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Dexcom

DXCM · Nasdaq

Gross margin climbed from 56.9% to 64.3% in six quarters

Revenue grew far faster than the cost of making sensors, so cost of sales fell from 43.1% of revenue to 35.7%.

Q3 FY2026, the quarter to Sep 30, 2026 · 10-Q filed Oct 29, 2026

Q3 FY2026 · revenue
$1.3B+11.2% on the year
Operating margin
24.3%
Net income
$275.1M
Free cash flow, quarter
$272.7M

Largest source of revenue: Distributor, 85.4% of the total.

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Where Dexcom's money goes

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Key insights · Q3 FY2026
  1. 01

    Gross margin climbed from 56.9% to 64.3% in six quarters

    Revenue grew far faster than the cost of making sensors, so cost of sales fell from 43.1% of revenue to 35.7%.

    Why it matters

    Six quarters ago, in the first quarter of the prior fiscal year, revenue was $1.04 billion and cost of sales $447.0 million, 43.1% of revenue, for a gross margin of 56.9%. In the latest quarter revenue was $1.34 billion and cost of sales $480.1 million, 35.7% of revenue, for a gross margin of 64.3%. Against the same quarter a year earlier, revenue rose 11.2% while cost of sales rose 0.5%, and gross margin moved up from 60.5%.1

    The filing attributes the gain to higher sales volume, the benefits of the longer-wear version of its newest sensor, manufacturing efficiencies, higher production volumes and a more favorable manufacturing mix, "which resulted in better absorption of fixed costs." It names higher inventory reserve charges, tied mainly to the planned end of manufacturing of its older sensor, as a partial offset.1

    The longer view puts the level in context. Gross margin was 64.4% seven fiscal years earlier and 60.1% in the last full fiscal year, so the current 64.3% is a return to an earlier level rather than a new high.1

    AnalysisAnalysis: because the gain rests on fixed-cost absorption rather than on price, it depends on volume continuing to fill the factories. The dip and recovery look like the cost of launching and ramping a new sensor generation, which is consistent with the filing's account but not stated by it.

  2. 02

    Operating profit rose 34.9% while net profit fell

    Last year's quarter had other income equal to 45.3% of operating income; this year it was 2.3%, so net income fell 3.1%.

    Why it matters

    Operating income rose to $327.2 million from $242.5 million. Other income, net fell to $7.5 million from $109.8 million, which the filing explains by the absence of a prior-year gain on equity investments and lower interest and dividend income, the result of a smaller average invested balance and changes in market interest rates. Income before income taxes fell 5.0% to $334.7 million.1

    Income tax expense fell to $59.6 million from $68.5 million, 17.8% of pre-tax income against 19.4% a year earlier, which the filing ties mainly to the release of reserves for uncertain tax positions as statutes of limitations expired. Net income was $275.1 million against $283.8 million, a net margin of 20.5% against 23.5%.1

    AnalysisAnalysis: the business earned more from its own operations; the lower net figure reflects a one-off gain in last year's base, not a weaker quarter. Operating income is the cleaner read of how the company performed.

  3. 03

    Fewer shares lifted earnings per share as profit fell

    Diluted shares fell to 383.5 million from 407.4 million, so diluted earnings per share rose to $0.72 from $0.70 despite lower net income.

    Why it matters

    Net income fell 3.1%, yet basic earnings per share held at $0.73 because basic shares fell to 374.7 million from 391.1 million. The company completed its share repurchase program in the quarter. The diluted count fell further, to 383.5 million from 407.4 million, partly because convertible notes that matured and were repaid in cash last year no longer add potential shares.1

    The board approved a further repurchase program in October, and the filing states an intention to allocate at least half of cash generated from operations, net of planned capital expenditures, to share repurchases over its long-range plan. The only risk factor this report adds concerns that program: the company cannot guarantee it will be completed or that it will lift the share price or earnings per share.1

    AnalysisAnalysis: per-share results now depend partly on capital allocation, not only on the business. Comparing growth in earnings per share with growth in operating income separates the two.

