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Here's Why You Should Retain DexCom Stock in Your Portfolio for Now
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Key Takeaways
DexCom's second-quarter 2026 gross margin rose to 64.1%, while operating margin climbed to 25.1%.
Nearly 50% of U.S. customers are expected to transition to G7 15-day by year-end 2026.
Ireland factory costs, forex headwinds and higher oil-linked input costs could limit near-term margin gains.
DexCom, Inc. (DXCM - Free Report) is well positioned for growth in the coming quarters, supported by the significant potential of the continuous glucose monitoring (CGM) market. A strong first-quarter 2026 performance and a robust international foothold are expected to contribute further. Risks related to stiff competition persist.
This Zacks Rank #3 (Hold) company’s shares have gained 29.4% so far this year against the industry’s 5.7% decline. The S&P 500 Index has gained 13.9% in the same time frame.
DXCM, a renowned medical device company and provider of CGM systems, has a market capitalization of $31.74 billion. It projects a 22.6% growth rate over the next five years and anticipates maintaining a strong performance going forward.
DexCom’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 11.39%.
Let’s delve deeper.
Image Source: Zacks Investment Research
Positive Drivers
Manufacturing Efficiencies and Operating Leverage Boost Profitability: DexCom’s improving manufacturing efficiency and operating discipline are supporting stronger earnings growth. In the second quarter of 2026, gross margin expanded 400 basis points year over year to 64.1%, while operating margin increased to 25.1% from 19.2%.
Operating expenses grew at a slower pace than revenues, demonstrating improved operating leverage even as the company invested in its Ireland facility. Management also raised its full-year gross margin guidance to approximately 64% and operating margin guidance to 23.5-24%. Sustaining these improvements could allow DexCom to convert incremental revenues to stronger operating income, although upcoming manufacturing investments may temporarily moderate the gains.
G7 15-Day Conversion Creates a Multiyear Product-Mix Opportunity: DexCom’s G7 15-day system is progressing toward a substantial shift in its U.S. product mix. Management expects nearly 50% of its U.S. customer base to transition to the system by the end of 2026. A greater contribution to profitability is expected in 2027 as more customers establish recurring purchasing patterns.
The rollout has also benefited from improved customer feedback, with G7 Net Promoter Scores rising for three consecutive quarters. Integration with Tandem’s insulin-delivery systems has removed an important adoption barrier, while Health Canada’s clearance provides a path to international expansion. The transition could therefore support sustained top- and bottom-line improvement beyond the current year.
Smart Basal and G8 Expand DexCom’s Longer-Term Innovation Potential: DexCom’s product pipeline could strengthen its competitive positioning beyond existing continuous glucose monitoring applications. Its Smart Basal dosing module is being piloted with key opinion leaders, and management reported that participating practices helped customers reach an optimal basal insulin dose in an average of three weeks, compared with 12 weeks or longer in routine care.
Meanwhile, the G8 sensor remains on track for late 2027 or early 2028, subject to regulatory timing. Management expects improvements in accuracy and reliability, reduction in size to approximately half of G7, and eventual expansion into additional analytes. Successful execution could broaden clinical utility and create new opportunities in diabetes management and metabolic health.
Risks
Ireland Factory Ramp-Up Could Temporarily Pressure Margins: DexCom’s margin expansion may face a near-term interruption as its Ireland manufacturing facility moves toward commercial production. Hiring and training should have increased in the third quarter before production lines become operational, with depreciation also beginning during the ramp-up.
A newly activated factory typically carries higher per-unit manufacturing costs until production volumes improve and fixed costs are absorbed more efficiently. Consequently, the facility’s initial operating burden could offset some of the benefits from manufacturing efficiencies and the G7 15-day product transition. While the investment is intended to support future capacity, the pace of production ramp-up will be key to near-term profitability.
Forex Movements Could Limit Reported Revenue Growth: Currency movements represent a measurable headwind to DexCom’s reported revenue outlook. Although management raised its full-year revenue guidance to $5.18-$5.25 billion, it expects recent foreign-exchange movements to reduce international revenues by approximately $15 million in the second half of 2026 relative to its previous assumptions. This creates a potential divergence between underlying operating performance and reported growth, particularly because international markets account for a meaningful portion of sales.
Management noted that the revised guidance still implies an improvement in expected organic growth, but investors will need to distinguish constant-currency performance from reported results when evaluating the company’s progress.
