Executive Summary / Key Takeaways

• Expanding Market Opportunity: DexCom is strategically unlocking the vast Type 2 non-insulin and metabolic health markets, evidenced by securing reimbursement from the three largest U.S. PBMs for all diabetes types and the strong early adoption of its over-the-counter Stelo biosensor. This significantly broadens its addressable patient population beyond traditional insulin users.
• Technological Leadership & Pipeline: The company maintains a strong competitive moat through continuous innovation, highlighted by the FDA clearance of the 15-day G7 system (MARD 8.0%) and ongoing development of the smaller, multi-analyte G8 platform. Software enhancements like AI-powered meal logging and EHR integration further enhance user experience and clinical utility.
• Robust Financial Performance & Outlook: DexCom delivered strong Q2 2025 revenue of $1.16 billion (15% organic growth) and raised its full-year 2025 revenue guidance to $4.6 billion to $4.625 billion (14-15% growth). This growth is supported by record new patient additions and improving operational efficiencies, despite short-term supply chain and pricing dynamics.
• Strategic Operational Execution: The company has effectively managed supply chain challenges, restoring inventory levels and improving sales force productivity. Refocused DME partnerships and new distribution channels for Stelo are enhancing market reach and customer support.
• Leadership Transition: The planned CEO succession from Kevin Sayer to Jake Leach in early 2026 signals a continued focus on innovation and market expansion, leveraging a deep understanding of the company's technology and strategic vision.

The Diabetes Epidemic and DexCom's Evolving Mission

DexCom, Inc. stands at the forefront of diabetes management, a critical healthcare sector addressing a global epidemic. Since its inception in 1999 and the commercialization of its first FDA-approved product in 2006, DexCom has been dedicated to empowering patients, caregivers, and clinicians through continuous glucose monitoring (CGM) systems. The company's journey has been marked by a relentless pursuit of innovation and market expansion, fundamentally reshaping diabetes care.

The overarching strategy centers on broadening access to CGM technology across the entire diabetes spectrum and into the burgeoning metabolic health market. This strategic pivot is driven by compelling clinical evidence demonstrating CGM's benefits beyond intensive insulin use, including improved health outcomes and significant cost savings for healthcare systems. DexCom's historical milestones, such as securing Medicare coverage in 2017 and launching the G6 and G7 systems in 2018 and 2023, respectively, have laid the groundwork for its current aggressive expansion into new patient populations.

Technological Edge: The Heart of DexCom's Moat

DexCom's competitive advantage is deeply rooted in its proprietary sensor technology and a robust innovation pipeline. The company's core CGM systems, G6 and G7, provide real-time glucose data, offering unparalleled accuracy and user experience. The recently FDA-cleared Dexcom G7 15-Day CGM System, for instance, boasts an impressive Mean Absolute Relative Difference (MARD) of 8.0%, setting a new benchmark for sensor accuracy and wear time in the industry. This extended wear time, combined with the G7's smaller form factor, directly translates into enhanced patient convenience and potentially higher adherence, driving recurring revenue and customer loyalty.

The company's commitment to R&D extends to its next-generation G8 platform, currently in deep development. G8 is designed to be 50% smaller in wearable size while packing even more functionality, including a custom chipset that supports multiple analyte sensing. This future platform aims to push the envelope on performance and reliability, ensuring DexCom remains at the forefront of biosensing technology. The strategic intent behind these advancements is to continually enhance the competitive moat by offering superior product performance, which can command premium pricing and drive market share gains.

Beyond hardware, DexCom is rapidly advancing its software capabilities. In the first half of 2025 alone, the company introduced 17 app updates across its Stelo, G-Series, and DexCom ONE+ core products. These include direct-to-watch connectivity for the Share and Follow features, enhanced data visualization, customizable target ranges, and connected pen technologies for automatic dose logging. A notable innovation is the AI-powered Smart Food Logging feature, launched on both Stelo and G7, which generates detailed meal descriptions from photos and provides post-meal glycemic impact. These software enhancements simplify complex diabetes management, improve user engagement, and provide valuable insights for both patients and clinicians, further solidifying DexCom's ecosystem advantage.

Strategic Expansion: Unlocking New Frontiers

DexCom's growth narrative is increasingly defined by its strategic expansion into previously underserved patient populations. The company is making significant inroads into the vast Type 2 non-insulin market, which represents approximately 25 million individuals in the U.S. This initiative gained substantial momentum with the announcement that, as of summer 2025, the three largest commercial PBMs in the U.S. now cover Dexcom G7 for anyone with diabetes, regardless of insulin use. This critical access win is expected to provide reimbursement for nearly 6 million Type 2 non-insulin lives by the end of the year.

The launch of Stelo, DexCom's over-the-counter glucose biosensor, in August 2024, further exemplifies this expansion. Designed for adults with prediabetes and Type 2 diabetes not on insulin, Stelo has seen rapid adoption, with over 400,000 app downloads by summer 2025. Stelo is attracting a wide range of new customers, including those focused on health and wellness, and is being leveraged by physicians as an accessible option for patients without coverage. The integration with platforms like Oura, which combines glucose data with vital signs, sleep, and activity, underscores DexCom's vision for personalized metabolic health management.

Internationally, DexCom continues to drive growth through expanded access and product availability. The DexCom ONE+ platform, leveraging G7 hardware, has shown particular strength in international markets, benefiting from Type 2 coverage wins. Recent highlights include the Ontario Drug Benefit Program in Canada expanding coverage for all insulin users and the launch of DexCom ONE+ in France, providing reimbursed access to over 600,000 individuals, including basal coverage. Japan has also returned to growth, with the company's direct sales organization making strong inroads and achieving its highest new customer start month since 2019. These international wins are crucial for long-term growth, as many global markets are still in earlier stages of CGM reimbursement development.