  4. 04

    Cash flow halved against an unusually strong base

    Operating cash flow of $325.6 million was 1.18 times net income; the year-earlier quarter's $659.9 million was more than twice net income.

    Why it matters

    Operating cash flow was $325.6 million against $659.9 million in the same quarter a year earlier, when net income was $283.8 million. Free cash flow was $272.7 million against $579.4 million, a free cash flow margin of 20.3%.1

    Quarterly cash flow swings. This year it was $525.6 million in the first quarter, $269.2 million in the second and $325.6 million in the third, above net income of $199.5 million, $249.1 million and $275.1 million in each. For the nine months, the filing attributes the change in working capital mainly to the timing of payables and higher inventory, partly offset by customer collections.1

    Capital spending was $52.9 million, 3.9% of revenue, against $80.5 million a year earlier. In the heaviest investment year of the last eight it was $389.2 million, 15.9% of that year's revenue, and free cash flow fell to $53.3 million. The filing says it expects significant capital expenditures over the next year for equipment and manufacturing facilities.1

    AnalysisAnalysis: single-quarter cash comparisons are noisy for this company; conversion across several quarters is the steadier read, and the capital spending line is where a new build phase would show first.

Sources

  1. 1.Dexcom 10-Q for the period to 2026-09-30 (the filing), Oct 29, 2026, read Nov 2, 2026

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Business performance

Growth, profit and margin

Revenue went from $29.7M in FY2009 to $4.7B in FY2025, the operating margin from -154.4% to 19.6%, over 16 years.

  • Revenue$4.7B
  • Operating income$911.8M
  • Operating margin19.6%
Period
Q3 FY2026
Revenue
$1.3B
Operating income
$327.2M
Operating margin
24.3%
Net income
$275.1M
Free cash flow
$272.7M
Business performance

Does the profit turn into cash?

Q3 FY2026: free cash flow of $272.7M against net income of $275.1M in the quarter.

  • Operating cash flow$1.4B
  • Capital expenditure$363.5M
  • Free cash flow$1.1B
  • Net income$836.3M

Capital expenditure is drawn below the axis as cash out. Cash conversion is operating cash flow over net income, shown in the tooltip for years with a profit.

Financial data and sources

How the revenue mix has shifted

Each breakdown the filing reports, as shares of revenue, for every period it restates.

ContractWithCustomerSalesChannel

Business Segment and Geographic Information - Schedule of Disaggregation of Revenue (Details). The filing restates this breakdown for 1 period.

Click a member to isolate it across the years shown.

The figures

Margins, cash and growth for the period, each with what it was computed from.

Gross margin
64.3%
Source10-Q, Derived from Gross profit and Revenue in the 10-Q filed 2026-10-29
Operating margin
24.3%
Source10-Q, Derived from Operating income and Revenue in the 10-Q filed 2026-10-29
Net margin
20.5%
Source10-Q, Derived from Net income and Revenue in the 10-Q filed 2026-10-29
Free cash flow, quarter
$272.7M
Source10-Q, Derived from the prior period in the history in the 10-Q filed 2026-10-29
Free cash flow margin, quarter
20.3%
Source10-Q, Derived from the prior period in the history in the 10-Q filed 2026-10-29
Cash conversion, quarter
1.18x
Source10-Q, Derived from the prior period in the history in the 10-Q filed 2026-10-29
Capital spending, quarter
3.9%
Source10-Q, Derived from the prior period in the history in the 10-Q filed 2026-10-29
Revenue growth
+11.2%
From the record's own history, against the prior year.

Where revenue comes from

Every breakdown the filing reports for the period, with each item's share.

ContractWithCustomerSalesChannel

Distributor$1.1B85.4%
Direct$196.5M14.6%

Source10-Q, us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax, as reported in the 10-Q filed 2026-10-29

What it costs

The cost lines beneath operating income, each as a share of revenue, then the operating result.

Costs are reported by function: what it cost to make what was sold, then the expenses of selling, developing and administering.

