Prepared remarks
Ladies and gentlemen, welcome to the Dexcom Second Quarter 2026 Earnings Release Conference Call. My name is Abby, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. We will conduct a question-and-answer session. During the question-and-answer session, if you have a question, please press *, then 1 on your touch-tone phone. As a reminder, the conference is being recorded. I will now turn the call over to Sean Christensen, Senior Vice President of Finance and Investor Relations.
Thank you, operator, and welcome to Dexcom's second quarter 2026 Earnings Call. Our agenda begins with Jake Leach, Dexcom's President and CEO, who will summarize our recent highlights and ongoing strategic initiatives, followed by a financial review and outlook from Jereme Sylvain, our Chief Financial Officer. Following our prepared remarks, we will open the call for your questions. At that time, we ask analysts to limit themselves to one question each so we can provide an opportunity for everyone participating today. Please note that there are also slides available related to our second quarter 2026 performance on the Dexcom Investor Relations website on the Events and Presentations page. With that, let's review our safe harbor statement. Some statements on today's call may constitute forward-looking statements. These statements reflect management's intentions, beliefs, and expectations about future events, strategies, competition, products, operating plans, and performance. These statements are made as of the date hereof based on information currently available to Dexcom and are subject to various risks and uncertainties that could cause actual results to differ materially. For discussion of these risks, please see Dexcom's annual report on Form 10-K, most recent quarterly report on Form 10-Q, and other filings with the Securities and Exchange Commission. Except as required by law, we assume no obligation to update any forward-looking statements or to conform any forward-looking statement to actual results. Additionally, during the call, we will discuss certain non-GAAP financial measures. Unless otherwise noted, all financial measures discussed on this call are presented on a non-GAAP basis. Non-GAAP measures should not be considered in isolation or as a substitute for or superior to GAAP results. Please refer to the tables in our earnings release and the slides accompanying our second quarter 2026 earnings call for reconciliations to the most directly comparable GAAP measure. Now I will turn it over to Jake.
Thank you, Sean, and thank you, everyone, for joining us. Today, we reported second quarter revenue growth of 13% compared to the second quarter of 2025, and organic revenue growth of 12%. We carried forward solid demand from the first quarter for Dexcom CGM globally as we benefited from broader access and share gains across several core markets as well as patient categories. The second quarter was also marked by solid execution across the business. This included multiple product launches, strong margin execution, and excellent product performance in the field. In addition, global new customer starts remained in line with our previous record from last quarter, including a sequential uptick in new customer starts in the U.S. During the quarter, we had the opportunity to connect with many of you at our 2026 Investor Day, which we hosted at our Arizona manufacturing facility. Since I stepped into the role of CEO, you have heard me reiterate my three priorities for Dexcom's next phase of growth: one, be the premier glucose sensing solution for all; two, set the standard for customer experience; and three, expand international market share. This event provided an opportunity to explore each of these topics in much greater detail. During the day, we shared updates on our product roadmap, reimbursement plans, international strategy, and future market opportunities. We also laid out our new five-year financial targets and capital allocation plans, which included a $1 billion share repurchase authorization to be executed in 2026. A key part of our presentation was detailing the pathway to full coverage for the 25 million people in the U.S. with type 2 diabetes not using insulin. In fact, we have an organizational initiative called the Road to 100, which represents our efforts to achieve coverage for all people with diabetes. And while it has only been two months since our Investor Day, we have recently taken an important step forward in advancing that opportunity. As many of you know, at this year's American Diabetes Association Scientific Sessions, we provided a full readout of CONNECT, our randomized controlled trial for people with type 2 diabetes who are not on insulin. For background, CONNECT enrolled nearly 300 participants across 22 primary care sites in the U.S. and was designed to reflect the widespread spectrum of people with type 2 diabetes. This included individuals across the full range of type 2 medication plans to ensure these results were reflective of real-world care. And we could not have been happier with the results. Over the six-month study period, we saw a 1.6% A1C improvement for the Dexcom CGM group, which equated to a 0.9% difference in A1C between the CGM arm and the control group. To put this in perspective, these results are even better than what we saw in our landmark DIAMOND and MOBILE studies, which ultimately helped shift standards of care and led to full coverage for anyone using insulin. Beyond the strong headline results, several additional outcomes stood out in the CONNECT trial. First, the Dexcom CGM arm spent over five more hours per day in normal glucose range compared to the control group. Importantly, these improvements began within the first week of using Dexcom and were sustained over the 26-week study. These were individuals who have had diabetes for 10-plus years on average, and Dexcom immediately gave them a path to better glucose control. Second, this real-time feedback led to very high engagement throughout the trial. Over the 26-week study, median wear was 97%, which is even higher than what we have seen in some AID trials. And finally, from a medication