 Guidance
Raised. Dexcom lifted the bottom of the range by $20 million, pushing the middle of the range up $10 million to $5.225 billion, or 12.1% growth. It is the second $10 million raise in two quarters: +$0M, +$10M, +$10M. By our math, that leaves $1.380 billion for the fourth quarter, or 9.6% growth from a year ago versus 11.2% in the third quarter.
Raised. The plan now points to roughly 24% for the year, up from 23.5–24% last quarter and the third raise since the initial 22–23% target. By our math, after 24.2% across the first nine months and 25.3% in the third quarter, the outlook leaves about 23.3% for the fourth quarter as Ireland factory costs begin.
Raised. Profit before interest, taxes, depreciation, amortisation and stock pay (Adjusted EBITDA) is now planned at roughly 32% of sales, up from 31.5–32% last quarter and the third straight increase. By our math, after 32.4% in the third quarter, the full-year target implies 32.7% in the fourth quarter, because higher factory depreciation does not hit this measure.
Unchanged. The sensor maker kept its full-year target at roughly 64%. Because gross margin excluding one-offs reached 65.1% in the third quarter and 64.3% over the first nine months, holding the full-year target at 64% leaves about 63.2% for the fourth quarter by our math, reflecting start-up costs at the new Ireland plant.
❓ Key Questions
What caused international growth to drop from 16% to 5%?
Last year's third quarter was a tough 18% underlying comparison, and currency hurt earlier in the year, but a 11-percentage-point drop in underlying overseas growth is sharp. Investors need to know how much came from the comparison versus slower patient additions or price pressure.
How much is Stelo contributing to 2026 sales after the app relaunch?
Dexcom reported over $100 million of Stelo revenue in its first year through September 2025, but has given no dollar figure in 2026 despite launching a redesigned app and buying Nutrisense.
What were inventory write-downs in the third quarter?
Inventory on the balance sheet rose to $770.7 million, up 28% from a year ago against 11% sales growth. In the first half, the company recorded $84.2 million in charges for obsolete stock during the G6 phase-out.
Was the $200 million credit facility renewed in October?
The release notes that the revolving credit facility remained undrawn on September 30, 2026, and says Dexcom will "expand production capacity and explore new market opportunities", but the facility was scheduled to mature on October 13, 2026.
How many US Type 2 non-insulin patients are now covered and starting?
Commercial insurance coverage passed 7 million people in the second quarter, and US sales accelerated to 14% growth in the third. Disclosing the new-patient start count would show how fast that insured pool is converting into users.