DexCom Stock Rises Despite Q1 Earnings Miss & Lower Margins

Core Insights - DexCom, Inc. reported first-quarter 2025 adjusted earnings per share (EPS) of 32 cents, missing the Zacks Consensus Estimate of 33 cents by 3% and matching the prior-year quarter's EPS [1] - Total revenues grew 12% year over year to $1.04 billion, beating the Zacks Consensus Estimate by 2%, driven by strong category demand despite short-term supply challenges [1][10] Revenue Details - Sensor and other revenues, which account for 96% of total revenues, increased 17% year over year to $997.2 million, while hardware revenues decreased 42% to $38.8 million [3] - U.S. revenues, representing 72% of total revenues, rose 15% year over year to $750.5 million, while international revenues improved 7% to $285.5 million [4] Margin Analysis - Adjusted gross profit totaled $596.2 million, up 4.8% from the prior-year quarter, with an adjusted gross margin of 57.5%, down 420 basis points year over year [5] - Adjusted operating income was $143.1 million, reflecting a 2.1% increase from the prior-year period, with an adjusted operating margin of 13.8%, down 140 basis points year over year [7] Financial Position - DexCom ended the first quarter with cash, cash equivalents, and marketable securities worth $2.7 billion, an increase from $2.58 billion in the previous quarter, and total assets amounted to $6.75 billion [8] 2025 Guidance - The company reiterated its 2025 revenue outlook of $4.6 billion, implying 14% year-over-year growth, and expects an adjusted gross margin of approximately 62% [9] Operational Highlights - DexCom's operational performance was driven by robust category demand and significant access wins, with record acceleration in demand from new customers attributed to expanded commercial reach [10] - Key product innovations included the launch of Stelo, the first over-the-counter CGM, and several software updates enhancing customer experience [11] Market Access and Regulatory Developments - The company secured coverage with two of the three largest pharmacy benefit managers for all diabetes patients, leading to a significant increase in new starts from the type 2 non-insulin population [12] - DexCom received FDA clearance for its 15-Day Dexcom G7 System, expected to launch in the second half of 2025 [13] International Performance - Internationally, DexCom experienced growth in key markets like Japan and France, despite facing short-term supply challenges [14]