perspective, the largest relative improvement in A1C was within the cohort using only GLP-1 therapies. This data only further reinforces the complementary relationship between CGM and incretin therapy. The results demonstrated in CONNECT translate to meaningful health outcomes and economic savings, and we are already seeing this recognized by commercial payers. As an example, in collaboration with CVS Health, we published a real-world evidence study for non-insulin type 2 customers. Over a three-year period, the study showed a 66% reduction in diabetes-related hospitalization after the initiation of CGM, and nearly a 50% reduction in microvascular complications. These tangible near-term cost savings are a key reason why we have seen commercial coverage build so quickly. As we mentioned in our Q1 call, as of this summer, we now have coverage for all people with diabetes across the four largest commercial PBMs. This represents reimbursement for more than seven million people with type 2 diabetes who are not on insulin. While this is a great start, we have stated previously we will not be satisfied until we have broad global coverage for all people who can benefit from Dexcom CGM, including the 25 million type 2 non-insulin customers in the U.S. The CONNECT readout adds Level A evidence to the already substantial body of real-world type 2 data and our momentum with commercial payers. Historically, this level of evidence has carried outsized influence in both shaping clinical practice and driving coverage forward, both in the U.S. and across international markets. We are now working with advocacy groups and KOLs across the world to help educate the market on these outcomes. We have also submitted the CONNECT data for publication and provided the evidence to CMS in support of the non-insulin coverage expansion. We believe these results only strengthen the case for reimbursement, and with roughly half of the type 2 non-insulin population being of Medicare age, this decision has the potential to completely reshape diabetes care in the U.S. The administration is already demonstrating its commitment to reducing the burden of chronic disease and expanding access to new technologies. Along those lines, we are excited to see the FDA's announcement of Dexcom as the first company chosen to participate in the TEMPO digital device pilot. As I shared at Investor Day, we believe that Dexcom's opportunity goes beyond diabetes care and into diabetes prevention. We have 115 million Americans with prediabetes, but only a fraction of them are aware. Under TEMPO, we will have the ability to demonstrate Dexcom's ability to screen for prediabetes with Dexcom CGM and drive people to better metabolic health. As we continue to expand the horizons of CGM access and metabolic health, we are driving exciting product enhancements that meet the needs of our customers. This includes our fully redesigned Stello app, which launched broadly last week. As you saw at Investor Day, this new interface offers a more consumer-friendly feel, new AI-driven insights, and enhanced food logging capabilities. This Stello update also creates the foundation from which our G Series app will evolve, providing greater personalization and additional functionality for all customers. More broadly, our technology roadmap remains focused on delivering innovations that can improve outcomes and the user experience. A great example of this is Dexcom Smart Basal. As a reminder, Smart Basal is a personalized dosing module to help simplify and optimize basal insulin management for both customers and physicians. We developed this technology to address a significant unmet need, as more than 70% of patients on basal insulin fail to achieve target A1C levels after a year of therapy, often due to the challenges associated with insulin titration. We currently have our pilot program of Smart Basal underway with several key KOLs, and the feedback has been great. In fact, across these practices, Smart Basal has helped customers reach an optimal basal dose in only three weeks on average, which is a process that typically takes 12 weeks or longer in routine care. These results validate our belief that Smart Basal has the potential to become the new standard of care for basal insulin management. During the quarter, we also continued to advance the rollout of our G7 15-day system. With the recent integration availability for Tandem pump users, including Mobi, our G7 15-day system is now accessible for all adult G7 customers in the U.S. We are very encouraged by the response we have seen since launch, with great feedback on the new algorithm, updated patch, extended wear time, and enhanced customer service. Importantly, these improvements are translating into stronger customer satisfaction, with G7 net promoter scores increasing in each of the last three quarters. Based on this positive customer feedback, strong adoption trends, and growing interest across the market, we remain on track to convert nearly 50% of our U.S. customer base to the G7 15-day system by year end. At Investor Day, we also discussed our plans to extend this 15-day experience across our international markets. We recently completed an important step on that journey as Health Canada became the first international regulator to clear Dexcom G7 15-day. We look forward to bringing G7 15-day to Canada in the second half of 2026 and to the rest of our international markets as quickly as possible. To close, it was great to connect with many of you in Arizona, to share our vision for Dexcom's next chapter of growth and to support that vision with a strong quarter of execution. As we discussed at the event, we see a significant opportunity to help millions more people globally. In fact, through our ongoing advocacy work, access efforts, market expansion, and product development, we believe we can exit our LRP with an even larger market opportunity than we have today. And we plan to execute on that growth vision with one of the more compelling cash flow and margin profiles in the industry. As you can tell from today's updates, we are wasting no time making this vision a reality. With that, I will turn it over to Jereme.
