DexCom, Inc. (DXCM) Earnings

Management highlights

### Core Strategic Priorities - CEO Jake Leach reaffirmed DexCom's three core priorities for its next growth phase: 1) become the premier glucose sensing solution for all people with diabetes, 2) set the global standard for customer experience, and 3) expand international market share. - The company held its 2026 Investor Day during the quarter, where it shared a 5-year strategic and financial roadmap, including a $1 billion share repurchase authorization to be executed in 2026, and outlined capital allocation plans prioritizing organic product development and selective tuck-in acquisitions to accelerate the technology pipeline. ### Clinical & Reimbursement Progress for Type 2 Non-Insulin Markets - The company released full positive results from the CONNECT randomized controlled trial for non-insulin type 2 diabetes patients at the 2026 American Diabetes Association Scientific Sessions. The trial of nearly 300 participants found a 0.9% differential A1C improvement in the DexCom CGM arm versus control, 5 additional hours per day in normal glucose range, and a 97% median sensor wear rate over 26 weeks, with the largest improvements seen in patients using only GLP-1 therapies. - As of summer 2026, all four of the largest U.S. commercial PBMs now offer coverage for non-insulin type 2 diabetes patients, representing reimbursement access for more than 7 million people in this segment. The CONNECT data has been submitted to CMS to support national coverage expansion for the 12.5 million Medicare-age people in the U.S. non-insulin type 2 population. ### Product Development & Commercial Launches - The redesigned consumer-focused Stello app launched broadly in July 2026, featuring new AI-driven insights and enhanced food logging capabilities, and serves as the foundation for the future evolution of DexCom's G Series app platform. - The DexCom Smart Basal personalized basal insulin titration pilot is ongoing with key opinion leaders, with early results showing patients reach optimal basal doses in an average of 3 weeks, compared to the typical 12+ weeks in standard care. - The G7 15-day system has completed integration for Tandem pump users (including Mobi), making it available to all adult U.S. G7 customers. G7 net promoter scores (NPS) have increased for three consecutive quarters, and the company remains on track to convert nearly 50% of the U.S. customer base to G7 15-day by the end of 2026. Health Canada became the first international regulator to approve G7 15-day, with launch planned for H2 2026. - DexCom was selected as the first participant in the FDA's Tempo digital device pilot, which will allow the company to test CGM for prediabetes screening and earlier metabolic health intervention, addressing the large undiagnosed prediabetes population in the U.S. - The company completed the acquisition of Nutrisense, a nutrition insights platform built on CGM data, during the quarter, to enhance personalized customer insights and metabolic health offerings across its product portfolio. ### Operational & Financial Execution - Gross margin improved 400 basis points YoY to 64.1% in Q2 2026, driven by manufacturing efficiencies, improved quality performance, and mix benefits from the G7 15-day transition. Operating income was $328.3 million (25.1% of revenue), up from $221.8 million (19.2% of revenue) YoY, with solid operating expense leverage despite pre-production investments in the new Ireland manufacturing facility. - Free cash flow in H1 2026 exceeded $600 million, more than double H1 2025 levels. The company repurchased $600 million of stock in Q2 2026 under the 2026 $1 billion repurchase program. Ending cash and cash equivalents totaled approximately $1.9 billion.

Guidance

- Full year 2026 revenue guidance was updated to a range of $5.18 billion to $5.25 billion, representing 11% to 13% YoY reported growth. The midpoint of the guidance range was raised, with organic growth expectations increasing more than 50 basis points at the midpoint after excluding a $15 million negative impact from recent foreign exchange movements. - Full year non-GAAP gross profit margin guidance was raised to approximately 64%. - Full year non-GAAP operating profit margin guidance was increased to a range of 23.5% to 24%. - Full year adjusted EBITDA margin guidance was increased to a range of 31.5% to 32%. - The base case timeline for a CMS non-insulin type 2 coverage decision remains unchanged: a decision is expected by the end of 2026, with coverage taking effect in mid-2027.