Financial Performance: Growth Amidst Evolution

DexCom's financial performance in the first half of 2025 reflects the strategic investments and market expansion efforts. For the second quarter of 2025, worldwide revenue reached $1,157.1 million, representing a robust 15% growth on both a reported and organic basis compared to Q2 2024. U.S. revenue grew 15% to $841.0 million, while international revenue increased 16% (14% organic) to $316.1 million. Disposable sensors and other revenue continued to dominate, comprising approximately 97% of total revenue.

Despite strong top-line growth, profitability metrics faced some headwinds. Gross profit margin for Q2 2025 was 59.5%, down from 62.4% in Q2 2024. This was primarily attributed to inefficiencies in ensuring supply availability, build configurations that lowered production yield, and product and channel mix changes. The company strategically invested in expedited shipping routes to stabilize its supply chain and restore inventory levels, incurring higher costs. Operating income for Q2 2025 was $212.6 million, or 18.0% of revenue, an increase of 35% from Q2 2024, demonstrating effective expense management. Net income for the quarter was $179.8 million.

For the six months ended June 30, 2025, total revenue was $2,193.1 million, up 14% from the prior year period. Net cash provided by operating activities was $486.8 million, indicating healthy cash generation. The company maintains a strong liquidity position, with $2.93 billion in cash, cash equivalents, and short-term marketable securities as of June 30, 2025. Its working capital ratio of 1.52 and quick ratio of 1.29 underscore a solid short-term financial standing. DexCom also authorized a $750 million share repurchase program in April 2025, reflecting confidence in its financial strength and future prospects.

Competitive Dynamics: A Shifting Landscape

The CGM market is dynamic, with DexCom positioned as a specialist leader against diversified healthcare giants and focused pump manufacturers. DexCom's core competitive advantage lies in its proprietary sensor technology, which consistently delivers high accuracy and real-time data, a critical differentiator against rivals like Abbott Laboratories (ABT) with its FreeStyle Libre and Medtronic (MDT) with its integrated systems. While ABT offers a 15-day wear time similar to the new G7, DexCom's MARD of 8.0% sets a new standard for accuracy, which is paramount for patient safety and clinical decision-making.

In the automated insulin delivery (AID) systems space, DexCom holds a significant lead. Over 2 million patient-years of experience on AID systems have been powered by DexCom CGM, with algorithms built and optimized around its technology. This deep integration and proven performance with partners like Tandem Diabetes Care (TNDM) provide a substantial barrier to entry for competitors. DexCom's strategy is to continue enhancing its ecosystem with features like direct-to-watch connectivity and EHR integration (over 100 health systems integrated with Epic), offering a comprehensive solution that extends beyond just the sensor.

The competitive landscape is evolving with new reimbursement models. The proposed CMS competitive bidding process for CGM, potentially starting in 2027, could introduce pricing pressure for the approximately 15% of DexCom's business tied to fee-for-service Medicare. However, management anticipates that any pricing compression would also lead to supplier consolidation, potentially concentrating volume among key players like DexCom and Abbott, who are best equipped to service the market. DexCom's proactive engagement with DME partners, focusing on volume and channel agnosticism, aims to stabilize its share in this critical segment, particularly as the majority of its DME business is in Medicare.

Outlook and Risks: Charting the Course Ahead

DexCom's outlook for 2025 is optimistic, underpinned by its strategic initiatives and market tailwinds. The company raised its full-year 2025 revenue guidance to a range of $4.6 billion to $4.625 billion, representing 14% to 15% growth. This guidance assumes continued strong category growth, stable DME share, new international access wins, and broader distribution for Stelo. Management expects 2025 to be a record year for new patient additions, driven by continued penetration in insulin-intensive segments, consistent growth in basal users, and a significantly increased contribution from the Type 2 non-insulin population.

Despite the positive outlook, several risks warrant investor attention. The FDA warning letter received in March 2025, citing manufacturing and quality system non-conformities, requires ongoing corrective actions. While it has not restricted product distribution or new clearances (as evidenced by the 15-day G7 approval), failure to fully satisfy the FDA could lead to further regulatory actions. Pricing pressure from third-party payors and the potential impact of CMS competitive bidding remain concerns, though DexCom's value proposition as a cost-saving solution for healthcare systems may mitigate some of this impact. Legal proceedings, including securities class action and derivative lawsuits, also present an ongoing risk.

The company's strategic investments in R&D, manufacturing scale, and commercial expansion are designed to mitigate these risks and capitalize on the immense market opportunity. The planned CEO transition from Kevin Sayer to Jake Leach in early 2026 is a deliberate succession plan, ensuring continuity of vision and leadership as DexCom enters its next phase of growth.

Conclusion

DexCom stands at a pivotal juncture, transforming from a specialized CGM provider for intensive insulin users to a comprehensive metabolic health company. Its core investment thesis is anchored in its unwavering commitment to technological innovation and its aggressive, strategic expansion into the vast, underserved Type 2 non-insulin and broader metabolic health markets. The successful securing of PBM coverage for all diabetes types, coupled with the rapid adoption of Stelo, underscores the effectiveness of this strategy.

While operational challenges related to supply chain and pricing dynamics have presented short-term hurdles, DexCom's robust financial performance, strong liquidity, and proactive management responses demonstrate resilience. The continuous pipeline of advanced products like the 15-day G7 and the future G8, combined with an expanding global footprint and deep clinical evidence, positions DexCom for sustained long-term growth. Investors should recognize DexCom's unique ability to drive both clinical outcomes and healthcare cost savings, making it a compelling play in the evolving landscape of chronic disease management.