Cost lineQ3 FY2026Of revenueSource
Cost of sales$480.1M35.7%Source10-Q, us-gaap:CostOfGoodsAndServicesSold, as reported in the 10-Q filed 2026-10-29
Operating income$327.2M24.3%Source10-Q, us-gaap:OperatingIncomeLoss, as reported in the 10-Q filed 2026-10-29

The statements, as filed

The income statement, cash flow statement and balance sheet in the company's own order and words. Every line links to the filing.

Income statement15 lines, as presented in the 10-Q
LineQ3 FY2026A year earlierChangeOf revenueSource
Income Statement
Revenue$1.34B$1.21B+11%100%Source10-Q, us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax, as reported in the 10-Q filed 2026-10-29
Cost of sales$480.1M$477.9M+0.5%35.7%Source10-Q, us-gaap:CostOfGoodsAndServicesSold, as reported in the 10-Q filed 2026-10-29
Gross profit$864.4M$731.4M+18%64.3%Source10-Q, us-gaap:GrossProfit, as reported in the 10-Q filed 2026-10-29
Operating expenses:
Research and development$161.6M$157.5M+2.6%12.0%Source10-Q, us-gaap:ResearchAndDevelopmentExpense, as reported in the 10-Q filed 2026-10-29
Selling, general and administrative$375.6M$331.4M+13%27.9%Source10-Q, us-gaap:SellingGeneralAndAdministrativeExpense, as reported in the 10-Q filed 2026-10-29
Total operating expenses$537.2M$488.9M+9.9%40.0%Source10-Q, us-gaap:OperatingExpenses, as reported in the 10-Q filed 2026-10-29
Income Statement
Operating income$327.2M$242.5M+35%24.3%Source10-Q, us-gaap:OperatingIncomeLoss, as reported in the 10-Q filed 2026-10-29
Other income, net$7.5M$109.8M-93%0.6%Source10-Q, us-gaap:OtherNonoperatingIncomeExpense, as reported in the 10-Q filed 2026-10-29
Income before income taxes$334.7M$352.3M-5.0%24.9%Source10-Q, us-gaap:IncomeLossFromContinuingOperationsBeforeIncomeTaxesExtraordinaryItemsNoncontrollingInterest, as reported in the 10-Q filed 2026-10-29
Income tax expense$59.6M$68.5M-13%4.4%Source10-Q, us-gaap:IncomeTaxExpenseBenefit, as reported in the 10-Q filed 2026-10-29
Net income$275.1M$283.8M-3.1%20.5%Source10-Q, us-gaap:NetIncomeLoss, as reported in the 10-Q filed 2026-10-29
Basic net income per share (in USD per share)$1$10.0%0.0%Source10-Q, us-gaap:EarningsPerShareBasic, as reported in the 10-Q filed 2026-10-29
Shares used to compute basic net income per share (in shares)374,700,000391,100,000-4.2%Source10-Q, us-gaap:WeightedAverageNumberOfSharesOutstandingBasic, as reported in the 10-Q filed 2026-10-29
Diluted net income per share (in USD per share)$1$1+2.9%0.0%Source10-Q, us-gaap:EarningsPerShareDiluted, as reported in the 10-Q filed 2026-10-29
Shares used to compute diluted net income per share (in shares)383,500,000407,400,000-5.9%Source10-Q, us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding, as reported in the 10-Q filed 2026-10-29
Cash flow statement6 lines, as presented in the 10-Q

Year to date, as a quarterly filing reports it.

