Medical technology company Inspire Medical Systems (NYSE: INSP) reported revenue ahead of Wall Streets expectations in Q3 CY2025, with sales up 10.5% year on year to $224.5 million. The company expects the full year’s revenue to be around $905 million, close to analysts’ estimates. Its GAAP profit of $0.34 per share was significantly above analysts’ consensus estimates.

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StockStory’s Take

Inspire Medical Systems’ third quarter results were well received by the market, supported by robust adoption of the Inspire V system and operational discipline. Management highlighted that growth was primarily driven by increased patient volume, positive clinical feedback, and continued expansion of the U.S. and international customer base. CEO Tim Herbert emphasized, “We are excited and energized by the strong performance of the Inspire V system and the clinical feedback on the simplified procedure and comfort settings has been tremendously positive.” The company also benefited from higher gross margins due to favorable product mix, despite increased marketing expenses.

Looking forward, Inspire’s guidance is anchored by expectations for continued adoption of Inspire V, increasing physician training, and expanded access through enhanced reimbursement. Management’s strategic priorities include building provider capacity, further integrating digital tools such as SleepSync, and leveraging new direct-to-consumer marketing to sustain patient flow. CEO Tim Herbert noted, “With Inspire V scaling and continued operational focus, we expect continued revenue growth and improvements in operating leverage.” However, leadership acknowledged potential headwinds from the ongoing transition between product generations, evolving reimbursement dynamics, and the impact of GLP-1 medications on patient pathways.

Key Insights from Management’s Remarks

Management attributed third quarter performance to the successful Inspire V rollout, improved clinical outcomes, and investments in marketing, while also noting increased legal and operating expenses.

• Inspire V adoption accelerates: The rollout of Inspire V—the latest generation of the company’s hypoglossal nerve stimulation system for obstructive sleep apnea (OSA)—drove higher adoption rates among both physicians and patients. Management reported that over 75% of implanting centers were using Inspire V by quarter end, with physician training nearly complete and clinical feedback emphasizing easier implantation and improved outcomes.

• Clinical evidence strengthens value proposition: Multiple independent studies presented at medical conferences demonstrated not only improved OSA symptom control with Inspire V, but also reductions in long-term cardiovascular complications compared to traditional CPAP (continuous positive airway pressure) therapy. These findings provided additional clinical justification for broader adoption, particularly among patients unable to tolerate CPAP.

• Marketing investments expand patient funnel: Inspire increased its direct-to-consumer marketing, including new ad campaigns and influencer partnerships, resulting in heightened patient engagement and awareness. Early indications suggest these efforts are successfully driving more patients into sleep centers for diagnosis and potential Inspire therapy consideration.

• Gross margin benefits from product mix: Gross margin improvement was driven by a higher proportion of Inspire V sales, which are less costly to manufacture than prior generations. However, this benefit was partially offset by rising operating expenses, including legal costs and increased marketing spend.

• Operational discipline amid expense growth: Management highlighted cost controls and territory realignment as levers for sustaining profitability, even as overall operating expenses rose. CFO Rick Buchholz emphasized that expense increases were primarily due to strategic marketing and patient outreach, with a view toward long-term leverage as Inspire V scales.

Drivers of Future Performance

Looking ahead, Inspire’s outlook is shaped by the ongoing Inspire V transition, evolving reimbursement, and changes in patient referral patterns driven by new therapies.

• Full Inspire V transition: Management expects the transition from Inspire IV to Inspire V across most centers to be largely complete by year-end, with Inspire V’s improved implantability and clinical performance seen as catalysts for higher utilization. Some centers may continue using Inspire IV for economic reasons, but the overall mix will shift toward Inspire V, supporting both volume growth and gross margin improvement.

• Reimbursement changes and market access: Recently finalized reimbursement increases for key procedure codes will take effect in 2026, which management believes will close the gap between different device codes and potentially expand eligible patient populations. The team continues to monitor pending outpatient payment rules and adjust commercial strategies accordingly.

• GLP-1 therapy and patient flow: The rising use of GLP-1 medications for weight loss has increased referrals to sleep clinics, as patients seek OSA diagnoses to obtain insurance coverage. While some patients may initially try GLP-1s before considering surgical options, management views the trend as expanding the addressable market for Inspire, particularly as higher BMI patients become eligible for therapy after weight loss.

Catalysts in Upcoming Quarters

In the coming quarters, our analysts will watch (1) the pace at which centers complete the transition to Inspire V and the resulting impact on procedure volumes, (2) the effect of upcoming reimbursement changes on both provider adoption and patient eligibility, and (3) ongoing developments in GLP-1 therapy usage and its influence on OSA diagnosis rates. Execution on expanding provider training and further integration of digital tools like SleepSync will also be important markers of Inspire’s ability to sustain growth.

Inspire Medical Systems currently trades at $79.01, up from $73.64 just before the earnings. In the wake of this quarter, is it a buy or sell? The answer lies in our full research report (it’s free for active Edge members).

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