InMode (INMD) Q3 2025: Consumables Surge 26% as Global Expansion and Tariffs Reshape Margin Profile

2025-11-05 | By EarningsIQ Research

InMode’s Q3 marked a pivotal shift toward international expansion and recurring revenue, with consumables up sharply and new subsidiaries in Argentina and Thailand laying groundwork for future growth. Margin compression from tariffs and a reset in capital equipment demand signal a more complex operating backdrop, even as the company maintains a strong balance sheet and disciplined cost controls. The outlook remains cautious, with management emphasizing conservatism for 2026 amid persistent financing headwinds and evolving market cycles.

Summary

• Recurring Revenue Outpaces Capital Equipment: Consumables and service sales accelerated, offsetting capital equipment softness.
• Tariffs and Mix Pressure Margins: Gross margin compressed as tariff headwinds hit, highlighting sensitivity to global cost structures.
• Strategic Expansion Drives Long-Term Optionality: Direct presence in Argentina and Thailand and new leadership in North America position InMode for future cycles.

Performance Analysis

InMode’s Q3 2025 results underscore a business in transition, balancing international expansion and recurring revenue growth against margin headwinds and a challenging capital equipment environment. Total revenue reflected a reset from last year’s pre-order-driven highs, but consumables and service revenue grew 26% year-over-year, now representing a material pillar of stability. This surge was led by markets outside the U.S., signaling successful global adoption of InMode’s minimally invasive platforms, which accounted for 75% of total revenue.

Gross margins compressed to 78% from 82% a year ago, as anticipated tariffs and mix shifts weighed on profitability. Operating expenses declined double digits year-over-year, reflecting disciplined cost management in response to lower sales volume. The U.S. remained the largest revenue contributor, but international sales grew to 43% of the mix, up 10% year-over-year, as new subsidiaries in Argentina and Thailand began to ramp. Operating margin and net income both saw significant year-over-year declines, consistent with the lower top-line and increased cost pressures.

• Consumables and Service Resilience: Outpaced capital equipment, providing recurring revenue stability amid cyclical demand.
• Tariff-Driven Margin Compression: Gross margin decline was in line with management’s warning, underscoring external cost sensitivity.
• International Growth: Direct sales outside the U.S. now comprise nearly half of business, validating regional investment.

Cash generation remained robust, with $24.5 million from operations and a $532.3 million cash position, giving InMode ample flexibility for continued expansion and R&D investment.

Executive Commentary

Strategic Positioning

1. International Expansion and Subsidiary Model

InMode is accelerating its direct-to-market strategy, opening subsidiaries in Argentina and Thailand and consolidating coverage in Europe and Asia. This approach enables closer customer engagement, tailored support, and higher margin capture versus distributor-only models. The Argentina base will also manage broader Latin America distribution, while Thailand complements existing Asian subsidiaries.

2. Recurring Revenue and Consumables Focus

Consumables (single-use handpieces and tips) are now a growth engine, with 230,000 disposables sold in Q3 and strong international uptake. This shift toward recurring, procedure-driven revenue reduces volatility tied to capital equipment cycles, broadening the company’s financial base and smoothing cash flow.

3. Tariff and Margin Management

Tariff-driven cost inflation is now a structural margin headwind, with management proactively resetting expectations and controlling operating expenses. Gross margin compression was anticipated, but the company’s ability to flex costs and maintain high absolute margins (still near 80%) is a relative strength compared to device peers.

4. Leadership and Organizational Realignment

The appointment of Michael Dennison as President of North America consolidates regional management, replacing multiple VP roles with a streamlined leadership structure. This move is designed to drive unified strategy, faster decision-making, and improved execution across the key U.S. and Canadian markets.

5. Pipeline and Segment Diversification

R&D investment remains robust, with new aesthetic lasers and wellness platforms set for launch in early 2026. The company is also segmenting its ophthalmology (Envision) sales force to target optometrists and ophthalmologists, aiming for FDA dry eye clearance by late 2026, and is evaluating direct sales in Israel to further expand margin and reach.

Key Considerations

InMode’s Q3 results reflect a deliberate pivot toward recurring revenue and international scale, but also expose sensitivity to macro and regulatory headwinds. Investors should weigh the following:

• Consumables Growth as Buffer: Strong procedure-driven sales mitigate capital equipment cyclicality and provide a foundation for stable cash flow.
• Margin Compression Not Transient: Tariff impacts are likely to persist, requiring ongoing cost discipline and pricing strategy refinement.
• Direct Subsidiary Model Expands Optionality: Local presence in key markets improves customer intimacy and may drive higher long-term share.
• Leadership Consolidation in North America: Streamlined management is intended to accelerate execution, but transition risk exists as legacy VPs exit.
• Pipeline Visibility and Regulatory Pathways: Upcoming product launches and FDA clearances in ophthalmology and wellness are critical for next-phase growth.

Risks

InMode faces ongoing risks from capital equipment financing constraints, especially in international markets where interest rates remain elevated. Tariff-related cost pressure is likely to persist, limiting margin recovery. Regulatory timelines for new indications (such as dry eye) introduce uncertainty, and competitive intensity in both aesthetics and wellness remains high. Leadership transitions and execution in new markets also present potential disruption if not managed carefully.

Forward Outlook

For Q4 and full-year 2025, InMode reiterated guidance:

• Revenue: $365 million to $375 million
• Non-GAAP gross margin: 78% to 80%
• Non-GAAP operating income: $93 million to $98 million
• Non-GAAP EPS: $1.55 to $1.59

Management signaled a conservative stance for 2026, citing continued uncertainty in capital equipment demand and macroeconomic headwinds:

• Q4 expected to be seasonally strongest, but no acceleration implied for 2026
• Guidance for 2026 will be set after Q4, with a bias toward caution

Takeaways

InMode’s evolution toward a more balanced, recurring revenue model is gaining traction, but the operating environment remains challenging as tariffs and capital equipment headwinds persist.

• Margin Reset Now Baked In: Tariff-driven gross margin compression is structural, not temporary, requiring investors to recalibrate profit expectations.
• International and Consumables Growth Provide Resilience: Global expansion and recurring sales are softening demand shocks in legacy capital equipment.
• 2026 Hinges on Financing and Product Pipeline: Recovery in capital equipment, regulatory wins, and new product launches will be key to re-accelerating growth.

Conclusion

InMode’s Q3 2025 results reflect a company repositioning for long-term resilience, leveraging recurring consumables, global reach, and pipeline innovation to offset margin and demand headwinds. Investors should expect a cautious near-term trajectory, with optionality building for the next industry cycle.

Industry Read-Through

InMode’s experience highlights sector-wide challenges for medical device and aesthetics peers: recurring revenue streams are increasingly critical as capital equipment cycles soften and financing costs remain elevated. Tariff sensitivity is reshaping margin structures across the industry, while direct subsidiary models are gaining favor for international expansion. Companies with robust consumables, strong balance sheets, and diversified product pipelines will be best positioned to weather the current macro and regulatory volatility. Investors should monitor how peers adapt cost structures and pursue local market strategies in response to persistent global headwinds.

INMD Healthcare Medical Devices Consumables Tariffs Recurring Revenue International Expansion Margin