Thank you, Jake. As a reminder, unless otherwise noted, the financial metrics presented today will be discussed on a non-GAAP basis. Reconciliations to GAAP can be found in today's earnings release as well as the slide deck on our IR website. For the second quarter of 2026, we reported worldwide revenue of $1.31 billion compared to $1.16 billion for the second quarter of 2025, representing growth of 13% on a reported basis and 12% on an organic basis. As a reminder, our definition of organic revenue excludes the impact of foreign exchange, in addition to non-CGM revenue acquired or divested in the trailing 12 months. U.S. revenue totaled $933 million for the second quarter, compared to $841 million in the second quarter of 2025, representing an increase of 11%. We continue to see strong new patient performance and share capture in the U.S. market, with good sequential momentum driven by solid execution in the field. International revenue grew 19%, totaling $375 million in the second quarter. International organic revenue growth was 16% for the second quarter. As we have seen over the past several quarters, some of our strongest performances came from markets where access has recently expanded, such as France and Canada. This is consistent with the international access strategy we outlined at Investor Day, as reimbursement wins often allow us to drive growth and market share over time. We also continued to expand our international product portfolio during the quarter with the launch of Dexcom Flex in Germany. Dexcom Flex is our newest 15-day sensor designed to address type 2 basal and the type 2 non-insulin markets in select geographies. We are excited to further roll out this product as type 2 reimbursement continues to build. Our second quarter gross profit was $838.5 million, or 64.1% of revenue, compared to 60.1% of revenue in the second quarter of 2025. This was another great quarter for gross margin performance, with margins improving approximately 400 basis points compared to last year. This improvement was driven by continued manufacturing efficiencies in quality management, and a benefit from the initial customer switch over to G7 15-day. As Jake mentioned, our execution has been excellent across our operations and supply chain. This included a return to more optimized shipping patterns, which helped us manage the fuel price environment in Q2. Operating expenses were $510.2 million for Q2 of 2026 compared to $474.1 million in Q2 of 2025. Operating income was $328.3 million, or 25.1% of revenue, in the second quarter of 2026 compared to $221.8 million, or 19.2% of revenue in the same quarter of 2025. Once again, we delivered nice operating expense leverage during the quarter, even as we expanded our investment in Ireland to prepare for commercial production later this year. This quarter was another great representation of ongoing cost discipline across our organization, which is driving margin performance and funding growth opportunities across the business. Adjusted EBITDA was $421.3 million, or 32.2% of revenue for the second quarter compared to $327.6 million, or 28.3% of revenue for the second quarter of 2025. Net income for the second quarter was $269.1 million, or $0.70 per share, representing 46% growth over the second quarter of 2025. We remain in a great financial position, closing the quarter with approximately $1.9 billion of cash and cash equivalents. Our cash flow generation continues to be a key differentiator, as we delivered more than $600 million in free cash flow in the first half of the year. This was more than double our first half free cash flow levels from 2025. As Jake mentioned, at Investor Day, we announced a commitment to repurchase $1 billion of stock in 2026. Following the event, we quickly started executing that plan and repurchased approximately $600 million in the second quarter. During the day, we also shared a broader framework for our capital allocation decisions, which includes an ongoing assessment of tuck-in M&A and where to invest for future production capacity. As we discussed, one area of particular interest is in transactions that have the potential to accelerate our technology pipeline. In line with that framework, we completed the acquisition of Nutrisense during the second quarter. Nutrisense has developed an innovative platform built on CGM data, with a focus on delivering nutrition-focused insights. We believe this integration has the potential to enhance our customer experience and provide new personalized insights. Turning to guidance, we are raising the midpoint of our guidance with an updated range of $5.18 billion to $5.25 billion, representing growth of 11% to 13% for the year. This updated revenue guidance reflects stronger organic growth expectations offset by recent movement in foreign exchange rates, which we expect to have about a $15 million impact to international revenue in the second half of the year relative to our prior guidance. Importantly, excluding the impact of foreign exchange, our updated guidance implies an increase in organic growth by more than 50 basis points at the midpoint compared to our prior guide. For margins, we are raising our full year non-GAAP gross profit margin guidance to approximately 64%. We are also increasing our non-GAAP operating profit margin guidance to a range of 23.5% to 24% and adjusted EBITDA margin guidance to a range of 31.5% to 32%. With that, we can open up the call for Q&A. Sean?
