Executive Summary / Key Takeaways

• Insulet Corporation (NASDAQ:PODD) is demonstrating robust and durable growth, driven by its highly differentiated Omnipod 5 tubeless automated insulin delivery (AID) system and a strategic focus on expanding market penetration in both Type 1 and Type 2 diabetes globally. The company achieved a record quarterly revenue of over $700 million in Q3 2025, with strong year-over-year growth and significant operating margin expansion.
• Technological leadership, exemplified by Omnipod 5's ease of use, smartphone control, and broad sensor integrations, forms a critical competitive moat, enabling superior patient outcomes and driving high customer satisfaction and retention.
• The company is successfully unlocking the massive Type 2 diabetes market in the U.S., with Type 2 users representing over 35% of new U.S. customer starts in Q3 2025, supported by strong clinical evidence, expanded sales force, and effective direct-to-consumer (DTC) campaigns.
• Insulet's unique pay-as-you-go pharmacy access model and robust, scalable manufacturing capabilities provide significant advantages in affordability and supply chain resilience, further solidifying its market leadership against traditional pump competitors.
• Management has raised its full-year 2025 guidance, projecting total company revenue growth of 28% to 29% and operating margins between 17.3% and 17.5%, reflecting sustained momentum and strategic investments in innovation and global expansion.

The Tubeless Revolution: Insulet's Differentiated Approach to Diabetes Management

Insulet Corporation stands at the forefront of diabetes management, revolutionizing insulin delivery with its proprietary Omnipod product platform. The company's core mission, established since its incorporation in 2000, is to alleviate the daily burden of diabetes through innovative, patient-centric solutions. At the heart of its offering is the Omnipod 5 Automated Insulin Delivery (AID) System, a tubeless, wearable patch pump that integrates seamlessly with continuous glucose monitors (CGM) and can be controlled directly from a compatible smartphone or a dedicated controller. This differentiated form factor and ease of use have carved out a unique position for Insulet in the competitive medical device landscape.

The diabetes care market presents a vast, underpenetrated opportunity. Globally, millions live with insulin-dependent diabetes, many still relying on multiple daily injections (MDI). Insulet's strategy is to transition these patients to AID therapy, offering a simpler and more discreet alternative to traditional tubed insulin pumps. This approach has allowed Insulet to become the market leader in new customer starts, bringing more patients off MDI to AID technology than all its competitors combined in recent years.

Technological Edge: Simplicity, Connectivity, and Advanced Algorithms

Insulet's technological differentiation is a cornerstone of its investment thesis. The Omnipod 5 system's tubeless design offers tangible benefits over conventional pumps, including enhanced user comfort, discretion, and freedom from tubing, which can be a significant barrier for many patients. This design simplifies daily life for users, leading to improved convenience, retention, satisfaction, and ultimately, better clinical outcomes.

The system's integration capabilities are continuously expanding. In 2025, the Omnipod 5 app for iPhone became fully available in the U.S. with Dexcom G7 CGM sensor compatibility, building on earlier integrations with Dexcom G6 and Abbott's FreeStyle Libre 2 Plus. This focus on smartphone control is critical, with over 55% of U.S. Omnipod users now managing their system via their smartphone, a notable increase from 45% just last quarter. This shift towards app-based control is directly linked to improved engagement and outcomes.

Beyond current offerings, Insulet is aggressively investing in its R&D pipeline to maintain its technological lead. The company has completed recruitment for its STRIVE pivotal trial, which aims to test enhancements to its SmartAdjust algorithm for a next-generation hybrid closed-loop system. Additionally, the EVOLUTION 2 feasibility study for a fully closed-loop algorithm specifically designed for Type 2 diabetes has completed recruitment, signaling future innovations tailored to this growing patient population. These advancements are designed to further enhance glycemic control, reduce hypoglycemia, and simplify diabetes management, thereby strengthening Insulet's competitive moat and driving future market share.

Financial Strength and Operational Excellence

Insulet's financial performance underscores the effectiveness of its strategy and technological advantages. For the three months ended September 30, 2025, the company reported total revenue of $706.30 million, a significant 29.9% increase year-over-year (28.2% in constant currency). This robust top-line growth was primarily fueled by higher sales volume from a rapidly expanding customer base and, to a lesser extent, favorable pricing.

Profitability metrics are equally impressive. Gross margin reached 72.2% in Q3 2025, expanding by 290 basis points year-over-year. This improvement is attributed to a higher average selling price and increased manufacturing scale and efficiencies. For the nine months ended September 30, 2025, gross margin increased by 240 basis points to 71.3%, also benefiting from improved manufacturing and supply chain efficiencies, higher average selling prices, increased volume, and the non-recurrence of a $13.50 million charge related to Omnipod GO inventory in the prior year. Operating margins expanded by 90 basis points year-over-year to 17.1% in Q3 2025, demonstrating effective operating leverage while continuing strategic investments.

The company's operational backbone is its resilient and scalable manufacturing infrastructure. Insulet has invested over $1 billion in manufacturing capabilities, including advanced automation in its Acton, Massachusetts, and Malaysia facilities. The Malaysia facility is ramping ahead of schedule and is expected to become accretive to margins in the second half of 2025, further enhancing cost advantages and global supply chain resilience.