Segment performance

DexCom operates two core geographic segments for its continuous glucose monitoring (CGM) product portfolio: U.S. and International. In Q2 2026, worldwide total revenue was $1.31 billion, representing 13% year-over-year (YoY) reported growth and 12% organic YoY growth. - U.S. Segment: Revenue totaled $933 million, up 11% YoY, accounting for 71.2% of total worldwide revenue. The segment saw strong sequential growth in new customer starts and ongoing share gains across core patient categories. - International Segment: Revenue totaled $375 million, up 19% YoY reported and 16% YoY organic, accounting for 28.8% of total worldwide revenue. Strong performance was concentrated in markets with recent reimbursement access expansions, including France and Canada. The segment launched DexCom Flex, a new 15-day sensor for type 2 non-insulin markets, in Germany during the quarter.

Risks & headwinds

- Foreign exchange rate volatility could negatively impact reported international revenue and overall annual results, with an expected $15 million headwind to H2 2026 international revenue already incorporated into updated guidance. - Higher than expected resin and freight costs tied to crude oil price movements could create pressure on gross margins, though recent oil price impacts have been in line with prior expectations. - The ramp-up of the new Ireland manufacturing facility will create near-term cost headwinds in Q3 2026, as new hires are trained and production lines are activated before full-scale output begins, temporarily reducing gross margins relative to underlying performance trends. - Slower than expected provider education and awareness of existing commercial reimbursement for non-insulin type 2 diabetes could delay near-term adoption growth in this segment. - Final CMS coverage decisions for non-insulin type 2 diabetes could include unexpected eligibility restrictions that limit near-term adoption growth. - Actual future results may differ materially from forward-looking statements due to competitive, regulatory, and operational risks outlined in the company's SEC filings.

Analyst Q&A

• Q: What is driving the recent sequential uptick in U.S. new patient starts, and what is the mix across patient segments? /

  A: Growth was broad-based across all segments: type 1, intensive type 2, basal type 2, and non-insulin type 2, with a small sequential step-up even in type 1 after years of stable penetration. Key drivers include rising G7 15-day customer satisfaction, with NPS increasing for three consecutive quarters, improved product reliability and reduced out-of-box failure rates, expanded coverage, and reduced administrative barriers like prior authorization. Easier onboarding and positive word-of-mouth around the extended 15-day wear time have also accelerated adoption.

• Q: What is the current status and timeline for the G8 next-generation sensor program? /

  A: The G8 development timeline remains fully intact, with the product on track for launch around the end of 2027 to early 2028, pending regulatory review. G8 will deliver a step-change improvement in accuracy and reliability, will be half the size of G7 in both footprint and thickness, and is built as a multi-analyte platform that will support future expansion into ketone, potassium, and other metabolic health measurements after the initial glucose-focused launch.

• Q: How has G7 15-day conversion progressed exiting Q2, and when will the full margin benefit of this mix shift be realized? /

  A: Conversion is progressing exactly in line with prior expectations, with incremental adoption accelerating in H2 2026 after the recent completion of Tandem pump integration. The full incremental margin impact will be most meaningful in 2027, when the 50% conversion target will serve as the starting base for the year. The margin improvement from the 15-day transition will be a multiyear trend as conversion expands to international markets and older products are fully sunsetted, with steady incremental gains rather than a one-quarter step to peak impact.

• Q: What have been the early reactions to the CONNECT trial results, and how will this impact adoption of CGM in non-insulin type 2 diabetes? /

  A: The trial results strongly resonate with providers because they prove high patient utilization (97% wear in the trial) and meaningful clinical benefits for this broad patient segment, using the latest G7 technology rather than older product generations. The data adds Level A evidence to the existing body of real-world data, which will be used globally to drive reimbursement expansion. Early feedback confirms the results reinforce the case for broad coverage, as the trial demonstrates product benefit across all type 2 medication regimens.