Thank you, Jereme. As a reminder, we ask our audience to limit to only one question at this time and then reenter the queue if necessary. Operator, please provide the Q&A instructions.
Questions and answers
Thank you. We will now begin the question and answer session. If you wish to be removed from the queue, please press 1 a second time. If you are using a speakerphone, you may need to pick up the handset first before pressing the numbers. Once again, if you have a question, press *, then 1 on your touch-tone phone. Our first question comes from the line of Travis Steed with Bank of America. Your line is open.
Hey, congrats on a good quarter. Jereme, I'll ask about the U.S. CGM growth for Dexcom and also the market. It was nice to see the quarter-over-quarter uptick in new patient starts. But the market for CGM in the U.S. kind of hanging around that 10% line — just kind of the confidence you are seeing in that sustainability of double-digit growth and how to think about some of the new products and expanding coverage as those hit later this year, and kind of what you are assuming for Nutrisense in the second half on the guidance?
Yeah, thanks, Travis. I'll take that one. Yeah, it was another robust quarter of new patient starts, and it was nice to see the sequential uptick in the U.S. It was pretty broad based across all of our patient segments. As we mentioned in the call, we saw some share taking across those. When you take a step back and look at the U.S. market today, there are approximately nine million people in the United States that have coverage for CGM but are not yet using it. So we do feel that there is robust growth still there before we talk about any expansion in coverage.
And so, happy with the patient adds. We're going to continue to drive and push so that everyone that can benefit from this technology gets it. And as you mentioned, CMS expansion is something that we have targeted for mid-next year as when we believe that coverage will come into place. That obviously gives us a pretty significant runway for future growth. Nutrisense, as you mentioned, is one of the acquisitions that we have made, and it really is focused on driving better insights and more value. It was a really exciting technology that the team developed. We have been partners with Nutrisense for quite a while, and as we continue to work with them, we saw the benefits of that technology could bring to the users. The engagement scores early on are really high because of the personalized nutrition coaching based on CGM that we see with that technology. So we are excited to work with it and integrate it into our product portfolio, and we are excited to see where it can drive us.
Yeah, and to your question on guidance, Travis, most of the revenue that ran through Nutrisense was actually pass-through CGM. So that has always been in our run rate, and that will continue into our run rate. I would say that any other contribution to the top line you can count the millions for the year on one hand, so it is truly immaterial in terms of impact to the organization. In terms of the P&L, we are assuming the P&L associated with that into our guidance range, so all of that is contemplated in there. Most importantly, the run rate that Nutrisense had — most of it was already Stello revenue, and so it continues to remain and does not change the organic growth profile.
Our next question comes from the line of Robert Marcus with JPMorgan. Your line is open. Please check your mute button.
Oh, great, sorry, just jumping back and forth. Appreciate it. Wanted to ask on CONNECT and the reception amongst doctors following ADA, and how you are thinking about how this data set and hopefully the eventual Medicare non-intensive reimbursement might help stimulate and advance adoption in type 2 non-intensives? You know, what has been the feedback and do you think this trial was a door that could open and help drive adoption once reimbursement comes? Thanks.
Yeah, thanks, Robbie. Absolutely, the results from the CONNECT trial, both in terms of the A1C reduction across the broad spectrum of type 2 users on all kinds of different medication plans as well as the engagement with the technology. The engagement is very, very high in this population. If you look at it compared to some of the older studies, one thing to always remember is that the technology has improved pretty substantially over time. So I think what we have seen in this study is not only the benefit to these users and their engagement with the product, but also the quality of the product experience. If you think about some of the earlier studies, those started back even on G4. Now with G7 and all the enhancements we've made to both the ease of use, it has really driven the capability for these folks to use this product full time. As I mentioned, 97% utilization. I think that really resonates with providers because if they are writing the prescription for this product and they want their patient to get it, they want them to use it. I think this trial is a great proof point in how this product will be used in this population. We saw it in our registry data — great utilization for those already using it — but in this trial, I think that stands out substantially as well as the improvement in A1C. Right now, we are working with that data. We have submitted it; it is in late-stage review for publication, and we will continue to take that data around the world to drive reimbursement. This is the type of trial that previously has driven pretty significant expansions. Our previous trial was obviously for insulin users. This one now for the broad segment of type 2, so we do feel that it is a very important part. The evidence was strong before the CONNECT trial results were available, but now that they are available, it just really reinforces the benefit that this technology has in the broad base of diabetes.