Higher Oil-Linked Input Costs Could Weigh on Near-Term Profitability: DexCom remains exposed to delayed input-cost pressure from higher oil prices because petroleum-based resins take time to move through procurement, manufacturing, inventory accounting and reported expenses. Management indicated that some of this impact had already flowed through in the second quarter, with additional effects expected in the third quarter.
Although the company said the headwind was broadly consistent with prior expectations, this exposure could constrain further margin expansion if input costs remain elevated or operational improvements fail to fully offset them. The risk is particularly relevant during the Ireland facility ramp-up, when incremental manufacturing costs could coincide with lingering resin-price pressure.
DexCom has witnessed a stable estimate revision trend for 2026. In the past 30 days, the Zacks Consensus Estimate for 2026 earnings per share has remained unchanged at $2.64.
The consensus mark for the company’s third-quarter revenues is pegged at $1.32 billion, indicating a 9.4% improvement from the year-ago quarter’s reported number. The consensus estimate for third-quarter earnings is pinned at 66 cents per share, implying an improvement of 8.2% year over year.
AxoGen reported second-quarter 2026 earnings per share (EPS) of 12 cents, which surpassed the Zacks Consensus Estimate by 33.3%. Revenues of $70 million beat the Zacks Consensus Estimate by 4.3%. AXGN has an estimated earnings growth rate of 48.4% for 2026, likely followed by another strong growth of 60.9% in 2027. The company’s earnings beat estimates in two of the trailing four quarters and missed in the other two, the average surprise being 6.25%.
Globus Medical reported second-quarter 2026 adjusted EPS of $1.34, which surpassed the Zacks Consensus Estimate by 19.6%. Revenues of $789.6 million beat the Zacks Consensus Estimate by 0.4%.
GMED has an estimated long-term earnings growth rate of 12.4%. The company’s earnings beat estimates in each of the trailing four quarters, the average surprise being 27.9%.
West Pharmaceutical reported second-quarter 2026 adjusted EPS of $2.37, which beat the Zacks Consensus Estimate by 13.9%. Revenues of $872.3 million surpassed the Zacks Consensus Estimate by 4.2%.
WST has an estimated long-term earnings growth rate of 16%. Its earnings surpassed estimates in each of the trailing four quarters, the average surprise being 17.4%.
View the Zacks #1 Rank List
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Here's Why You Should Retain DexCom Stock in Your Portfolio for Now
Key Takeaways
DexCom, Inc. (DXCM - Free Report) is well positioned for growth in the coming quarters, supported by the significant potential of the continuous glucose monitoring (CGM) market. A strong first-quarter 2026 performance and a robust international foothold are expected to contribute further. Risks related to stiff competition persist.
This Zacks Rank #3 (Hold) company’s shares have gained 29.4% so far this year against the industry’s 5.7% decline. The S&P 500 Index has gained 13.9% in the same time frame.
DXCM, a renowned medical device company and provider of CGM systems, has a market capitalization of $31.74 billion. It projects a 22.6% growth rate over the next five years and anticipates maintaining a strong performance going forward.
DexCom’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 11.39%.
Let’s delve deeper.
Image Source: Zacks Investment Research
Positive Drivers
Manufacturing Efficiencies and Operating Leverage Boost Profitability: DexCom’s improving manufacturing efficiency and operating discipline are supporting stronger earnings growth. In the second quarter of 2026, gross margin expanded 400 basis points year over year to 64.1%, while operating margin increased to 25.1% from 19.2%.
Operating expenses grew at a slower pace than revenues, demonstrating improved operating leverage even as the company invested in its Ireland facility. Management also raised its full-year gross margin guidance to approximately 64% and operating margin guidance to 23.5-24%. Sustaining these improvements could allow DexCom to convert incremental revenues to stronger operating income, although upcoming manufacturing investments may temporarily moderate the gains.
G7 15-Day Conversion Creates a Multiyear Product-Mix Opportunity: DexCom’s G7 15-day system is progressing toward a substantial shift in its U.S. product mix. Management expects nearly 50% of its U.S. customer base to transition to the system by the end of 2026. A greater contribution to profitability is expected in 2027 as more customers establish recurring purchasing patterns.
The rollout has also benefited from improved customer feedback, with G7 Net Promoter Scores rising for three consecutive quarters. Integration with Tandem’s insulin-delivery systems has removed an important adoption barrier, while Health Canada’s clearance provides a path to international expansion. The transition could therefore support sustained top- and bottom-line improvement beyond the current year.
