Outset Medical (OM) Q3 2026 earnings review
Outset Medical's machine sales rebound, but cash costs still rise
Outset Medical, the maker of the Tablo kidney dialysis machine, returned to double-digit sales growth while its underlying loss widened slightly. Revenue rose 14% from a year ago to $33.6 million as console shipments jumped 26% and recurring sales of treatment cartridges and service grew 10%. Chief executive Leslie Trigg kept the full-year outlook unchanged, which by our math leaves about 19% growth for the fourth quarter at the middle of the range.
| Revenue | $33.6M +14% from a year ago |
|---|---|
| Console revenue | $10.5M +26% from a year ago |
| Recurring revenue | $23.1M +10% from a year ago |
| Full-year revenue outlook | Unchanged $125M–$130M (7% growth at middle of range) |
⚖️ Verdict: 🟢 Bullish
The story got better because both machine sales and recurring supply sales grew again after stalling for three quarters. That rebound takes pressure off the second-half ramp and makes the full-year revenue target easier to reach. One caution: operating costs excluding stock awards and lawsuit charges rose 9%, and cash burn reached $32 million through nine months against a $40 million annual ceiling.
The question now is whether third-quarter growth marks a lasting recovery in hospital demand or just the first wave of HCA Healthcare's fleet replacement against an easy comparison. If demand has broadened, fourth-quarter sales will clear the $34 million needed for the middle of the full-year plan and deferred service revenue will stop falling. Fourth-quarter results and the full-year 2027 outlook will settle it.
🐂 Bull Case
Machine Sales Lifted Revenue After Four Slow Quarters
Outset Medical sells Tablo, a compact dialysis machine that lets hospitals run kidney treatments with their own nurses instead of hiring outside clinics. Machine revenue had stalled for a year until the company signed a $40 million deal last quarter to replace older units at HCA Healthcare.
In the third quarter, console revenue rose 26% from a year ago and 10% from last quarter to $10.5 million. Chief executive Leslie Trigg said high customer retention is "expanding adoption of Tablo across our existing customer base and fueling new insourced dialysis partnerships with leading health systems". That console rebound lifted total sales 14% to $33.6 million, the highest quarterly total in the history supplied.
What to watch: fourth-quarter console revenue. The full-year plan still requires total revenue to rise again next quarter, which will show whether orders extend beyond the initial HCA shipments.
Treatment Supplies and Services Returned to Growth
Each Tablo machine uses single-use cartridges and maintenance plans, which Outset groups as recurring revenue. That stream had shrunk from a year ago in each of the prior three quarters, raising concern that hospitals were using their machines less often.
This quarter, recurring revenue grew 10% from a year ago to $23.1 million, and rose 4% from the second quarter. By our math, subtracting $10.5 million of console sales from $23.7 million of product revenue leaves $13.2 million of cartridge sales, up about 8% from a year ago. Service and other revenue rose 12% to $9.9 million. One catch is that the third quarter of last year was an easy comparison because customers held back cartridge orders then.
What to watch: cartridge revenue growth in the fourth quarter and the exact split in the quarterly filing. Growing again against a normal comparison period would show that machine usage is rising.
Service Profits Offset Lower Machine Margins
Outset has been working to make its maintenance and service contracts profitable so that a larger installed base lifts overall gross margin. For years, servicing the machines barely broke even and dragged down the profit made on consoles and cartridges.
- Service and other gross margin: 32.4%, up 7.6 percentage points from 24.8% a year ago
- Product gross margin: 44.2%, down 1.5 percentage points from 45.7% a year ago
- Total gross margin, excluding one-offs: 40.8%, up 0.9 percentage points from a year ago, but down from 42.2% last quarter
Because service costs stayed flat at $6.7 million while service revenue grew, overall gross margin rose from a year ago even as lower-margin consoles took a larger share of product sales.
What to watch: product gross margin in the fourth quarter. A further drop would show that fleet replacement deals carry lower prices than earlier console sales.
🐻 Bear Case
Hitting the Full-Year Target Still Needs a Record Fourth Quarter
Outset kept its full-year revenue forecast at $125 million to $130 million. With $93.1 million booked through the first nine months, the medical device maker still needs its largest quarter of the year at the end.
By our math, reaching the $127.5 million middle of the range requires $34.4 million in the fourth quarter, or 19% growth from a year ago. Even the $125 million bottom of the range requires $31.9 million, which is 11% growth from last year's fourth quarter. The third quarter's $33.6 million reading reduces the gap, so the target is closer than it looked three months ago, but hospital equipment orders at year-end have slipped before.
