Pulmonx's 2025 Guidance: A Test of Execution and Margin Discipline

In the high-stakes arena of medical device innovation, Pulmonx (NASDAQ: LUNG) has positioned itself as a niche player with a promising therapeutic focus on lung volume reduction via its Zephyr Valve franchise. However, the company's updated 2025 guidance-$89 million to $90 million in revenue, a 73% gross margin, and $125 million to $126 million in operating expenses-raises critical questions about its ability to balance growth with cost control. For investors, the key issue is whether Pulmonx can sustain its premium gross margins while curbing expenses that currently consume 140% of revenue, a ratio far exceeding industry norms.

Revenue Growth and Gross Margin: A Double-Edged Sword

Pulmonx's Q3 2025 results showed a 5% year-over-year revenue increase to $21.5 million, with U.S. revenue flat at $14.0 million and international revenue surging 15% to $7.5 million, according to a Stock Titan report. This geographic diversification is a positive sign, but the company's reliance on a single product (Zephyr Valve) remains a vulnerability. The 75% gross margin in Q3, consistent with prior periods, underscores the unit economics of its device-based business model, as noted in the Stock Titan report. However, this margin, while impressive, must be contextualized against the medical device industry's average gross margin of 47.52% in Q2 2025, according to a CSIMarket analysis. Pulmonx's ability to maintain a 73% gross margin in 2025 hinges on pricing power and procedural adoption rates, both of which face downward pressure from reimbursement shifts and competitive dynamics.

Operating Expenses: A Looming Overhead

The elephant in the room is Pulmonx's operating expense ratio. At $30.4 million in Q3 2025, operating expenses grew 4% year-over-year, with full-year guidance projecting $125 million to $126 million-140% of expected revenue, according to the Stock Titan report. This ratio dwarfs industry benchmarks. For context, Medtronic and Abbott, two of the sector's giants, typically operate with operating expense ratios below 20% of revenue, according to a Mass Device ranking. Pulmonx's heavy spending on clinical trials, commercial expansion, and stock-based compensation ($21 million non-cash), as detailed in the Stock Titan report, reflects a high-risk, high-reward strategy. Yet, with a net loss of $14.0 million and an adjusted EBITDA loss of $8.2 million in Q3, the company's path to profitability remains obscured, according to the Stock Titan report.

Industry Headwinds and Strategic Challenges

The medical device sector is navigating a perfect storm of rising production costs (tariffs on components), reimbursement model shifts toward value-based care, and intensified competition. Pulmonx's Zephyr Valve, while innovative, faces scrutiny in a market where payers increasingly demand cost-effectiveness. The company's emphasis on expanding treatment volumes and refining execution is laudable, but these efforts must translate into tangible revenue growth to justify its expense structure.

Moreover, the industry's operating expenses grew 1.9% in 2024, driven by non-labor costs like tariffs and supply chain disruptions, according to a Market Research report. Pulmonx's guidance assumes it can navigate these pressures without sacrificing operational discipline-a tall order given its current trajectory.

The Path Forward: Can Pulmonx Deliver?

For Pulmonx to unlock value, it must achieve two seemingly contradictory goals: scale revenue rapidly while tightening cost control. The Zephyr Valve's international growth (15% YoY) offers hope, but scaling this momentum requires significant capital. Meanwhile, reducing operating expenses from 140% to, say, 60% of revenue-a level typical for mature medical device firms-would necessitate drastic cuts to R&D or commercial spending, which could stifle innovation and market penetration.

Investor confidence will hinge on Pulmonx's ability to demonstrate that its current losses are a temporary phase rather than a chronic condition. The company's 73% gross margin target is a critical buffer, but it must also show that it can rein in expenses as revenue grows. If Pulmonx can achieve this balance, it may yet prove its niche therapeutic focus is a sustainable competitive advantage. If not, the high-margin promise of the Zephyr Valve could remain just that-a promise.