Inspire Medical Systems, Inc. Announces Third Quarter 2026 Financial Results
Inspire Medical Systems, Inc. (INSP) filed an SEC Form 8-K — Results of Operations and Financial Condition. Exhibit 99.1 Inspire Medical Systems, Inc. Announces Third Quarter 2026 Financial Results • Third quarter revenue of $206.7 million • Third quarter diluted EPS of $(0.84); adjusted diluted EPS of $0.14 • Third quarter operating cash flow of $46.4 million • AMA CPT® Editorial Pane
How this was made
The 30-second read
Why it matters
The earnings miss and narrowed guidance suggest near‑term downside, but the approval of a new CPT code for 2028 could support future growth.
Market read
The release is a primary earnings disclosure with new guidance, making it highly relevant for traders holding or considering INSP.
What to watch
Restructuring charges and legal settlement expenses are one‑time items that may improve future profitability.
Third quarter revenue of $206.7 million; third quarter diluted EPS of $(0.84); adjusted diluted EPS of $0.14; and third quarter operating cash flow of $46.4 million.
Revenue decreased 7.9% to $206.7 million, operating loss was $28.7 million, and diluted EPS was $(0.84), driven by lower U.S. revenue amid coding and reimbursement challenges and by restructuring, legal settlement, and legal expenses.
Key metrics
shortened, hover for the filing’s print| Metric | Value | q/q | y/y |
|---|---|---|---|
| Revenue, three months ended September 30GAAP | $206.7M | – | decreased 7.9% |
| Cost of goods sold, three months ended September 30GAAP | $28.84M | – | – |
| Gross profit, three months ended September 30GAAP | $177.9M | – | – |
| Gross margin, three months ended September 30GAAP | 86.0% | – | increased 20 bps |
| Research and development expense, three months ended September 30GAAP | $22.18M | – | – |
| Selling, general and administrative expense, three months ended September 30GAAP | $184.4M | – | – |
| Total operating expenses, three months ended September 30GAAP | $206.6M | – | increased $23.5 million, or 12.8% |
| Operating loss, three months ended September 30GAAP | −$28.72M | – | – |
| Operating margin, three months ended September 30GAAP | (13.9)% | – | – |
| Adjusted operating income, three months ended September 30non-GAAP | $1.86M | – | – |
| Adjusted operating margin, three months ended September 30non-GAAP | 0.9% | – | – |
| Interest and dividend income, net, three months ended September 30GAAP | −$3.90M | – | – |
| Other expense, net, three months ended September 30GAAP | $191K | – | – |
| Loss before income taxes, three months ended September 30GAAP | −$25.01M | – | – |
| Income tax benefit, three months ended September 30GAAP | −$616K | – | – |
| Effective tax rate, three months ended September 30GAAP | 2.5% | – | – |
| Net loss, three months ended September 30GAAP | −$24.39M | – | – |
| Adjusted net earnings, three months ended September 30non-GAAP | $4.06M | – | – |
| Basic loss per share, three months ended September 30GAAP | $(0.84) | – | – |
| Diluted loss per share, three months ended September 30GAAP | $(0.84) | – | – |
| Adjusted diluted EPS, three months ended September 30non-GAAP | $0.14 | – | – |
| Adjusted EBITDA, three months ended September 30non-GAAP | $37.85M | – | – |
| Adjusted EBITDA margin, three months ended September 30non-GAAP | 18.3% | – | – |
| Revenue, nine months ended September 30GAAP | $611.9M | – | – |
| Gross profit, nine months ended September 30GAAP | $526.2M | – | – |
| Total operating expenses, nine months ended September 30GAAP | $556.6M | – | – |
| Operating loss, nine months ended September 30GAAP | −$30.35M | – | – |
| Adjusted operating income, nine months ended September 30non-GAAP | $5.36M | – | – |
| Net loss, nine months ended September 30GAAP | −$35.37M | – | – |
| Adjusted net earnings, nine months ended September 30non-GAAP | $10.92M | – | – |
| Diluted loss per share, nine months ended September 30GAAP | $(1.23) | – | – |
| Adjusted diluted EPS, nine months ended September 30non-GAAP | $0.38 | – | – |
| Adjusted EBITDA, nine months ended September 30non-GAAP | $112.6M | – | – |
| Adjusted EBITDA margin, nine months ended September 30non-GAAP | 18.4% | – | – |
Amounts quoted below without a unit are in thousands, as in the filing’s tables. Per-share figures are as printed.
