Pulmonx (LUNG) Q3 2025: U.S. Revenue Growth Slows to 1% as Leadership Signals Cost Discipline
Leadership turnover brings a new mandate for disciplined execution and sharper capital allocation at Pulmonx. U.S. growth deceleration and uneven territory performance have forced a strategic reset, with management prioritizing operating leverage and cash runway extension over expansion-at-all-costs. Investors should expect near-term focus on efficiency and transparency, with more granular 2026 plans promised next quarter.
Summary
- Execution Reset: New CEO and CFO are reorienting Pulmonx toward disciplined, profitability-focused execution.
- Growth Imbalance: U.S. revenue stagnation contrasts with stronger international momentum, exposing operational inconsistencies.
- Forward Focus: Detailed turnaround plans and capital allocation priorities will be outlined in early 2026.
Performance Analysis
Pulmonx’s Q3 2025 results underscore the company’s transition phase, with total revenue growing 5% year-over-year to $21.5 million, but U.S. revenue—comprising nearly two-thirds of the business—rising just 1%. International sales delivered more robust 15% growth, led by Europe, partially offsetting weakness from China. Segment mix continues to be a drag on overall growth, with underperforming U.S. territories diluting the impact of new center additions.
Gross margin improved modestly to 75%, attributed to a lower mix of distributor sales, but operating leverage remains elusive. Operating expenses increased 4% to $30.4 million, with research and development (R&D) spend up 29% as clinical trial activity accelerated. The net loss held steady at $14 million, while cash burn reached $7.7 million for the quarter, leaving $76.5 million in cash and equivalents. Management highlighted that operating discipline and resource reallocation are now top priorities, as prior investments have not translated into the desired growth or margin expansion.
- U.S. Growth Deceleration: U.S. revenue, 65% of total, grew just 1%, highlighting systemic execution challenges.
- International Outperformance: European markets drove 15% international growth, emphasizing opportunity outside the U.S.
- Margin Resilience: Gross margin gains suggest pricing and channel discipline, but cost containment is now critical.
The quarter’s results reflect a company at a crossroads—balancing a strong product foundation and global reach with the need to realign expenses and reignite core market momentum.
Executive Commentary
"Our growth trajectory, particularly in the U.S., has slowed. We acknowledge that some of the investments have not yielded the timely returns we expected. That said, we do see strength across many territories and an opportunity to raise our overall growth profile by bringing underperforming territories in line with those that are consistently performing best. Our slowing sales growth has made operating leverage elusive, and we are determined to change this. We must now thoughtfully realign spending with growth expectations to put ourselves back on a sustainable path to profitability."
Glenn French, President and Chief Executive Officer
"While our team has worked hard to realize our mission, we have not delivered the operating leverage that I believe is critical to ensuring long-term success. To that end, I am committed to working with Glenn and our entire team to reorient Pulmonx and ultimately deliver the value that all of our stakeholders expect."
Derek Sung, Chief Operating Officer and Chief Financial Officer
Strategic Positioning
1. U.S. Commercial Model Under Scrutiny
Despite expanding the U.S. center footprint, Pulmonx has not achieved corresponding sales growth, revealing gaps in territory execution and patient throughput. Management is focused on transferring best practices from high-performing accounts to laggards, with an emphasis on optimizing referral and workup processes—a critical bottleneck for adoption of Zephyr valves, the company’s flagship interventional pulmonology device for severe emphysema.
2. Global Sales Force and Market Access
Pulmonx maintains one of the largest dedicated interventional pulmonology sales teams, with presence in 25 countries. International growth, particularly in Europe, validates the product’s global value proposition, though China remains a volatility source. The company’s broad reimbursement coverage and global infrastructure are strategic assets, but require sharper focus on ROI and market prioritization.
3. Capital Allocation and Cost Realignment
Leadership is conducting a line-by-line review of all programs and expenses, shifting resources toward high-return initiatives and away from underperforming projects. The explicit goal is to extend the cash runway without relying on external financing, creating a path to sustainable growth and margin improvement. R&D investments will be scrutinized for impact, with a bias toward near-term commercial value.
4. Operating Leverage as a Strategic Imperative
The new executive team is prioritizing operating leverage and cash discipline over expansionist growth. With gross margins in the mid-70s, management believes profitability is achievable at current scale, contingent on disciplined execution and targeted investment.
Key Considerations
Q3 marks a strategic reset for Pulmonx, with a leadership team focused on efficiency and value creation after a period of disappointing U.S. growth and limited operating leverage. The company’s strong product-market fit and global infrastructure provide a platform, but execution gaps and capital allocation discipline are now front and center.
Key Considerations:
- Leadership Transition Impact: Recent CEO and CFO changes bring a renewed focus on cost and operational discipline.
- U.S. Commercial Bottlenecks: Patient referral and workup processes remain key hurdles to scaling adoption, despite broad reimbursement.
- International Diversification: Europe’s growth momentum and global sales infrastructure offer a hedge against U.S. weakness.
- Cash Runway Prioritization: Management is targeting internal cost realignment, not external fundraising, to extend liquidity.
Risks
Ongoing U.S. growth deceleration, if unaddressed, could undermine the company’s path to profitability and erode investor confidence. Reliance on a complex multi-step referral process and inconsistent execution across territories may continue to limit adoption. Cash burn remains a concern if operating leverage improvements lag, and international volatility (notably in China) could offset gains elsewhere. Regulatory and competitive pressures remain present in the medical device landscape.
Forward Outlook
For Q4 2025, Pulmonx guided to:
- Full-year revenue in the range of $89 to $90 million
- Gross margin of approximately 73% for the year
- Full-year operating expenses of $125 to $126 million (including $21 million stock-based compensation)
Management stressed a high degree of confidence in achieving this range, citing realistic expectations and a shift toward execution-driven growth. Detailed plans for operating leverage and profitability will be provided on the Q4 call.
- Resource allocation decisions will be finalized after a comprehensive review
- Focus will remain on high-impact, measurable growth initiatives
Takeaways
Pulmonx’s Q3 signals a decisive shift from expansion to disciplined execution. Investors should monitor management’s ability to drive operating leverage and cash efficiency, particularly in the U.S. market, while leveraging international momentum as a growth offset.
- Execution Over Expansion: Leadership is prioritizing profitability and cash discipline over top-line growth at any cost, marking a strategic inflection.
- U.S. Weakness Is the Key Watchpoint: The company’s ability to standardize best practices and accelerate patient throughput in the U.S. will determine revenue trajectory in 2026.
- Transparency and Accountability: Expect more granular operational targets and capital allocation updates on the next call as management finalizes its turnaround blueprint.
Conclusion
Pulmonx enters 2026 with a clear mandate for disciplined execution and cost realignment, led by a returning executive team. The company’s commercial model and capital allocation framework are under active review, with investors awaiting detailed turnaround plans next quarter. Sustainable growth will require closing U.S. execution gaps while maximizing international opportunity and protecting cash runway.
Industry Read-Through
Pulmonx’s reset highlights a broader trend among medical device innovators: commercial execution and cash discipline are now paramount as market growth slows and capital becomes more expensive. Companies with strong gross margins but low operating leverage face mounting pressure to deliver profitability at current scale. Territory-level heterogeneity and referral complexity are common hurdles in procedure-driven medtech, underscoring the need for operational best practice transfer and resource reallocation. Investors should watch for similar pivots across the sector, particularly among single-product or specialty device firms with global footprints.