DexCom Inc

DexCom’s Q1 2026 was defined by leadership transitions and AI-driven innovation. While Q4 earnings showed 13% growth, conservative 2026 guidance caused some investor hesitation. The largest growth lever is the push into the non-insulin-using Type 2 diabetes market. Management is eyeing a breakthrough in coverage for nearly 12 million people in this category, which would drastically increase the addressable market. Regardless of insurance reimbursement, the awareness of prediabetes in a well-to-do aging demographic creates a market opportunity.

We believe that Dexcom with continued market growth, stabilizing share dynamics, and a coming product cycle will drive strong growth and profitability not currently reflected in the valuation.

Our investment case for Dexcom is compelling due to its strong financial health, including a clean balance sheet and robust free cash flow generation. The company is experiencing significant growth, with organic revenue increasing in fiscal 2025 and earnings growth projected to continue over the next several years. The company is expanding its market reach with the successful launch of Stelo, a CGM for non-diabetics, and the transition to the G7 system, which offers a longer sensor life. Additionally, Dexcom is targeting the large and growing non-intensive type 2 diabetes market and continues to benefit from positive reimbursement trends. Overall, we believe this medical device company is well-positioned to capitalize on the increasing prevalence of diabetes and the growing adoption of CGM technology.

Dexcom is a medical device company that helped pioneer the design and development of continuous glucose monitoring systems (CGMs). The company has been under pressure since posting unexpectedly bad results in the second quarter of 2024, despite improving or at least stabilizing revenues and operating profits since then. Recently, there have been concerns over accuracy issues with Dexcom’s latest generation G7 continuous glucose monitor. The company is addressing the issue, but so far it’s unclear whether these issues have impaired the brand and caused a loss of market share.

DexCom (DXCM) exceeded second quarter consensus expectations, but its modest guidance increase failed to reflect year-to-date strength, pressuring sentiment. A subsequent short report raised concerns about yield, accuracy, and injury rates related to the G7 launch, adding to volatility. However, most production issues were already known and addressed through changes in third-party sourcing. Moreover, while early G7 injury rates were higher than the G6, they have since improved and remain below those of key competitors.

Dexcom is one of the global leaders in continuous glucose monitors, which any diabetic will likely tell you has revolutionised the lives of sufferers. This is an oligopolistic market segment with high entry barriers across technology and regulation. Dexcom’s shares were targeted by a very negative report from a small independent hedge fund looking to benefit from a fall in the shares. Although initially successful, the report has been largely debunked, and we took advantage of the fall to add to our position.

Dexcom is positioned as a leader in continuous glucose monitoring, which allows diabetics to better dose their insulin and helps athletes optimize their food intake. The company utilizes innovative patch-like sensors that enhance user experience and health management. The manager believes that Dexcom offers a better valuation compared to its competitor Abbott Labs, indicating confidence in its growth potential and market position.