Inspire Medical Cuts Revenue Outlook by $150 Million as U.S. Sales Slump

The Tip Desk · August 4, 2026 · 3 min read

Inspire Medical Systems posted a 7.6% revenue decline in the second quarter and slashed its full-year guidance to $835-875 million, well below the $1,003-1,013 million it forecast in January.

Inspire Medical Systems (INSP) reported second-quarter revenue of $200.6 million, down 7.6% from a year earlier, as U.S. sales weakened amid an evolving coding and reimbursement environment, partially offset by growth in its International segment.

The decline marks a sharp reversal from the trajectory the company had projected as recently as January, when it guided to preliminary fourth-quarter 2025 revenue growth of roughly 12% and set full-year 2026 guidance at 10-11% growth, or $1,003-1,013 million. Inspire has now cut that full-year outlook to $835-875 million, a reduction of roughly $150 million to $170 million from the original guide.

Despite the top-line contraction, profitability metrics moved in different directions. Gross margin expanded 150 basis points to 85.5%, due to a higher-margin mix from its Inspire V system. Operating expenses fell 7.4%, or $13.8 million, to $172.0 million, with research and development costs down to $24.7 million from $26.2 million and selling, general and administrative expenses down to $147.3 million from $159.5 million, reflecting lower stock-based compensation and reduced marketing spend. The operating loss narrowed to $0.5 million from $3.3 million a year earlier, though adjusted operating margin compressed to 1.6% from 4.4%, and adjusted EBITDA margin slipped to 19.4% from 20.3%.

Net earnings swung to a $0.3 million profit, or $0.01 a share, from a $3.6 million loss, or $(0.12) a share, in the prior-year quarter. Adjusted diluted earnings per share fell to $0.14 from $0.34. The effective tax rate jumped to 89.9% from (54.0)%, linked to a tax shortfall on stock-based compensation and the release of a deferred-tax valuation allowance in the prior year. Inspire also flagged $3.7 million of legal fees tied to a Department of Justice civil investigative demand and patent litigation with Nyxoah S.A., up from $1.7 million a year earlier, both excluded from non-GAAP results.

Operating cash flow rose to $23.2 million from $2.7 million, aided by improved working capital in receivables and inventories, and cash, cash equivalents and investments grew $10.6 million to $415.2 million since December 31, 2025.

Alongside the guidance cut, Inspire disclosed new full-year targets for adjusted operating margin of 4-6% and adjusted diluted earnings per share of $1.05-1.45. The company also announced a restructuring plan called Project Horizon, expected to generate about $30 million of annualized growth investment capacity through $20 million to $25 million in pre-tax restructuring charges, split between $4 million to $5 million of employee-related costs and $16 million to $20 million that is largely non-cash. The actions will be substantially complete by the end of 2026.

The quarter followed a leadership change disclosed in the prior release, with Matt Osberg named executive vice president and chief financial officer effective January 19, 2026, succeeding Rick Buchholz.