iRhythm's Q3: Volume-led growth and 23.1% adjusted EBITDA margin, masked by a $49.8M litigation charge

The quarter in numbers

iRhythm Holdings reported third-quarter 2026 revenue of $221.6 million, up 14.9% from $192.9 million a year earlier. Gross profit rose 20.0% to $164.5 million from $137.1 million, and gross margin reached 74.2%, up 310 basis points.

Adjusted EBITDA was $51.2 million, a margin of 23.1%. The company said that was a $29.6 million and 1,190-basis-point improvement on the third quarter of 2025. Adjusted net income was $27.8 million, or $0.82 per diluted share, against an adjusted net loss of $2.0 million, or $0.06 per share, a year earlier.

The GAAP picture is far weaker. Net loss was $29.9 million, or $0.90 per share, compared with $5.2 million, or $0.16 per share, in the prior-year quarter. Nine-month revenue was $645.2 million versus $538.2 million, and the nine-month net loss narrowed to $44.2 million from $50.1 million.

What drove growth

The company attributed the revenue increase primarily to "sustained volume demand across our customer base," with contributions from newer growth channels. Management described healthy volume-led growth of Zio Monitor and said momentum was broad-based across cardiology, primary care, innovative channels and international markets. CEO Quentin Blackford said Zio Monitor demand exceeded the company's expectations in the quarter.

The release gives no revenue split by product or region, and no pricing or reimbursement commentary. Readers cannot separate the contributions of Zio Monitor, other Zio services or international markets from the disclosed material. The "volume-led" framing is the company's characterisation, not something the release quantifies.

Margins, costs and the GAAP-to-adjusted gap

Cost of revenue grew only modestly, to $57.1 million from $55.8 million, which is the arithmetic behind the margin gain. The company credited continued operational efficiencies, product mix, disciplined execution and a one-time tariff refund benefit of approximately $3.1 million. That refund also contributed to the gross profit increase, so part of the 74.2% margin is not repeatable on the company's own description.

The gap between GAAP and adjusted results sits in operating expenses. GAAP operating expenses were $197.0 million versus $145.6 million a year ago, driven by $49.8 million of litigation settlements in the quarter (none in Q3 2025). Nine-month litigation settlements totalled $63.7 million. Impairment charges were $0.7 million.

Adjusted operating expenses fell to $138.6 million from $141.4 million. The company said it funded key growth initiatives while managing costs elsewhere. Reported R&D was $20.6 million versus $21.0 million, and SG&A was $125.6 million versus $124.2 million. The release does not detail the nature of the settlements; the adjusted EBITDA definition excludes certain litigation settlements net of expected insurance recoveries.

Guidance and balance sheet

iRhythm raised full-year 2026 revenue guidance to $890 million to $895 million. That includes approximately $16 million of expected VitalConnect revenue from the October 5 close through year-end. Adjusted EBITDA margin guidance is now 15.5% to 16.0%, inclusive of VitalConnect. The excerpt does not state the prior ranges, so the size of the raise cannot be quantified here.

On our arithmetic, subtracting nine-month revenue of $645.2 million implies fourth-quarter revenue of roughly $244.8 million to $249.8 million, or about $228.8 million to $233.8 million excluding VitalConnect's expected contribution. That compares with $221.6 million in Q3.

Unrestricted cash, cash equivalents and marketable securities were $560.7 million at September 30, 2026. Cash and equivalents were $394.7 million and marketable securities $166.0 million, compared with $236.0 million and $347.8 million at December 31, 2025. Long-term senior convertible notes were $651.9 million. A new $300 million senior secured revolving credit facility closed on November 3, which the company said adds liquidity for long-term growth. Accrued liabilities rose to $167.6 million from $128.7 million, and the balance sheet also shows $10.0 million of newly classified current restricted cash.

Pipeline, regulatory and strategic catalysts

The VitalConnect acquisition closed on October 5, 2026. The company said it brings an immediate FDA-cleared mobile cardiac telemetry (MCT) offering, advances a multi-vitals strategy and expands the addressable market across the continuum of care. Blackford called it a "best-in-class MCT portfolio" opportunity.

On the regulatory front, iRhythm submitted FDA 510(k) applications for pediatric use of its Zio Monitor long-term continuous monitoring business. The release gives no decision timeline. The company also published three large real-world studies covering over 1.7 million total patients: CAMELOT-ALERT (Zio AT), EXCALIBUR (Zio Long-Term Continuous Monitoring), and a comparison of Zio Monitor with Zio XT. The company said they demonstrate product superiority or improved performance and diagnostic yield.

What to watch next

First, VitalConnect integration: the roughly $16 million fourth-quarter contribution and margin impact are embedded in guidance, and integration is a risk the company itself lists. Second, how much of the gross margin gain persists without the roughly $3.1 million tariff refund. Third, whether adjusted opex discipline holds as growth initiatives and the acquired business are funded. Fourth, any further litigation charges, given $63.7 million of settlements over nine months. Finally, the timing of FDA action on the pediatric 510(k) submissions.