Full Year 2026 outlook
- Revenue$850 million to $860 million
- Tax rateeffective tax rate of approximately 120% to 175%; adjusted effective tax rate of 33% to 34%
- Noteadjusted operating margin of 4.5% to 5.5%
- Notediluted EPS of $(0.36) to $(0.10)
- Noteadjusted diluted EPS of $1.20 to $1.40
- Noteestimated weighted average diluted shares outstanding of approximately 28.9 million
- Notecapital expenditures between $35 million to $40 million
What drove it
- Revenue decreased 7.9% to $206.7 million, driven primarily by a decline in U.S. revenue.
- The U.S. revenue decline was primarily driven by adverse impacts of coding and reimbursement challenges.
- Gross margin increased 20 bps to 86.0%, primarily due to increased sales mix of the Inspire V system, which has a higher gross margin than the Inspire IV system.
- Operating expenses included $24.1 million of restructuring charges, legal settlement expense of $7.0 million, and higher legal fees.
- Lower marketing expenses and lower stock-based compensation expense partially offset the operating expense increases.
- The AMA CPT Editorial Panel approved new Category I CPT codes for single lead hypoglossal nerve stimulation, including Inspire V, set to take effect January 1, 2028.
Concerns
- Revenue declined and the company reported a GAAP operating loss of $(28.7) million and GAAP net loss of $(24.4) million.
- Coding and reimbursement challenges adversely affected U.S. revenue.
- Operating expenses increased $23.5 million, or 12.8%, including Project Horizon restructuring charges, legal settlement expense, and higher legal fees.
- Adjusted operating income declined to $1.9 million from $10.9 million and adjusted EBITDA declined to $37.9 million from $44.0 million.
- Operating cash flow declined to $46.4 million from $68.5 million, principally reflecting lower net earnings and lower collections on receivables.
What to watch
- Execution against the narrowed full-year revenue outlook of $850 million to $860 million.
- The impact of coding and reimbursement conditions on U.S. revenue and physician comfort with the current coding dynamic.
- Progress under Project Horizon and the redirection of investment capacity into revenue growth initiatives.
- Final 2027 Medicare reimbursement payments and the January 1, 2028 effective date for the new Category I CPT code set.
- Delivery of full-year adjusted operating margin of 4.5% to 5.5% and adjusted diluted EPS of $1.20 to $1.40.
Balance sheet and cash flow
- Net cash provided by operating activities for the three months ended September 30, 2026 was $46.4 million, compared to $68.5 million in the prior year period.
- Cash, cash equivalents, and investments increased $48.5 million to $453.1 million as of September 30, 2026, compared with December 31, 2025.
- Cash and cash equivalents were $190,803 (in thousands) as of September 30, 2026, compared with $104,813 (in thousands) as of December 31, 2025.
- Investments, short-term were $137,168 (in thousands) and investments, long-term were $125,125 (in thousands) as of September 30, 2026.
- Accounts receivable, net were $104,706 (in thousands) and inventories, net were $178,960 (in thousands) as of September 30, 2026.
- Total assets were $953,033 (in thousands), total liabilities were $126,084 (in thousands), and total stockholders' equity was $826,949 (in thousands) as of September 30, 2026.
Analysis
Inspire reported a weaker third quarter on a year-over-year basis. Revenue decreased 7.9% to $206.7 million, with the company attributing the decline primarily to U.S. revenue and adverse coding and reimbursement challenges. Management nevertheless described sequential growth and said U.S. performance was ahead of its expectations, pointing to greater comfort among implanting physicians with the current coding dynamic.