Smart Basal and G8 Expand DexCom’s Longer-Term Innovation Potential: DexCom’s product pipeline could strengthen its competitive positioning beyond existing continuous glucose monitoring applications. Its Smart Basal dosing module is being piloted with key opinion leaders, and management reported that participating practices helped customers reach an optimal basal insulin dose in an average of three weeks, compared with 12 weeks or longer in routine care.
Meanwhile, the G8 sensor remains on track for late 2027 or early 2028, subject to regulatory timing. Management expects improvements in accuracy and reliability, reduction in size to approximately half of G7, and eventual expansion into additional analytes. Successful execution could broaden clinical utility and create new opportunities in diabetes management and metabolic health.
Risks
Ireland Factory Ramp-Up Could Temporarily Pressure Margins: DexCom’s margin expansion may face a near-term interruption as its Ireland manufacturing facility moves toward commercial production. Hiring and training should have increased in the third quarter before production lines become operational, with depreciation also beginning during the ramp-up.
A newly activated factory typically carries higher per-unit manufacturing costs until production volumes improve and fixed costs are absorbed more efficiently. Consequently, the facility’s initial operating burden could offset some of the benefits from manufacturing efficiencies and the G7 15-day product transition. While the investment is intended to support future capacity, the pace of production ramp-up will be key to near-term profitability.
Forex Movements Could Limit Reported Revenue Growth: Currency movements represent a measurable headwind to DexCom’s reported revenue outlook. Although management raised its full-year revenue guidance to $5.18-$5.25 billion, it expects recent foreign-exchange movements to reduce international revenues by approximately $15 million in the second half of 2026 relative to its previous assumptions. This creates a potential divergence between underlying operating performance and reported growth, particularly because international markets account for a meaningful portion of sales.
Management noted that the revised guidance still implies an improvement in expected organic growth, but investors will need to distinguish constant-currency performance from reported results when evaluating the company’s progress.
Higher Oil-Linked Input Costs Could Weigh on Near-Term Profitability: DexCom remains exposed to delayed input-cost pressure from higher oil prices because petroleum-based resins take time to move through procurement, manufacturing, inventory accounting and reported expenses. Management indicated that some of this impact had already flowed through in the second quarter, with additional effects expected in the third quarter.
Although the company said the headwind was broadly consistent with prior expectations, this exposure could constrain further margin expansion if input costs remain elevated or operational improvements fail to fully offset them. The risk is particularly relevant during the Ireland facility ramp-up, when incremental manufacturing costs could coincide with lingering resin-price pressure.
DexCom, Inc. Price
DexCom, Inc. price | DexCom, Inc. Quote
Estimate Trend
DexCom has witnessed a stable estimate revision trend for 2026. In the past 30 days, the Zacks Consensus Estimate for 2026 earnings per share has remained unchanged at $2.64.
The consensus mark for the company’s third-quarter revenues is pegged at $1.32 billion, indicating a 9.4% improvement from the year-ago quarter’s reported number. The consensus estimate for third-quarter earnings is pinned at 66 cents per share, implying an improvement of 8.2% year over year.
Stocks to Consider
Some better-ranked stocks from the broader medical space are AxoGen (AXGN - Free Report) , Globus Medical (GMED - Free Report) andWest Pharmaceutical Services (GKOS - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
AxoGen reported second-quarter 2026 earnings per share (EPS) of 12 cents, which surpassed the Zacks Consensus Estimate by 33.3%. Revenues of $70 million beat the Zacks Consensus Estimate by 4.3%. AXGN has an estimated earnings growth rate of 48.4% for 2026, likely followed by another strong growth of 60.9% in 2027. The company’s earnings beat estimates in two of the trailing four quarters and missed in the other two, the average surprise being 6.25%.
Globus Medical reported second-quarter 2026 adjusted EPS of $1.34, which surpassed the Zacks Consensus Estimate by 19.6%. Revenues of $789.6 million beat the Zacks Consensus Estimate by 0.4%.
GMED has an estimated long-term earnings growth rate of 12.4%. The company’s earnings beat estimates in each of the trailing four quarters, the average surprise being 27.9%.
West Pharmaceutical reported second-quarter 2026 adjusted EPS of $2.37, which beat the Zacks Consensus Estimate by 13.9%. Revenues of $872.3 million surpassed the Zacks Consensus Estimate by 4.2%.
WST has an estimated long-term earnings growth rate of 16%. Its earnings surpassed estimates in each of the trailing four quarters, the average surprise being 17.4%.