Expanding Horizons: U.S. Type 2 and International Growth

Insulet is strategically expanding its reach into new and underserved markets. In the U.S., the FDA clearance in August 2024 for Omnipod 5's label expansion to include adults with Type 2 diabetes represents a monumental opportunity. This segment significantly expands Insulet's total addressable market to over 5.5 million people, including 2.5 million insulin-intensive MDI users (currently less than 5% penetrated) and 3 million basal-only users (barely penetrated).

The initial traction in the Type 2 market has been remarkable, with Type 2 users representing over 35% of new U.S. customer starts in Q3 2025. This acceleration is driven by the product's compelling clinical outcomes (e.g., 0.8% A1c reduction in the SECURE-T2D trial), the leverage of Insulet's established prescriber base from Type 1, and targeted direct-to-consumer (DTC) advertising. The company's growing prescriber base of over 27,000 healthcare professionals, coupled with an expanded sales force targeting Type 2 patients, underscores the strong return on these commercial investments.

Internationally, Insulet's business continues to deliver robust growth. In Q3 2025, International Omnipod revenue grew 46.5% (39.9% constant currency), crossing $200 million for the first time. This growth is fueled by strong demand for Omnipod 5 and positive price/mix realization as customers transition from Omnipod DASH. Omnipod 5 has launched in nine additional countries in 2025, including Australia, Canada, and the Nordic countries, bringing the total international market launches to 13. Further rollouts are planned for 2026, including expansion into the Middle East.

Competitive Landscape and Strategic Moats

Insulet operates in a dynamic competitive environment, primarily against traditional insulin pump manufacturers like Medtronic (MDT) and Tandem Diabetes Care (TNDM), and continuous glucose monitor providers such as Abbott Laboratories (ABT) that also integrate with insulin delivery. Insulet's tubeless Omnipod system offers a distinct advantage in user comfort and discretion compared to Medtronic's traditional tubed pumps and Tandem's pump-based devices. This simplicity and ease of use have enabled Insulet to capture significant market share, even as a later entrant in the AID space for Type 1 diabetes.

A key competitive moat for Insulet is its pioneering "pay-as-you-go" pharmacy access model. The Omnipod system is available in over 47,000 U.S. pharmacies and covered by more than 90% of commercial plans, making it accessible and affordable for over 300 million lives, often for about $1 per day. Furthermore, Insulet is the only insulin pump with Medicare Part D reimbursement, leading to $0 co-pays for many government-insured customers. This distribution model provides a significant advantage over competitors, whose durable pumps often face challenges in stocking, delivery, and revenue recognition through the pharmacy channel.

Insulet is also leveraging its data ecosystem with the limited market release of Omnipod Discover, a digital platform connecting clinicians and patients for personalized data management and insights. Every Omnipod 5 customer is cloud-connected, allowing Insulet to use this data to improve algorithms, enhance customer experience, and optimize outcomes, creating an emerging data-driven moat.

Outlook and Risk Considerations

Insulet's management has expressed strong confidence in its future trajectory, reflected in its raised full-year 2025 guidance. The company now expects total Omnipod revenue growth of 29% to 30% (constant currency) and total company revenue growth of 28% to 29% (constant currency). Gross margin is projected to be over 71%, and adjusted operating margin is expected to be between 17.3% and 17.5%, representing a substantial 240 to 260 basis point improvement over 2024. This outlook is underpinned by continued volume growth from new customer acquisitions in both Type 1 and Type 2, positive price/mix realization, successful international rollouts, and ongoing manufacturing efficiencies.

Despite the optimistic outlook, investors should consider certain risks. The U.S. Department of Commerce initiated an investigation in September 2025 into the effects of medical device imports on national security, which could potentially override existing tariff exemptions for insulin pumps. While Insulet does not anticipate a significant impact on its 2025 gross margin due to its robust manufacturing and diversified supply chain, the elimination of this exemption could materially affect future results. Additionally, a proposed Medicare competitive bidding process for medical equipment, including insulin pumps, could introduce pricing pressure. However, Insulet's unique Medicare Part D reimbursement and pharmacy channel model differentiate it from competitors and may mitigate some of these risks. The ongoing appeal in the EOFlow trade secret litigation also presents a contingent risk, despite a favorable initial judgment for Insulet.

Conclusion

Insulet Corporation is a compelling investment story, characterized by its innovative tubeless technology, expanding market leadership, and a clear path to sustained profitable growth. The company's ability to consistently deliver strong financial results, driven by record new customer starts in both Type 1 and the burgeoning Type 2 diabetes markets, highlights the power of its differentiated Omnipod 5 platform. Strategic investments in R&D, global manufacturing, and market development are fortifying its competitive moats, ensuring continued innovation and broad patient access. While regulatory and competitive pressures warrant monitoring, Insulet's unique product, robust operational foundation, and disciplined financial management position it strongly to transform diabetes care and generate long-term shareholder value.