Our next question comes from the line of Matthew Charles Taylor with Jefferies. Your line is open.
Hi, thank you for taking the question. I just wanted to follow up on CONNECT and non-insulin type 2. You talked about having submitted the data package to CMS as well. Could you give us any update if there is one on the timeline that you might expect for coverage? You said mid-2027 previously. Is that still your base case, or could it potentially be sooner with the progress that you have made?
Yeah. We did submit the CONNECT data to CMS, and there is no change in our assumptions around the coverage decision. We do expect to hear back from CMS on that decision before the end of this year, and in our plans right now, we have it taking effect in the middle of 2027. That being said, I do believe that CONNECT is a pretty powerful dataset that, not only for CMS but for the world, will continue to advance reimbursement for this population.
Our next question comes from the line of Larry Biegelsen with Wells Fargo. Your line is open.
Hi. This is Gursimran on for Larry. Thanks for taking the questions, and congrats on a good quarter here. I'll just ask about the pilot program with the FDA, TEMPO. What does TEMPO mean for type 2 non-insulin and prediabetes coverage exactly? Can you elaborate on the kind of evidence development in the TEMPO program for those two indications and when you could potentially have a prediabetes label? And then is there any near-term revenue benefit from CMS coverage and any read-through to broader type 2 non-insulin CMS coverage from it being mentioned alongside the TEMPO program as well?
Thanks, Gursimran. TEMPO is an innovative regulatory framework introduced by the FDA that is really around access to technology for patients. It aligns with target areas identified by the CMS Access program, which are early-stage cardiometabolic conditions. We are talking prediabetes and diabetes, which squarely fit into those. TEMPO is about allowing participants to release digital technologies into the market under an enforcement discretion-type approach. What it means for Dexcom is it allows us to innovate more quickly on our glucose health program as well as some screening techniques that we are looking at using CGM to screen for prediabetes as well as diabetes, because of the significant lack of awareness of prediabetes diagnoses. We believe CGM is a powerful technology to help intervene earlier in the progression of disease. TEMPO is not specific to coverage per se; it is a framework to get technology in the hands of users. The CMS Access program does add additional payments into the system for Medicare beneficiaries, and obviously a technology under TEMPO that can help there could benefit, but it is not connected to the general CMS decision for broad coverage for type 2. It is really more specific to the TEMPO and Access programs.
Our next question comes from the line of Matthew O'Brien with Piper Sandler. Your line is open.
Great, thanks. This is Anna on for Matt. Thanks for taking our question. I wanted to ask on 15-day. You mentioned the 50% conversion by the end of the year in the U.S. Just wanted to know if there was any color you could provide on conversion to 15-day sites exiting Q2 and how you are thinking about the accretive margin impact from that mix shift for the rest of the year. Is that sort of showing up in line with your expectations or anything to note there? Thanks.
Sure. I can take that question. The transition is occurring essentially in line with expectations. If you think about all the assumptions as we were going into the year, we really launched it in earnest starting in January. We did a little bit of early release in the DME space in the back quarter of last year, but it went into retail at the beginning of this year. Over the course of the first half, there are obviously folks that have adopted it. One of the gating items was integration with Tandem and Mobi, and that is now in place as we move into the back half of the year. Our expectations were that you would continue to see it ramp up, especially as all of the AID integrations took place. You are seeing Tandem coming in now and it is already connected to Beta. We are making great progress. It is in line with expectations, and you are seeing it start to contribute a little bit more here in the second quarter. The expectation is it starts to contribute more into the third quarter and the fourth quarter as your base continues to move over and as that starts to represent recurring purchase patterns. The expectation is it really starts to contribute more next year, because as you start to close in on 50%, that becomes your starting point for 2027 and that starts to get pretty meaningful as you move into the next year. For now, it is progressing in line, great customer feedback, and we have really gotten all connections on board. So we are right on track.
Our next question comes from the line of Joshua Jennings with TD Cowen. Your line is open.
Good evening, guys. Thank you for taking the questions. This is Colin on for Josh. I had a quick one. Now that you have got seven million-plus covered lives to play with, what is the kind of awareness level among physicians for the reimbursement already in place? Are physicians identifying which patients can already receive reimbursement with the Medicare decision upcoming? Thank you.
