Shares of diabetes management equipment provider DexCom (DXCM 14.60%) had tumbled 17% by 11:15 a.m. ET on Friday, according to data provided by S&P Global Market Intelligence. The culprit was the company's third-quarter earnings report, which was released after the market closed on Thursday.
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A solid quarter marred by a warning about 2026
DexCom reported revenue of $1.21 billion in the third quarter, up 22% year over year, with U.S. revenue growing by 21% and international revenue growing by 22%. Adjusted net income was $0.61 per share, up from $0.45 per share in the prior-year period.
Both metrics beat analyst expectations. DexCom's Stelo wearable glucose biosensor reached $100 million in cumulative revenue in its first year of availability.
DexCom's guidance was a mixed bag. The company boosted its full-year outlook for revenue to a range of $4.63 billion to $4.65 billion, which represents about 15% growth. However, it was forced to slightly lower its outlook for gross margin to 61%. Issues with certain third-party components identified earlier this year have led to a higher rate of materials being discarded in the manufacturing process, which is putting pressure on margins.
For 2026, while DexCom didn't provide specific guidance, management commentary during the earnings call suggests that growth is likely to come up short of analyst expectations. President and COO Jacob Leach explained: "I'm certainly in that double-digit range. But I think as we look at our range, the top end of our range is probably slightly below where -- the Street is today for our base case."
NASDAQ: DXCM
Key Data Points
Is DexCom a buy?
The stock market doesn't like DexCom's 2026 outlook despite a strong quarter, and the margin issues are likely a factor as well. DexCom stock is now trading at pre-pandemic levels, but the stock doesn't look like a bargain. With a forward price-to-earnings ratio of roughly 28, investors should tread carefully.
