Cerebel (CBLL) Q2 2025: Gross Margin Climbs to 88% as Supply Chain Shift Accelerates
Cerebel’s Q2 marked a pivotal inflection in both scale and profitability, as commercial expansion and margin recovery outpaced seasonal headwinds. Rapid supply chain adaptation and a broadened clinical pipeline reinforce the company’s positioning for 2026, while competitive and IP litigation risks remain in focus.
Summary
- Margin Expansion Outpaces Tariff Headwinds: Cerebel’s gross margin rebounded on rapid supply chain moves and cost discipline.
- Commercial Model Scales Despite Seasonality: Active account growth and deeper utilization offset typical summer slowdowns.
- Pipeline and IP Defense Signal Ambition: Pediatric, neonate, and delirium launches plus litigation reinforce leadership intent.
Performance Analysis
Cerebel delivered 38% year-over-year revenue growth in Q2, with total revenue reaching $21.2 million. The company added 26 net new active accounts, bringing the total to 584, demonstrating continued commercial traction even amid expected seasonal softness in ICU volumes. Product revenue and subscription revenue both posted strong double-digit gains, indicating broadening adoption of the seizure detection system across new and existing accounts.
Gross margin improved to 88%, up from 86% a year ago, as management executed on supply chain diversification and inventory strategies to counter tariff volatility. Operating expenses increased 56% year-over-year, reflecting heavy investment in commercial infrastructure, R&D, and legal costs associated with IP litigation. Despite these investments, sales and marketing expense declined sequentially, reflecting disciplined spend and timing effects. The company ended the quarter with $177.4 million in cash and marketable securities, reinforcing its capacity to fund growth and defend its IP portfolio.
- Gross Margin Rebound: Margin rose to pre-tariff levels as Vietnam manufacturing ramped and inventory strategies offset cost pressure.
- Seasonal Volume Dynamics: Q2 and Q3 typically see lower ICU census; utilization initiatives helped maintain growth.
- Operating Leverage Emerging: Sequential decline in sales expense and stable G&A outside of legal costs signal maturing cost structure.
Management’s full-year revenue guidance was raised, reflecting confidence in commercial momentum and underlying utilization trends. Investments in territory managers are expected to yield outsized account growth beginning in 2026, with the current year focused on infrastructure and pipeline expansion.
Executive Commentary
"Our second quarter performance has strengthened our conviction in the near and long-term growth trajectory. Given our momentum and the strength of our performance year to date, we're raising our full year 2025 revenue guidance."
Jane Chow, Co-Founder & Chief Executive Officer
"The speed of this transition illustrates our ability to quickly adapt to a changing trade environment, maintain supply chain security, and continue to deliver industry-leading gross margins."
Scott Blumberg, Chief Financial Officer
Strategic Positioning
1. Commercial Expansion and Utilization Depth
Cerebel’s commercial model—anchored by territory managers and clinical account managers (CAMs)—is scaling across new and existing hospital accounts. The company is targeting departmental penetration (expanding into more ICUs, emergency departments, and general floors), deeper physician training, and protocol-driven usage to drive higher utilization per account. While seasonal census dips impact Q2 and Q3, systematic usage initiatives and data-driven workflow integration have sustained growth. Management expects the recent expansion to 55 territories to translate into accelerated account acquisition in 2026 as the new sales force matures.
2. Pipeline Diversification: Pediatric, Neonate, and Delirium
Product development is broadening Cerebel’s addressable market. The launch of pilots in pediatric and neonate populations, following recent FDA clearances, positions the company to address unmet needs in high-risk patient segments. Early neonate pilots have validated ease of use and signal quality, while pediatric initiatives are focused on workflow optimization and prevalence studies in emergency settings. The delirium pipeline is drawing positive feedback from key opinion leaders, with the potential to become the first objective diagnostic device for a condition affecting a majority of ICU patients. This pipeline, if commercialized, would materially expand Cerebel’s market opportunity and entrench its platform status.