What to watch: fourth-quarter revenue against the $31.9 million needed for the bottom of the range. Falling short would mark a second straight year in which initial full-year plans proved too high.
Operating Costs Excluding One-Offs Rose and Prepay Balances Fell
"Third-quarter results demonstrated continued progress against our strategic priorities and solid sales execution across both capital and recurring revenue," chief executive Leslie Trigg said. While reported operating expenses fell 5% from a year ago, that drop came entirely from a $3.4 million reduction in employee stock awards.
- Operating expenses excluding stock awards and lawsuit costs: $24.2 million, up 9.2% from $22.1 million a year ago
- General and administrative expenses excluding one-offs: $7.0 million, up 2.4 percentage points of revenue to 21.0%
- Net loss excluding one-offs: $12.9 million, wider than $12.4 million a year ago
- Total deferred revenue (prepaid service contracts): $13.7 million, down 12.1% from a year ago and down $0.7 million from last quarter
Sales and marketing costs fell 11.1 percentage points of revenue on a reported basis, yet higher cash overhead kept the underlying loss from shrinking.
What to watch: deferred revenue on the year-end balance sheet. Another drop would show that new service contracts are not keeping pace with the revenue Outset recognizes each quarter.
Cash Burn Leaves Thin Cushion Above the Term Loan
Outset has promised to use less than $40 million of cash in 2026 and says its current reserves will last until it breaks even. The dialysis company used $10.3 million of cash in the third quarter, up from $9.5 million in the second quarter.
By our math, total cash, investments and restricted cash have fallen by $32.0 million over the first nine months to $140.7 million, leaving less than $8.0 million of room in the fourth quarter to stay under the $40 million annual ceiling. Against $98.4 million of term debt and $1.7 million of finance leases, net cash now stands at $40.7 million.
What to watch: fourth-quarter cash use. If year-end machine shipments tie up cash in unpaid customer bills, full-year cash burn could cross $40 million.
Risks this quarter didn't answer
Four standing concerns could not be checked in the earnings release because the details live in the quarterly filing or conference call.
- Next-generation Tablo rollout: the release gave no update on when the upgraded console moves from pilot testing to full commercial sale.
- Unpaid customer bills reserve: the allowance for credit losses on accounts receivable, which reached $6.8 million last quarter, awaits the filing's footnote.
- Loan covenant headroom: the minimum trailing revenue target under the amended credit agreement is disclosed only in the quarterly filing.
- Mexico tariff exposure: the release included no new detail on potential trade duties for consoles and cartridges made in Mexico.
💲 Other KPIs
Uncollected customer bills rose 7.3% from $28.3 million at the end of 2025. Revenue grew over the same stretch as machine shipments picked up in the third quarter, which ties up working capital until hospitals pay their invoices.
Stock on hand fell from $47.3 million in the second quarter and $47.6 million at the end of 2025. Drawing down existing parts and machines helped limit cash use during the third quarter as console deliveries rose.
The weighted-average share count rose 5.9% from 17.8 million a year ago and edged up from 18.6 million in the second quarter. Ongoing employee stock grants continue to add to the share base.
🔮 Guidance
Unchanged. Outset still plans for full-year sales to grow 5% to 9% from last year's $119.5 million. By our math, the $127.5 million middle of the range leaves $34.4 million for the fourth quarter, up 19.2% from a year ago and up from $33.6 million this quarter.
Unchanged. The dialysis group continues to target a full-year gross margin excluding stock awards in the "low-40% to mid-40% range". Through nine months, that margin sits at 42.2%. By our math, hitting a 42.5% full-year middle of the range implies a 43.3% margin in the fourth quarter, up from 40.8% in the third quarter.
❓ Key Questions
How much did HCA add to third-quarter console sales?
Console revenue jumped 26% to $10.5 million a quarter after Outset signed a $40 million replacement deal with HCA Healthcare. Knowing HCA's share will show whether new hospitals are also buying machines.
Why did overhead costs excluding one-offs jump 29%?
General and administrative expenses excluding stock awards and lawsuit charges rose to $7.0 million from $5.5 million a year ago, preventing the underlying net loss from narrowing despite 14% revenue growth.
Did the reserve for unpaid customer bills rise again?
The allowance for credit losses reached $6.8 million on $28.3 million of receivables last quarter. The third-quarter press release omits the allowance figure, which will appear in the quarterly filing.
Why is deferred service revenue falling while service sales grow?
Service and other revenue rose 12% from a year ago, yet deferred revenue on the balance sheet dropped 12% to $13.7 million. That gap raises questions about how much service work is billed one visit at a time.