Thanks, Colin. I think what you are getting at is what is the physician awareness of reimbursement, how much more needs to take place in lieu of expansion of coverage, and what are we doing to make folks aware. We have been working on this for some time. Our salesforce has various tools that they use with physicians to go through historical claims adjudication by payer to show them in their practice where coverage exists and where it does not. That helps more physicians get comfortable that access exists. It takes time as more coverage comes in, because every time we show up we are going to show them better enhancement or improved coverage. We also expect to continue to bring the CONNECT study with us because it demonstrates the benefits. For those on the fence about what this will do and how it will impact patients, CONNECT shows if patients use CGM they achieve significant results regardless of medication. We can also show coverage ahead of time. There is work to do because there are hundreds of thousands of prescribers and each is at a different point in their education, but that is what the team is doing. If you talk to our sales leadership, they are excited as more and more coverage comes because it is easier to rebut the question of whether a patient has coverage. We can start to show clear line of sight to where coverage exists today. Where it does not exist, Stello is a great opportunity for patients. That helps. Hope that answers the question.
Our next question comes from the line of Jayson Bedford with Raymond James. Your line is open.
Congrats on the progress. Just a clarification and then a question. I missed the comments around NCS adds. Was the takeaway that Q2 adds were similar to Q1? And then my question is, it is tough not to notice the OpEx leverage. Are there timing dynamics at play here or is this the level at which you can kind of leverage the business going forward? Thanks.
Sure, Jayson. Basically, Q2 is in line with Q1. Q1 was a record globally, so Q2 is in line with that record globally. We are still waiting for some final patient data to come in; in the U.S. it can take up to 45 days to get it all. What is important is that U.S. new patient starts sequentially increased from Q1. OUS patients came down a bit, but these things happen with tenders and timing. To your question on operating leverage, we have had some operating leverage ahead of plan and that is part of why we increased the guide for the year. Over time, the operating leverage we are building across technology and capability should continue to contribute. One thing to note is as we launch our Ireland factory, we will hire manufacturing folks in the quarter ahead of starting manufacturing; they are training and not yet producing and you'll start to see some depreciation. We have invested in Ireland in Q2 and we will make more investments in Q3. The levers we are building in the organization to achieve operating leverage continue to progress, and we are proud of the results this quarter and glad to pass it along via guidance increases on margin.
Our next question comes from the line of Marie Yoko Thibault with BTIG. Your line is open.
Hi, good afternoon. Thank you for taking the question. Wanted to ask about international. You had really strong organic growth over there again this quarter. I think the comp may be getting a little bit tougher in the second half. Just want to understand what pace is sustainable. I know Japan went direct, and I believe you mentioned Health Canada and the 15-day approval there. So what are some of the catalysts to help drive international growth through the second half of the year? Thanks.
Thanks, Marie. The exciting thing about international is the tremendous opportunity as coverage expands. We are still working through Type 1 coverage in a number of our top 10 OUS markets — that is before we even get to basal and then ultimately non-insulin type 2. If you look at just those core markets, we are well north of 60 million potential lives we could impact. In the second half, comps get a little tougher because we had some great access wins in the back half of last year, but we continue to get access wins and new tenders. Much of growth is around people having access to Dexcom CGM for the first time because we now have our product portfolio where we can bring Dexcom 1 Plus or Dexcom Flex to patient populations that did not have a choice before. As we win tenders and get on formularies, that gives them access and we are seeing those wins. We expect more to come, and over the long run we see a significant opportunity.
To your question on what to think about for the back half of the year and comps, Q3 and Q4 comps in international are a little tougher; we've talked about that all year. Q3 got a bit tougher in OUS. Also be mindful of currency — around a dollar 17 to 18 in the euro is about breakeven. As of June 30, we were thinking about a dollar 1.14, so be mindful of that as you model. If you neutralize currency, organic growth is not as impacted, but updated currency assumptions matter.
Our next question comes from the line of Jeffrey Johnson with Baird. Your line is open.
Thank you. Good afternoon, guys. Just want to swing back maybe to the U.S. Jereme, could you provide any high-level color on what are the drivers of getting back to that kind of record equivalent to a record new start in the U.S.? Were basal-only patients doing most of the heavy lifting? Is it share gains in basal-only? My gut would tell me that maybe your Type 1 and intensive Type 2 new starts on a year-over-year basis are down a little bit. I do not know if you'd comment on that, but given those penetration rates, just kind of the mix and makeup of what drove that good U.S. number this quarter. Thanks.
Sure. When we talk about a broad-based performance, we did see some step up from last quarter even in Type 1 a little bit, but you really saw a step up across the board — Type 1, Type 2 intensive, basal, and a little bit in Type 2 non-insulin. It's a mix across the board. A couple factors: NPS scores continue to go up — third consecutive quarter of improvement. New product like G7 15-day, the algorithm, wear time, performance in the field, addressing prior sensor deployment challenges, all play into customer satisfaction. Combined with broader coverage levels and efforts to eliminate friction like prior authorizations, that gives both physicians and customers reasons to choose our product. Improvements in onboarding and out-of-box experience, algorithmic improvements, and positive word-of-mouth are all contributing. So no single silver bullet — it's the combination of product, coverage, and experience.