LineQ3 FY2026A year earlierChangeSource
Operating activities
Net income$275.1M$283.8M-3.1%Source10-Q, us-gaap:NetIncomeLoss, as reported in the 10-Q filed 2026-10-29
Adjustments to reconcile net income to cash provided by operating activities:
Net (gains) losses on equity investments (shown as a deduction)($0)$82.7MSource10-Q, us-gaap:EquitySecuritiesFvNiGainLoss, as reported in the 10-Q filed 2026-10-29
Statement of Cash Flows
Cash, cash equivalents and restricted cash, end of period$961.5M$1.84B-48%Source10-Q, us-gaap:CashCashEquivalentsRestrictedCashAndRestrictedCashEquivalents, as reported in the 10-Q filed 2026-10-29
Reconciliation of cash, cash equivalents and restricted cash, end of period:
Cash and cash equivalents$961.4M$1.84B-48%Source10-Q, us-gaap:CashAndCashEquivalentsAtCarryingValue, as reported in the 10-Q filed 2026-10-29
Restricted cash$100.0K$1.2M-92%Source10-Q, us-gaap:RestrictedCash, as reported in the 10-Q filed 2026-10-29
Total cash, cash equivalents and restricted cash$961.5M$1.84B-48%Source10-Q, us-gaap:CashCashEquivalentsRestrictedCashAndRestrictedCashEquivalents, as reported in the 10-Q filed 2026-10-29
Balance sheet30 lines, as presented in the 10-Q
LineQ3 FY2026A year earlierChangeSource
Current assets:
Cash and cash equivalents$961.4M$1.84B-48%Source10-Q, us-gaap:CashAndCashEquivalentsAtCarryingValue, as reported in the 10-Q filed 2026-10-29
Short-term marketable securities$856.5MSource10-Q, dxcm:DebtSecuritiesAvailableForSaleExcludingAccruedInterestAndEquitySecurities, as reported in the 10-Q filed 2026-10-29
Accounts receivable, net$1.19BSource10-Q, us-gaap:AccountsReceivableNetCurrent, as reported in the 10-Q filed 2026-10-29
Inventory$770.7MSource10-Q, us-gaap:InventoryNet, as reported in the 10-Q filed 2026-10-29
Prepaid and other current assets$141.2MSource10-Q, us-gaap:PrepaidExpenseAndOtherAssetsCurrent, as reported in the 10-Q filed 2026-10-29
Total current assets$3.92BSource10-Q, us-gaap:AssetsCurrent, as reported in the 10-Q filed 2026-10-29
Assets
Property and equipment, net$1.54BSource10-Q, us-gaap:PropertyPlantAndEquipmentAndFinanceLeaseRightOfUseAssetAfterAccumulatedDepreciationAndAmortization, as reported in the 10-Q filed 2026-10-29
Operating lease right-of-use assets$83.7MSource10-Q, us-gaap:OperatingLeaseRightOfUseAsset, as reported in the 10-Q filed 2026-10-29
Goodwill$24.0MSource10-Q, us-gaap:Goodwill, as reported in the 10-Q filed 2026-10-29
Intangibles, net$89.4MSource10-Q, us-gaap:IntangibleAssetsNetExcludingGoodwill, as reported in the 10-Q filed 2026-10-29
Deferred tax assets$305.4MSource10-Q, us-gaap:DeferredIncomeTaxAssetsNet, as reported in the 10-Q filed 2026-10-29
Other assets$277.2MSource10-Q, us-gaap:OtherAssetsNoncurrent, as reported in the 10-Q filed 2026-10-29
Total assets$6.24BSource10-Q, us-gaap:Assets, as reported in the 10-Q filed 2026-10-29
Current liabilities:
Accounts payable and accrued liabilities$2.07BSource10-Q, us-gaap:AccountsPayableAndOtherAccruedLiabilitiesCurrent, as reported in the 10-Q filed 2026-10-29
Accrued payroll and related expenses$159.7MSource10-Q, us-gaap:EmployeeRelatedLiabilitiesCurrent, as reported in the 10-Q filed 2026-10-29
Short-term operating lease liabilities$20.7MSource10-Q, us-gaap:OperatingLeaseLiabilityCurrent, as reported in the 10-Q filed 2026-10-29
Other current liabilities$6.6MSource10-Q, us-gaap:OtherLiabilitiesCurrent, as reported in the 10-Q filed 2026-10-29
Total current liabilities$2.25BSource10-Q, us-gaap:LiabilitiesCurrent, as reported in the 10-Q filed 2026-10-29
Liabilities and Stockholders’ Equity
Long-term senior convertible notes$1.24BSource10-Q, us-gaap:ConvertibleLongTermNotesPayable, as reported in the 10-Q filed 2026-10-29
Long-term operating lease liabilities$77.5MSource10-Q, us-gaap:OperatingLeaseLiabilityNoncurrent, as reported in the 10-Q filed 2026-10-29
Other long-term liabilities$129.6MSource10-Q, us-gaap:OtherLiabilitiesNoncurrent, as reported in the 10-Q filed 2026-10-29
Total liabilities$3.70BSource10-Q, us-gaap:Liabilities, as reported in the 10-Q filed 2026-10-29
Stockholders’ equity:
Preferred stock, $0.001 par value, 5.0 million shares authorized; no shares issued and outstanding at September 30, 2026 and December 31, 2025$0Source10-Q, us-gaap:PreferredStockValueOutstanding, as reported in the 10-Q filed 2026-10-29
Common stock, $0.001 par value, 800.0 million shares authorized; 412.7 million and 373.0 million shares issued and outstanding, respectively, at September 30, 2026; and 410.7 million and 384.8 million shares issued and outstanding, respectively, at December 31, 2025$400.0KSource10-Q, us-gaap:CommonStockValueOutstanding, as reported in the 10-Q filed 2026-10-29
Additional paid-in capital$2.43BSource10-Q, us-gaap:AdditionalPaidInCapitalCommonStock, as reported in the 10-Q filed 2026-10-29
Accumulated other comprehensive income$85.5MSource10-Q, us-gaap:AccumulatedOtherComprehensiveIncomeLossNetOfTax, as reported in the 10-Q filed 2026-10-29
Retained earnings$3.16BSource10-Q, us-gaap:RetainedEarningsAccumulatedDeficit, as reported in the 10-Q filed 2026-10-29
Treasury stock, at cost; 39.7 million shares at September 30, 2026 and 25.9 million shares at December 31, 2025 (shown as a deduction)($3.13B)Source10-Q, us-gaap:TreasuryStockCommonValue, as reported in the 10-Q filed 2026-10-29
Total stockholders’ equity$2.54B$2.73B-7.0%Source10-Q, us-gaap:StockholdersEquity, as reported in the 10-Q filed 2026-10-29
Liabilities and Stockholders’ Equity
Total liabilities and stockholders’ equity$6.24BSource10-Q, us-gaap:LiabilitiesAndStockholdersEquity, as reported in the 10-Q filed 2026-10-29

