iRhythm (IRTC)

Medical technology company iRhythm Technologies (NASDAQ:IRTC) reported Q3 CY2025 results exceeding the market’s revenue expectations, with sales up 30.7% year on year to $192.9 million. The company’s full-year revenue guidance of $737.5 million at the midpoint came in 1.5% above analysts’ estimates. Its non-GAAP loss of $0.06 per share was 78.9% above analysts’ consensus estimates.

Company Overview

Pioneering the shift from bulky, short-term heart monitors to sleek, wire-free patches, iRhythm Technologies (NASDAQ:IRTC) provides wearable cardiac monitoring devices and AI-powered analysis services that help physicians detect and diagnose heart rhythm disorders.

Patient monitoring companies within the healthcare equipment industry offer devices and technologies that track chronic conditions and support real-time health management, such as continuous glucose monitors (CGMs) and sleep apnea machines. These businesses benefit from recurring revenue from consumables and software subscriptions tied to device sales (razor, razor blade model). The rising prevalence of chronic diseases like diabetes and respiratory disorders due to an aging population as well as growing adoption of digitization are good for the industry. However, these companies face challenges from high R&D costs and reliance on regulatory approvals. Looking ahead, the sector is positioned for growth due to tailwinds like the rising burden of chronic diseases from an aging population, the shift toward value-based care, and increased adoption of digital health solutions. Innovations in AI and machine learning are expected to enhance device accuracy and functionality, improving patient outcomes and driving demand. However, there are headwinds such as pricing pressures as healthcare costs are a key focus, especially in the US. An evolving regulatory landscape and competition from more tech-forward new entrants could present additional challenges.

iRhythm's main competitors include BioTelemetry (acquired by Royal Philips), Preventice Solutions (acquired by Boston Scientific), and Bardy Diagnostics (acquired by Baxter International). The company also competes with traditional Holter monitor manufacturers like GE Healthcare, Philips Healthcare, and Welch Allyn (now part of Baxter International).

Larger companies benefit from economies of scale, where fixed costs like infrastructure, technology, and administration are spread over a higher volume of goods or services, reducing the cost per unit. Scale can also lead to bargaining power with suppliers, greater brand recognition, and more investment firepower. A virtuous cycle can ensue if a scaled company plays its cards right.

With just $702.6 million in revenue over the past 12 months, iRhythm is a small company in an industry where scale matters. This makes it difficult to build trust with customers because healthcare is heavily regulated, complex, and resource-intensive.

Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Thankfully, iRhythm’s 23.4% annualized revenue growth over the last five years was excellent. Its growth beat the average healthcare company and shows its offerings resonate with customers.

Long-term growth is the most important, but within healthcare, a half-decade historical view may miss new innovations or demand cycles. iRhythm’s annualized revenue growth of 21.9% over the last two years is below its five-year trend, but we still think the results suggest healthy demand.

This quarter, iRhythm reported wonderful year-on-year revenue growth of 30.7%, and its $192.9 million of revenue exceeded Wall Street’s estimates by 4.6%.

Looking ahead, sell-side analysts expect revenue to grow 15.9% over the next 12 months, a deceleration versus the last two years. Still, this projection is admirable and implies the market is baking in success for its products and services.

iRhythm’s high expenses have contributed to an average operating margin of negative 23% over the last five years. Unprofitable healthcare companies require extra attention because they could get caught swimming naked when the tide goes out. It’s hard to trust that the business can endure a full cycle.

On the plus side, iRhythm’s operating margin rose by 12.2 percentage points over the last five years, as its sales growth gave it operating leverage. The company’s two-year trajectory shows its performance was mostly driven by its recent improvements. These data points are very encouraging and show momentum is on its side.

in line with the same quarter last year. This indicates the company’s overall cost structure has been relatively stable.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Although iRhythm’s full-year earnings are still negative, it reduced its losses and improved its EPS by 7% annually over the last five years. The next few quarters will be critical for assessing its long-term profitability. We hope to see an inflection point soon.

In Q3, iRhythm reported adjusted EPS of negative $0.06, up from negative $1.26 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects iRhythm to improve its earnings losses. Analysts forecast its full-year EPS of negative $1.33 will advance to negative $0.69.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

iRhythm’s demanding reinvestments have consumed many resources over the last five years, contributing to an average free cash flow margin of negative 10.4%. This means it lit $10.45 of cash on fire for every $100 in revenue.

Taking a step back, an encouraging sign is that iRhythm’s margin expanded by 22.5 percentage points during that time. In light of its glaring cash burn, however, this improvement is a bucket of hot water in a cold ocean.

iRhythm reported $565.2 million of cash and $733 million of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $53.89 million of EBITDA over the last 12 months, we view iRhythm’s 3.1× net-debt-to-EBITDA ratio as safe. We also see its $3.45 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

It was good to see iRhythm beat analysts’ EPS expectations this quarter. We were also glad its revenue outperformed Wall Street’s estimates. Zooming out, we think this was a good print with some key areas of upside. The stock traded up 5.5% to $194.50 immediately after reporting.

Updated: December 3, 2025 at 10:51 PM EST

We think that the latest earnings result is only one piece of the bigger puzzle. If you’re deciding whether to own iRhythm, you should also grasp the company’s longer-term business quality and valuation.

iRhythm possesses a number of positive attributes. To kick things off, its revenue growth was impressive over the last five years. And while its operating margins reveal poor profitability compared to other healthcare companies, its rising cash profitability gives it more optionality. On top of that, its expanding adjusted operating margin shows the business has become more efficient.

iRhythm’s EV-to-EBITDA ratio based on the next 12 months is 66.1x. Looking at the healthcare space right now, iRhythm trades at a compelling valuation. If you believe in the company and its growth potential, now is an opportune time to buy shares.

Wall Street analysts have a consensus one-year price target of $219.93 on the company (compared to the current share price of $183.15), implying they see 20.1% upside in buying iRhythm in the short term.