Outset Medical’s Earnings Call: Mixed Signals and Future Prospects

Outset Medical, Inc. ((OM)) has held its Q3 earnings call. Read on for the main highlights of the call.

The recent earnings call for Outset Medical, Inc. presented a mixed sentiment, reflecting both optimism and caution. While the company celebrated achievements like increased Tablo console sales, improved gross margins, and a robust cash position, it also faced challenges such as slower-than-expected revenue growth, leadership changes, and uncertainties in deal closing timing. These factors contributed to a cautious outlook for the company’s future.

Increase in Tablo Console Sales

The third quarter saw an 8% increase in Tablo console sales, indicating a growing demand from hospitals and an expanded sales pipeline. This growth is further underscored by a more than 20% increase in the size of sales opportunities, showcasing the company’s potential to capture a larger market share.

Improved Gross Margin

Outset Medical reported a significant improvement in its non-GAAP gross margin, which expanded by 350 basis points year-over-year to reach 39.9%. The product gross margin rose to 45.7%, while the service margin more than doubled to 24.8%, reflecting operational efficiencies and cost management.

Strong Cash Position and Reduced Cash Use

The company ended the quarter with a strong cash position of $182 million and successfully reduced its cash use by more than 50% from 2024, projecting to use less than $50 million in 2025. This financial stability positions Outset Medical well for future investments and growth.

Positive Clinical Outcomes

Outset Medical presented three new data sets at the Annual Kidney Week Conference, highlighting a 94% reduction in serious cardiac or respiratory events and a sustained reduction in infections at AdventHealth. These positive clinical outcomes enhance the credibility and attractiveness of the company’s offerings.

Revenue Growth Below Expectations

Despite the positive developments, the company’s revenue growth was below expectations, with a third-quarter revenue of $29.4 million, representing only a 3% year-over-year increase. This shortfall led to a revision of the 2025 revenue guidance from $122-126 million to $115-120 million.

Head of Sales Resignation

The resignation of the Head of Sales poses a potential disruption to the company’s internal operations and could impact sales execution in the fourth quarter. This leadership change adds an element of uncertainty to the company’s future performance.

Challenges in Deal Closing

Several large deals that were anticipated to close in the third quarter have been delayed to the fourth quarter and into 2026. This shift affects the company’s ability to predict deal timing and close deals consistently, adding to the uncertainty in revenue projections.

Order Timing Discrepancies

Recurring revenue was affected by mismatches between treatment utilization and ordering patterns from large acute care customers. These discrepancies are expected to normalize in 2026, which could stabilize the company’s revenue streams in the future.

Revised Forward-Looking Guidance

Outset Medical revised its revenue guidance for 2025 to a range of $115 million to $120 million, down from the previous range of $122 million to $126 million. This revision was primarily due to the timing shift of several large sales opportunities now expected to close in Q4 2025 and into 2026. Despite these challenges, the company remains optimistic about future growth, driven by increasing demand for its Tablo systems and high utilization rates of its installed units.

In summary, the earnings call for Outset Medical, Inc. highlighted a mix of positive achievements and challenges. While the company is making strides in sales growth and operational efficiency, it faces hurdles in revenue growth and leadership stability. The revised guidance reflects these challenges, but the company’s optimism about future demand and market opportunities provides a hopeful outlook.