DexCom, Inc. (DXCM Quick QuoteDXCM - 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 performance in the first nine months of 2026 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 22.6% so far this year compared with the industry’s 4.8% growth. The S&P 500 Index has gained 10.2% in the same time frame.

DXCM, a renowned medical device company and provider of CGM systems, has a market capitalization of $29.96 billion. It projects a 22.6% growth rate over the next five years and anticipates maintaining a strong performance going forward.

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DexCom’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 12.28%.

Let’s delve deeper.

Positive Drivers

Promising G7 15 Day Adoption and International Expansion: The continued rollout of Dexcom's G7 15 Day System should support product differentiation and improve customer retention through longer sensor wear and better performance. Management expects nearly 50% of its U.S. customer base to transition to the system by year-end, with adoption building steadily during the third quarter.

The updated adhesive has already delivered a 4-5 percentage-point improvement in 15 Day survivability, while physician and customer feedback has remained positive. International launches in Canada beginning in November and Japan in early 2027 could expand the product’s market reach and support future growth. Broader insulin pump connectivity could also enhance its appeal among insulin-dependent patients.

Manufacturing Efficiencies Support Margin Expansion: DexCom's operational improvements are translating into meaningful profitability gains. Third-quarter gross margin expanded approximately 380 basis points year over year to 65.1%, reflecting manufacturing efficiencies, improved freight costs, better quality management and the G7 15 Day production ramp up.

Operating margin also increased to 25.3% from 22.6% a year earlier, despite higher operating expenses and investment in the Ireland facility. Management raised its full-year operating margin guidance to approximately 24%, while maintaining gross margin guidance at 64%. Continued manufacturing optimization and better utilization of production capacity could provide further operating leverage as volumes expand.

European Direct Distribution Strategy Holds Potential: DexCom's planned acquisition of a European distribution partner's business represents an opportunity to strengthen its commercial presence in high-potential markets. The transaction, which is expected to be closed in 2027, will allow the company to transition its largest remaining distributor market in Europe to a direct operating model. This strategy could improve control over market access, customer relationships and execution of its go-to-market plans.

Management has identified distributor acquisitions as an important component of its international expansion strategy. Although the transaction will not contribute to 2026 results, it could become an incremental growth lever as DexCom expands CGM access across Europe.

Smart Basal Technology Could Expand DexCom's Reach: DexCom's Smart Basal technology offers an additional opportunity to strengthen its position among patients using basal insulin. Management reported that most patients in the pilot achieved their optimal basal insulin dose within approximately three weeks without experiencing hypoglycemia.

Positive patient and prescriber feedback, alongside improvements in A1c outcomes, could support broader adoption. The technology may also differentiate DexCom's CGM offering by helping physicians manage insulin titration more effectively. If the company successfully expands compatibility with additional insulin types and integrates the system into electronic health records, Smart Basal could improve its appeal to prescribers and support further penetration in the basal insulin market.

Risks

PBM Formulary Changes Could Create Challenges: The loss of preferred formulary status under a CVS-related pharmacy benefit manager arrangement highlights potential risks to DexCom's customer access. Although the affected PBM represents less than 4% of U.S. revenues, patients moving from preferred to secondary status could face substantially higher prices. This may encourage some users to switch products or seek alternative reimbursement channels, creating friction in customer retention.

DexCom plans to address the issue through Dexcom Direct, which will help patients navigate pharmacy and medical-benefit coverage. However, the service will require additional customer support, and its effectiveness in minimizing patient disruption remains to be seen.

Ireland Facility Ramp-Up Could Weigh on Margins: Although DexCom's new Ireland facility began commercial production on schedule, its initial ramp-up is expected to create near-term margin pressure. Management indicated that a new facility typically requires several quarters to reach normal production volumes, with the associated drag likely to extend into the first quarter and, to a lesser extent, the second and third quarters of 2027.

The company also expects a sequential gross margin setback in the fourth quarter of 2026 as Ireland's operations come online. While the facility should eventually strengthen manufacturing capacity and supply-chain resilience, underutilization and start-up inefficiencies could temporarily offset some benefits from G7 15 Day adoption and ongoing manufacturing improvements.

Rising Investment Requirements Restrain Operating Leverage: DexCom expects to keep increasing investment in product development and commercial infrastructure, which could constrain the pace of operating margin expansion. Management specifically highlighted additional spending on G8 clinical work ahead of its FDA submission, as well as investment in Dexcom Direct and international expansion.

DexCom expects to launch G8 in late 2027 or early 2028, pending regulatory approval, requiring continued research and development investments ahead of commercialization. Management indicated that annual operating expenses have historically risen by a few hundred million dollars. Although the company anticipates operating leverage over time, achieving it will depend on revenue growth outpacing incremental spending.

DexCom, Inc. Price and Consensus

DexCom, Inc. price-consensus-chart | DexCom, Inc. Quote

Estimate Trend

DexCom has witnessed an improving estimate revision trend for 2026. In the past 30 days, the Zacks Consensus Estimate for 2026 earnings per share (EPS) has improved 1.5% to $2.68.

The consensus mark for the company’s fourth-quarter revenues is pegged at $1.39 billion, indicating a 10% improvement from the year-ago quarter’s reported number. The consensus estimate for fourth-quarter earnings is pinned at 71 cents per share, implying an improvement of 4.4% year over year.  

Stocks to Consider

Some better-ranked stocks from the broader medical space are Glaukos (GKOS Quick QuoteGKOS - Free Report) , Intuitive Surgical (ISRG Quick QuoteISRG - Free Report) and West Pharmaceutical Services (WST Quick QuoteWST - Free Report) .

Glaukos, currently flaunting a Zacks Rank #1 (Strong Buy), reported third-quarter 2026 adjusted EPS of 47 cents, which surpassed the Zacks Consensus Estimate by 491.7%. Revenues of $211 million beat the Zacks Consensus Estimate by 25%. You can see the complete list of today’s Zacks #1 Rank stocks here.

GKOS has an estimated earnings growth rate of 155.6% for 2026. The company’s earnings beat estimates in three of the trailing four quarters and missed once, the average surprise being 138.6%.

Intuitive Surgical, currently carrying a Zacks Rank #2 (Buy), reported third-quarter 2026 adjusted EPS of $3.00, which beat the Zacks Consensus Estimate by 13.6%. Revenues of $3.05 billion surpassed the Zacks Consensus Estimate by 4.9%.

Intuitive Surgical has a long-term estimated growth rate of 15.5%. ISRG’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 15.1%.

West Pharmaceutical, currently carrying a Zacks Rank #2, reported a third-quarter 2026 adjusted EPS of $2.66, which surpassed the Zacks Consensus Estimate by 22%. Revenues of $874.5 million beat the Zacks Consensus Estimate by 5.9%.

WST has an estimated long-term earnings growth rate of 17.4%. The company’s earnings beat estimates in each of the trailing four quarters, the average surprise being 18.6%.