About this data

Source
Dexcom 10-Q, accession 0001093557-26-000195, filed Oct 29, 2026, read on Nov 2, 2026.
History
From the SEC's XBRL company facts, the value from the latest filing that stated each period.
Reading
Paragraphs marked Analysis are CXProWealth's reading; everything else is the filing's own numbers and words, or a cited source.
Version
methodology business-lens-1.0 · schema 1.2.0 · run business-lens-2026-11-02
Edge and risks

What holds Dexcom's model up, and what could bend it

Competitive edge

  • A disposable sensor turns patients into repeat buyers

    Revenue grew every fiscal year, from $1.03 billion to $4.66 billion over seven years, built on sensors that patients replace and reorder.

    The detail

    The filing says revenue comes from "the sale of disposable sensors and reusable transmitters and receivers," and attributes the quarter's growth primarily to higher sensor volume from the continued growth of its worldwide customer base. Over the same seven fiscal years the operating result went from a loss of $186.3 million to income of $911.8 million.1

    AnalysisAnalysis: each patient who stays on the system reorders, so last year's new patients become this year's base. Switching takes a new device, often a new prescription and insurer approval, which helps the base hold.

  • Operating costs grow slower than gross profit

    Gross profit rose 18.2% and operating expenses 9.9%, lifting the operating margin to 24.3%, up 4.3 points from a year earlier.

    The detail

    Operating expenses took 40.0% of revenue, slightly less than a year earlier. Research and development fell to 12.0% of revenue, down 1.0 point, which the filing puts down to "the timing of project spend"; selling, general and administrative rose slightly to 27.9% of revenue, mainly on advertising and marketing, facilities and consulting fees. Operating income was $327.2 million against $242.5 million a year earlier.1

    AnalysisAnalysis: part of this quarter's spread is timing. If research spending catches up, the operating margin has to absorb it, so the durable part of the edge is the sales and engineering base already in place, not the latest quarter's ratio.