Product mix supported gross profitability. Gross margin increased 20 bps to 86.0%, primarily because sales mix shifted toward Inspire V, which carries a higher gross margin than Inspire IV. That benefit did not offset the revenue decline and elevated operating costs: operating expenses increased $23.5 million, or 12.8%, to $206.6 million. The expense increase included $24.1 million of Project Horizon restructuring charges, $7.0 million of legal settlement expense, and higher legal fees, partly offset by lower marketing and stock-based compensation expense.
The result was a GAAP operating loss of $28.7 million, operating margin of (13.9)%, and net loss of $24.4 million, or $(0.84) per diluted share. Adjusted operating income was $1.9 million, adjusted operating margin was 0.9%, adjusted net earnings were $4.1 million, and adjusted diluted EPS was $0.14. Adjusted EBITDA was $37.9 million, compared with $44.0 million in the prior-year period, while adjusted EBITDA margin was 18.3%, compared with 19.6%.
Cash generation remained positive but declined. Operating cash flow was $46.4 million versus $68.5 million in the prior-year period, reflecting lower net earnings and lower collections on receivables after the prior-year cash recovery tied to invoice portal and delivery-process implementation issues. Cash, cash equivalents, and investments increased $48.5 million to $453.1 million as of September 30, 2026.
Management narrowed full-year revenue guidance to $850 million to $860 million from the previous range of $835 million to $875 million. The company expects adjusted operating margin of 4.5% to 5.5%, diluted EPS of $(0.36) to $(0.10), and adjusted diluted EPS of $1.20 to $1.40. The principal operating watchpoints are U.S. revenue performance amid reimbursement conditions, execution of Project Horizon, and the anticipated reimbursement clarity from the new Inspire V CPT code set effective January 1, 2028.
Management, verbatim
We are pleased to have delivered sequential growth in the third quarter, with U.S. performance coming in ahead of our expectations. Results suggest that, despite some lingering headwinds, there is greater comfort among implanting physicians with the current coding dynamic. We will stay disciplined in our education initiatives and focused on executing our strategic priorities as we finish out 2026 and plan for a return to growth in 2027.
Tim Herbert, Chairman and CEO of Inspire Medical Systems
Looking further ahead, we were also pleased with the AMA Editorial Panel’s September approval of a new CPT® code for single lead HGNS devices, including the Inspire V system. When this takes effect in January 2028, a dedicated code set will give physicians and hospitals enhanced clarity around coding and reimbursement and, in turn, further enable patient access to Inspire therapy.
Tim Herbert, Chairman and CEO of Inspire Medical Systems
Not in the filing
stated, not guessed- Revenue by reportable segment was not provided.
- International revenue was not provided.
- Free cash flow was not reported.
- Debt was not reported.
- Share repurchases, dividends, and other capital returns were not reported.
- Prior-quarter values for the reported third-quarter income-statement metrics were not provided.
- A previous-release outlook section was not provided, so actual results cannot be compared with prior guidance in vs_prior_guidance.
AlphAI analysis generated from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure was cross-checked against the filing text; consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.
Background
Inspire Medical Systems (NYSE: INSP) provides hypoglossal nerve stimulation therapy for obstructive sleep apnea. The company disclosed Q3 2026 results and updated its full‑year guidance.
Ticker impact
Inspire Medical Systems reported Q3 2026 results with revenue down 7.9% to $206.7M and issued revised full-year guidance narrowing revenue to $850M-$860M.
likely pressure as the market prices in updated revenue outlook and modest adjusted margin guidance
The earnings release includes a revenue decline and a tighter, lower revenue range than previously indicated, which typically triggers a sell-off in the near term.
Market effects
May weigh on other sleep‑apnea device makers and broader med‑tech stocks as investors reassess coding and reimbursement risks.
Limited to U.S. healthcare investors; no broader regional effect.
Minimal global impact beyond niche medical‑technology sector.
Counterpoint
If the new CPT code approval in 2028 unlocks higher reimbursement, the long‑term upside could outweigh short‑term revenue miss.
Key entities
- companyInspire Medical Systems
Medical technology firm focused on sleep‑apnea therapy.
