Medical technology company Inspire Medical Systems (NYSE: INSP) beat Wall Street’s revenue expectations in Q2 CY2025, with sales up 10.8% year on year to $217.1 million. On the other hand, the company’s full-year revenue guidance of $905 million at the midpoint came in 4.6% below analysts’ estimates. Its GAAP loss of $0.12 per share was significantly below analysts’ consensus estimates.

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StockStory’s Take

Inspire Medical Systems’ second quarter results were marked by operational challenges tied to the commercial rollout of its Inspire V system, with management attributing slower-than-expected transitions at implanting centers and delayed Medicare billing as primary headwinds. CEO Tim Herbert described these issues as “the predominant drivers,” citing slower onboarding of SleepSync and delays in Medicare software updates. Although early feedback on Inspire V was positive, these rollout frictions contributed to a cautious tone from management, as well as a significant negative market reaction to the quarter’s results.

Looking forward, Inspire Medical’s updated guidance reflects a more measured outlook as the company works to accelerate the Inspire V transition and ramp up patient marketing and center expansion in the second half of the year. Management emphasized that the current headwinds are largely temporary, with Herbert stating, “We have our arms around the headwinds that I described and actions are already underway to accelerate the adoption of Inspire V in the latter half of the year.” The company is also banking on increased capacity at centers and improved reimbursement rates in the coming periods to support a rebound in growth.

Key Insights from Management’s Remarks

Management highlighted several key factors impacting the quarter, focusing on product transition hurdles, operational execution, and early signals from new initiatives.

• Inspire V rollout delays: The transition to the next-generation Inspire V system progressed slower than management anticipated, primarily due to lengthy onboarding processes for SleepSync, the company’s cloud-based patient management platform. IT department approvals and training at many centers took longer than expected, delaying new device implants.

• Medicare billing disruption: Implementation of the new CPT code 64568 for Medicare patients was delayed as software updates needed for claims processing were not in effect until July. Many centers chose to delay Inspire V adoption, continuing with Inspire IV for Medicare patients, which stalled the transition.

• Patient behavior shifts: Some patients opted to wait for the Inspire V device instead of proceeding with Inspire IV, while others delayed therapy to try GLP-1 weight-loss drugs. Management believes the GLP-1 effect is minor now but could support long-term demand by enabling more patients to qualify for therapy.

• Marketing and expansion pause: Inspire intentionally scaled back patient marketing and new center expansion in the first half of the year to prioritize the Inspire V rollout. As these efforts resume, early indicators such as increased website activity and provider appointments have emerged.

• Positive Inspire V feedback: Despite rollout issues, centers that completed the transition to Inspire V saw over 20% increases in patient implants year-over-year, with reduced surgical times and positive clinical feedback. Management expects these operational gains to expand as more centers switch to the new system.

Drivers of Future Performance

Inspire Medical’s outlook hinges on the pace of Inspire V adoption, expanded marketing, and enhanced provider capacity, with ongoing risks tied to execution and patient trends.

• Acceleration of Inspire V adoption: Management expects that as more centers complete SleepSync onboarding and Medicare billing barriers are removed, Inspire V adoption will accelerate. This should drive higher procedure volumes and improve surgical throughput, with the company citing over 20% implant growth at transitioned centers.

• Increased marketing and center expansion: The company plans to significantly ramp up direct-to-consumer (DTC) marketing and add new U.S. centers and surgeons in the second half of the year. These actions are expected to rebuild patient flow and expand the provider base, though they will also increase operating expenses and pressure margins in the near term.

• Ongoing inventory and reimbursement dynamics: Inspire continues to manage the wind-down of Inspire IV inventory, which remains a headwind until fully depleted. Proposed increases in Medicare reimbursement rates for Inspire V, if finalized, could improve profitability and enhance adoption among providers in 2026.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will be tracking (1) the rate at which additional centers transition to Inspire V and complete SleepSync onboarding, (2) the effectiveness of increased patient marketing and expansion efforts in rebuilding patient flow, and (3) tangible improvements in surgical capacity and throughput at transitioned centers. We will also watch for updates on Medicare reimbursement and the competitive landscape for sleep apnea treatments.

Inspire Medical Systems currently trades at $83.50, down from $130.41 just before the earnings. Is there an opportunity in the stock?See for yourself in our full research report (it’s free).

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