  • Partners build the sensor into insulin and health systems

    The filing describes partnerships with insulin pump makers and automated insulin delivery developers, and with consumer technology companies for its over-the-counter Stelo.

    The detail

    The filing says the company supports partnerships with insulin pump companies and developers of automated insulin delivery systems, and pursues development partnerships with consumer technology companies seeking to offer metabolic health insights. It plans networked platforms with open architecture and connectivity, and predictive modeling on accumulated patient data. Stelo, sold over the counter, recently had its indication expanded to children who do not use insulin.1

    AnalysisAnalysis: once a sensor feeds a pump's dosing system or a partner's app, replacing it means changing more than the sensor, which raises the cost of switching.

What to watch

  • Revenue growth has slowed in each quarter this year

    Year-on-year growth eased from 15.0% to 13.1% to 11.2%, while the margin gain rests on volume keeping the factories full.

    The detail

    Quarterly revenue this year was $1.19 billion, $1.31 billion and $1.34 billion, against $1.04 billion, $1.16 billion and $1.21 billion a year earlier. For the nine months the filing also cites favorable revenue per customer from payor mix and utilization, partly offset by channel and product mix and rebate eligibility.1

    AnalysisAnalysis: the gross margin gain the filing describes depends on fixed-cost absorption. Slower volume growth would test how much of the 64.3% gross margin is structural and how much is utilization.

  • Payers and distributors stand between Dexcom and its users

    Distributors carried 85.4% of quarterly revenue, and the filing names pharmacy rebates and third-party reimbursement among its key estimates and dependencies.

    The detail

    Distributors accounted for $1.15 billion of revenue and direct sales for $196.5 million. Pharmacy rebates are among the filing's significant estimates, accrued rebates are the largest item in its payables and accrued liabilities, and third-party reimbursement is among the factors it says its future depends on. Sales dip each first quarter as insurance deductibles reset: first-quarter revenue of $1.19 billion was below the prior fourth quarter's $1.26 billion.1

    AnalysisAnalysis: the effective price is negotiated with payers and pharmacy channels rather than set with the user, so a change in coverage or rebate terms reaches revenue per customer directly.

  • Product quality and a sensor changeover weigh on costs

    Inventory reserve charges for quality data and retiring the older sensor offset part of the margin gain, and sensor class actions remain unresolved.

    The detail

    The filing records higher inventory reserve charges in cost of sales, reflecting quality control data, the planned discontinuation of its older sensor's manufacturing and forecast demand, and for the nine months higher enhanced product replacement program costs. It names a securities class action, derivative actions and class actions concerning its two most recent sensor generations, whose outcome it cannot yet estimate, and lists product quality among the factors its capital needs depend on.1

    AnalysisAnalysis: quality reaches the numbers in three places at once: reserves and replacements in cost of sales, legal costs, and the trust of prescribers and payers on which reorders depend.

Sources

  1. 1.Dexcom 10-Q for the period to 2026-09-30 (the filing), Oct 29, 2026, read Nov 2, 2026
Go deeper

Dexcom, further in

Member research, then your own questions on ChatGPT.

What could change the outlook

What Dexcom's numbers depend on from here, read from the filing: the conditions behind this period's margins and growth, and where a change would show first.

  • How much of the margin is volume, and how much will hold?

    What the gross margin depends on from here: sensor volume, the end of the older generation, and what a slower growth line would do to factory absorption.

  • Where the cash goes: capacity, buybacks and convertible notes

    How the company's stated uses for its operating cash compete with each other, and which line in the cash flow statement would show a shift first.

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Questions to start with
  • How much of Dexcom's rise in gross margin to 64.3% came from factory utilization, and what would slower sensor volume do to it?
  • Why did Dexcom's operating income rise 34.9% this quarter while its net income fell 3.1%?
  • How much did Dexcom's share buybacks add to its diluted earnings per share this quarter?

Business Lens describes Dexcom from its own filings with the SEC. It is not a view on its shares, a target, or advice to buy, sell or hold anything; figures are as filed and may be restated by the company later. The filing, the dates and the version are under the financial data above.