3. Intellectual Property Defense and Competitive Moat
Active litigation against NATOs Medical underscores Cerebel’s intent to defend its category leadership and patent portfolio. The company is seeking both damages and injunctions via the US ITC and Delaware District Court, targeting alleged infringement on six patents related to its EEG headband and electrical design. Management views this legal action as a proactive measure to protect innovation and maintain competitive advantage, especially as new entrants emerge. The company’s FedRAMP cybersecurity certification further differentiates its platform in a market increasingly sensitive to data security.
4. Supply Chain Resilience and Margin Management
The rapid establishment of Vietnam manufacturing is a direct response to tariff uncertainty and single-country risk. By creating production redundancy and leveraging favorable trade policies, Cerebel has restored gross margins to pre-tariff levels and insulated itself from future volatility. Inventory build-up and flexible sourcing strategies ensure supply security and support continued margin leadership into 2026.
Key Considerations
Cerebel’s Q2 was defined by operational agility, commercial scale, and pipeline momentum, set against a backdrop of intensifying competition and ongoing legal costs.
Key Considerations:
- Sales Force Investment Lag: Recent territory manager hires will not materially impact account growth until 2026, requiring patience on ROI.
- Clinical Evidence as Marketing: Real-world patient stories and health economic outcomes are central to driving adoption and administrator buy-in.
- Seasonality Remains a Core Dynamic: Q2 and Q3 typically see lower utilization, but internal initiatives are mitigating downside risk.
- Legal Costs Are Non-Trivial: G&A expense will remain elevated as IP litigation proceeds, with costs expected to persist into 2026.
- Pipeline Execution Is Critical: Success in pediatric, neonate, and delirium launches will determine mid-term market expansion and differentiation.
Risks
Material risks include ongoing legal spend and the uncertain outcome of IP litigation, potential delays or setbacks in regulatory approvals for pipeline products, and execution risk in scaling new manufacturing operations. Competitive entrants could pressure pricing or erode share if differentiation is not maintained. Seasonality and hospital budget constraints could dampen utilization growth, especially if macro conditions worsen.
Forward Outlook
For Q3, Cerebel guided to:
- Continued revenue growth, with Q2’s momentum expected to persist despite seasonal headwinds.
- Gross margins in the mid to high 80% range, supported by Vietnam manufacturing ramp and inventory strategies.
For full-year 2025, management raised guidance:
- Revenue of $85 to $88 million, up from previous range of $83 to $87 million.
Management highlighted several factors that will shape results:
- Sales force expansion impact will be most visible in 2026.
- Legal costs and supply chain investments will continue to weigh on near-term operating expenses.
Takeaways
Cerebel’s Q2 execution signals a company increasingly able to translate commercial investments into sustainable growth, while protecting its technology and margin profile.
- Margin Leadership Restored: Supply chain agility and cost management have offset tariff volatility and restored gross margin to pre-disruption levels.
- Pipeline Execution Remains the Swing Factor: The breadth and clinical validation of new indications will determine the speed and scale of future growth.
- Legal and Competitive Dynamics Are Central: The outcome of IP litigation and ability to maintain differentiation in a crowded market are critical watchpoints for investors.
Conclusion
Cerebel’s Q2 demonstrates solid execution on commercial, operational, and pipeline fronts, with margin recovery and guidance raise underscoring management’s confidence. The next phase hinges on pipeline launches, legal outcomes, and sustained utilization growth amid intensifying competition.
Industry Read-Through
Cerebel’s rapid supply chain diversification and gross margin recovery highlight the necessity for medtech peers to de-risk manufacturing and respond nimbly to trade policy shifts. The company’s focus on health economic evidence and workflow integration reflects a broader trend toward value-based selling in hospital technology. IP defense and cybersecurity differentiation are emerging as critical competitive levers in digital health, especially as new entrants target established niches. The expansion into pediatric and delirium indications signals a growing market for real-time, objective diagnostic tools, with implications for adjacent neurodiagnostic and acute care segments.