Shares of DexCom, a leading provider of diabetes management equipment, saw a significant decline of 17% by mid-morning trading on Friday, following the release of the company’s third-quarter earnings report. The report, which was unveiled after market hours on Thursday, revealed strong financial performance but also included a cautionary outlook for the future.
In the third quarter, DexCom reported impressive revenues of $1.21 billion, marking a 22% increase year-over-year. This growth was fueled by a 21% rise in U.S. revenues and a similar 22% growth in international markets. The company also saw adjusted net income rise to $0.61 per share, a notable increase from $0.45 per share in the corresponding quarter of the previous year. Both revenue and earnings figures surpassed analyst expectations, indicating robust demand for DexCom’s products. Notably, the company’s Stelo wearable glucose biosensor achieved a significant milestone, generating $100 million in cumulative revenue within its first year on the market.
However, despite the solid quarterly performance, DexCom’s guidance introduced some uncertainty for investors. The company raised its full-year revenue outlook to a range of $4.63 billion to $4.65 billion, suggesting an overall growth of around 15%. On the other hand, DexCom adjusted its gross margin forecast downward to 61%, attributing the revision to difficulties with specific third-party components that have resulted in higher material discard rates during manufacturing processes. This increase in waste is putting pressure on profit margins.
Looking ahead to 2026, while DexCom did not provide detailed guidance, executives hinted during the earnings call that growth might fall short of analyst expectations. Jacob Leach, the company’s President and COO, suggested that growth would likely remain in the double-digit range but indicated that the upper limits might not align with current market projections.
Investors reacted negatively to the company’s outlook, with DexCom’s share price plummeting to levels not seen since before the pandemic. As of the latest session, the stock was trading at approximately $59.65, with a market capitalization of $27 billion. This sharp decline has raised questions about the stock’s value, particularly given its forward price-to-earnings ratio of around 28, suggesting that investors should approach with caution.
In light of the situation, analysts and market experts are weighing the prospects for DexCom. While the company has demonstrated strong quarterly results, the future outlook, coupled with potential margin pressures, has made the stock less appealing. Some analysts maintain a positive stance on DexCom, prompting discussions about investment strategies surrounding options trading for the upcoming years.