Our next question comes from the line of Joanne Karen Wuensch with Citi. Your line is open.
Good evening, and thank you for taking the questions. Briefly, I wanted to make sure that the G8 sensor timeline was still intact or if you had an update on that. And then it looks like you acquired Nutrisense in early June. Just curious what your thoughts are on that and if it is in guidance. Thank you.
Thanks, Joanne. G8 timeline is still very much intact. The team is doing great work. We are in the middle of lots of validation on the product as we prepare to start very large clinical trials to show performance levels. As we mentioned at Investor Day, we expect step-change improvement in accuracy and reliability for this product based on brand-new technology being implemented into the G8 system for the very first time. It is also a wearable that is half the size of G7 — slimmer in height and footprint — making it easier to fit into patients' lifestyles. Very much on track for end of 2027, early 2028 depending on regulatory timing. It is also a multi-analyte platform; we will be launching with the glucose version first, with multi-analytes to come after that as we push towards ketones, potassium, and other analytes. We feel those are an important part of the future for diabetes care and metabolic health. On Nutrisense, we did acquire them and they have been a partner for a long time. We believe the technology, the engagement it drives, and the insights they deliver should be part of Stello and the G Series and our entire product portfolio. We will continue to integrate that technology and advance it with the Nutrisense team to enhance insights and drive outcomes. Nutrition is a big part of metabolic health, and we have been expanding the product's ability to capture nutrition. The new Stello app now analyzes nutrition and gives a full breakdown of a meal — whether you barcode scanned it or took a picture of something prepared — and Nutrisense helps power that capability.
To your question on guidance, a big chunk of the revenue that is in Nutrisense is actually CGM pass-through revenue and predominantly Stello-related. So there is no real change there — we have always sold and passed it through. The incremental non-CGM revenues are very small; you can count them in the millions on one hand, so it is not a huge revenue item relative to the size of Dexcom. The technology is the strategic driver behind the acquisition, and the OpEx has been assumed into our run rate and into our guidance. You will see details in the 10-Q regarding purchase and cash flows.
Our next question comes from the line of Anthony Petrone with Mizuho. Your line is open.
Great, congrats on a nice print. A couple on type 2 non-intensive: we are hearing from some docs in the field that potentially the coverage decision could have some requirements around it, specifically around A1C verification at various increments, say six months or nine months. What do you think coverage could potentially look like? Will it have certain verification requirements to keep folks on CGM in this patient category? And in the study, utilization was 97% — very high. In the real world, what do you think utilization intensity for type 2 non-intensive patients could look like? Thanks, and congrats again.
Thanks. Starting with utilization: our real-world registry also shows very high utilization, not quite 97% but well above 80% in this population. That speaks to the real-world engagement where patients have coverage and low out-of-pocket costs. Regarding A1C thresholds, that is not consistent with our discussions. CGM benefits users across the A1C spectrum — those with higher A1C see larger improvements, but the whole cohort benefits. ADA standards of care focus on a 7% A1C target, and many people who are not using CGM are not achieving that. We feel CONNECT will continue to evolve those standards of care toward recommending CGM broadly for people with diabetes. If there were an A1C threshold requirement, that would be inconsistent with what CMS has done previously and inconsistent with broad commercial coverage, which is generally for anyone diagnosed with diabetes. So that kind of threshold is not consistent with our discussions with CMS and other stakeholders.
Our next question comes from the line of Michael Polark with Wolfe Research. Your line is open.
Good afternoon. Jake, at the beginning of your prepared remarks, you noted product performance was excellent in the quarter. I heard Jereme alluded to some manufacturing quality improvements earlier. I'm hoping you can unpack 'excellent product performance' a little more for us — give us some metrics: scrap, warranty rates, returns, complaints. Obviously this was a challenge last year and you rolled out a new product, so it's good to hear things are better. Any further color would be appreciated. Thank you.
Thanks for the question. We did see excellent product performance. One of the biggest measures is NPS, which continues to increase for G7 — three quarters in a row. We had challenges last year with out-of-box failure rates that disrupted the patient experience; we addressed those and the team worked hard across the board to solve those problems. We focus on building the absolute best customer experience, both in the product and customer support. Complaint levels have come down because of the enhancements we've implemented. We will continue to advance the technology and improve performance as we launch 15-day around the globe. Accurate and reliable glucose data is critical even for customers using AID systems, so improving product performance remains a core focus.
A good way to see improvement is both through NPS scores and margin performance. Some of the margin impacts were related to freight and addressing product issues. A significant improvement driver has been reduction of scrap, which focuses on quality as product runs through our lines. You have seen that improve steadily from Q2 last year into Q3, then into Q4, and into this year, and that improvement in performance is the result of the team's work over the back half of last year and into this year.
Our next question comes from the line of Jonathan Block with Stifel. Your line is open.
Great, thanks. Jereme, maybe just on the financials. You had the gross margin raise of 50 basis points — is that a function of a different oil/resin price assumption relative to three months ago, or is that more underlying efficiency that you are seeing and you still have some cushion on oil prices built into the guidance? And second, based on the guidance, it seems like the second-half implied gross margin is in line with what you saw in first half, but you do have a growing percentage contribution from the 15-day as you called out. What prevents further gross margin expansion from the 15-day tailwind? Is it Ireland turning on that negates that tailwind? Thanks, guys.
Happy to answer both. On your second question first: the expectation was always a peak into Q3 in gross margin and then a step down as you turn on Ireland. Underlying performance would continue to improve, but turning on a factory increases per-unit costs initially while training and ramp occur. On your first question, resin purchases and oil price changes take time to flow through to product cost as we purchase and inventory materials, so gasoline impacts are quicker than resin flows. We have bought in at various windows and you'll see some of that flow through in Q2 and into Q3 as inventory is used. The raise is really driven by underlying performance improvements — line throughputs, reduced scrap, and other operational improvements we've implemented over recent quarters.
Our next question comes from the line of Issey Kirby with Redburn Atlantic. Your line is open.
Hey, thanks for taking my question. I wanted to ask about the Stello app redesign. Any feedback on engagement with the app? You also mentioned bringing some of these features over to the G Series app eventually. Which features are you looking at integrating? How are you thinking about app design particularly as you go after the type 2 non-insulin population? Thanks.
Thanks for the question. The new Stello app has been really well received by users. The redesign — both functionality and the aesthetic — was based on user feedback we've collected over the past year. We looked at reviews and direct customer feedback and built the new app ground-up. It will become our platform for future apps. Moving features to G Series is about bringing G7 functionality into the Stello platform, since many features are beneficial for all users. There are differences: G7 requires alerting, predictive alerts, AID connectivity, and the ShareFollow system, which Stello does not have today. We'll bring those protective and connectivity features into the Stello platform for G7 users. One exciting aspect is that Stello now provides more contextual insight, which can re-engage people who tried an earlier version and didn't see as much value. We expect more consistent use with the updated Stello.
And our final question comes from the line of Rich Newitter with Truist Securities. Your line is open.
Hi, thanks for squeezing me in. Jereme, just one follow-up to Jon's question earlier on gross margin. You started to get at it and you're seeing improved underlying trends in part related to 15-day. When can we expect to see the peak impact from the 15-day compound? If you are exiting at 50% this year into next, does that mean one of the quarters in 2027 will be the final stepped-up run rate? I'm trying to get a sense for when we might feel the max incremental impact of this ongoing tailwind.
Good question. Think back to Investor Day for cadence. We are approaching 50% U.S. conversion by year-end. If you do an average over the course of the year, you are at 20-25%. Next year, if your starting point is approaching 50% and you go up from there, that will be a meaningful step up. Also consider that outside the U.S., Dexcom 1 Plus and G7 outside the U.S. will start to roll in, so it's a multi-year improvement as we sunset G6 and more folks move to 15-day platforms. There is not really one quarter where it plateaus; it should be a steady benefit. The biggest improvements are likely to accrue into next year given the higher starting point, but it will be a steady positive over time. We'll keep you apprised on the transition and OUS rollouts.
That concludes our question and answer session. I would now like to turn the call back over to Mr. Jake Leach for closing remarks.
Thank you, operator. As we wrap up today, I would like to take a moment to recognize the people who make Dexcom what it is. Across our company, our employees show up every day with an unwavering commitment to the people we serve. Our results this quarter are a reflection of their passion and commitment to executing on our mission. We are proud of the momentum we created, but we believe we are still really early in the chapter of a much larger opportunity to transform how diabetes and metabolic health are managed around the world. The road ahead is very exciting, and we are confident in our strategy, our innovation pipeline, and most importantly, in our people. Thanks, everybody.
Ladies and gentlemen, this concludes today's call, and we thank you for your participation. You may now disconnect.