Omada Health (OMDA): Investment Thesis Explained

The last time I published a Deep Dive on a new company was almost two months ago.

This is honestly my favorite type of article to write, even though they require the most time and effort. That said, I never force them. I prefer to write one only when I believe there’s a genuinely interesting company that isn’t being covered enough (even if I ultimately decide not to invest for a specific reason).

That’s the case here.

Omada Health went public in 2025, just five months ago, yet it has flown largely under the radar. One of my subscribers suggested the company to me a few months ago. While I initially thought the numbers looked solid, I’m generally cautious about jumping straight into newly public companies.

After a couple of quarters of strong execution and a meaningful correction in the stock price, I decided to spend some time digging deeper into the business, and I came away increasingly excited.

In this article, I’ll explain the full investment thesis for Omada Health (OMDA).

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Origins

Omada Health was founded in 2011 by Sean Duffy, after he dropped out of Harvard Medical School and following an earlier experience at Google.

The problem he wanted to solve was easy to understand: most healthcare is built around short, infrequent doctor visits, while the behaviors that actually determine long-term outcomes (what people eat, how active they are, whether they adhere to treatment, etc.) happen almost entirely outside the clinic. For patients with chronic conditions, that gap matters even more. Chronic diseases account for ~90% of U.S. healthcare spending, yet after a diagnosis many patients leave with little more than general advice and are largely on their own until the next appointment.

Omada was created to address that “in-between” period. The idea was not to replace doctors, but to complement them by providing structured, ongoing support between visits. Early on, the company focused on diabetes prevention and weight management, using a combination of human coaching, connected devices, and software to help people make sustained behavioral changes over time.

From there, the platform expanded gradually. In 2018, Omada added diabetes and hypertension programs. In 2020, it entered musculoskeletal care. More recently, in 2023, it has layered in support for patients using GLP-1 therapies. While the scope has broadened, the underlying model has stayed consistent: long-term, behavior-driven care designed to reduce downstream health costs and improve patient outcomes.

It’s fair to say that what Omada offers today does not look radically innovative on the surface. There are many digital health apps focused on nutrition, exercise, coaching, or even chronic disease management. Where Omada differentiated itself was not by rushing to acquire consumers directly, but by making an early strategic choice that shaped the company’s trajectory.

Instead of pursuing a direct-to-consumer model and optimizing right from the beginning for fast user growth, Omada spent its early years building clinical and economic evidence. The goal was to prove not only that its programs could improve outcomes like weight, blood glucose, or blood pressure, but more importantly that they could lower total healthcare costs for the entities paying the bills. That decision pushed Omada toward a B2B2C model, integrated into employer benefits, health plans, and pharmacy benefit managers, with services typically fully covered for eligible members.

This approach required patience. Publishing peer-reviewed studies is slow, expensive, and uncertain. But over time, Omada accumulated 30 peer-reviewed publications, which became critical in winning the trust of insurers and large employers, partners like Cigna and Costco, among others. These are the buyers that ultimately matter, and they tend to be skeptical by default.

That evidence-first strategy created barriers to entry. It also resulted in a go-to-market model that is structurally different from most consumer health apps. Omada does not rely on the same level of paid advertising to acquire users. Instead, its partners identify eligible populations and run targeted outreach, often positioning Omada as a covered benefit. In some cases, participation in Omada programs is even tied to coverage decisions, such as requiring engagement as a condition for GLP-1 reimbursement, because of the long-term cost savings it can generate.

The result is a distribution model with relatively low incremental customer acquisition costs and high scalability, especially compared to DTC health apps that are facing rising competition and higher marketing spend.

Based on current partnerships alone, more than 20M individuals are estimated to have benefit coverage for at least one Omada program. Yet Omada has enrolled less than 5% of that population so far. Membership growth has been accelerating, with members up 53% YoY in the most recent quarter, suggesting there is still substantial runway within its existing footprint.

None of this eliminates risk. Digital health remains a crowded space, buyer budgets can tighten, and outcomes-based models demand consistent execution. But Omada’s origins explain why the company looks the way it does today: slower to scale early on, more integrated into the healthcare system, and structurally aligned with the incentives of payers rather than consumers.

Let’s dig deeper into the Business Model.

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Business Model

At a high level, Omada Health makes money by helping employers, health plans, and other payers manage chronic disease more effectively, and at a lower total cost, by supporting patients between doctor visits.

That sentence sounds abstract, so it’s worth breaking the model down into very simple pieces.

Who becomes a member (and how they get there)

Omada does not sell primarily to consumers. Instead, it sells to organizations that already pay for healthcare: employers, health plans, and pharmacy benefit managers (PBMs). These organizations decide to offer Omada as a covered benefit for specific populations, typically people with, or at risk of, chronic conditions.

From there, the flow looks roughly like this:

1. Eligibility is identified
   The payer or employer identifies people who are clinically eligible (for example, prediabetes, obesity, diabetes, hypertension, or MSK conditions).

2. Targeted outreach
   Omada runs outreach campaigns, like email or workplace communications, inviting eligible individuals to enroll. Importantly, this is not broad advertising. It’s targeted, benefit-based outreach, usually positioned as “this is covered for you.”

3. Onboarding and enrollment
   A member is not just a registered user, it’s someone enrolled in a program and actively participating in care. This distinction matters because Omada’s reported member count reflects people who are economically relevant to the business, not just downloads or dormant accounts.

What Omada actually does for members

Omada’s core product is built to be a long-term care program around three components working together:

• Human care teams
  Health coaches, specialists (such as diabetes or hypertension specialists), and physical therapists guide members over time. The company has been explicit that it does not aim to replace clinicians with AI, but to extend their reach, a decision strongly influenced by patients’ feedback (they want the human part of the service, and that actually helps to keep members engaged).

• Connected devices and data
  Depending on the program, members may receive devices like digital scales, blood pressure cuffs, glucose meters, or continuous glucose monitors. Data flows back into Omada’s system, allowing care teams to personalize support.

• Software and AI-enabled tools
  Software organizes data, surfaces insights, and supports both members and care teams. AI is used to scale care, helping humans manage more patients efficiently, not to replace them.

The emphasis is on behavior change over time, not one-off interventions. Programs are designed to last months or years, translating into recurring revenue, because chronic disease does not resolve in a few weeks.

Conditions Omada covers (and the size of the opportunity)

Omada focuses on a set of chronic conditions that are both highly prevalent and high-cost for commercial payers:

• Prediabetes / Weight Health

• Diabetes

• Hypertension

• Musculoskeletal (“MSK”)

Management frames the commercial opportunity in two layers: (1) the long-term TAM, and (2) the near-term opportunity already sitting inside existing channel relationships.

1) Long-term TAM (commercial lives + these conditions)
Omada defines its primary target population as the commercially insured U.S. population (about 154M lives). Using prevalence estimates and its program list prices, the company estimates the current addressable market at roughly:

• $41.4B for prediabetes

• $17.3B for diabetes

• $31.6B for hypertension

• $44.8B for MSK

That adds up to ~$135B+ in total current TAM across the conditions it serves (excluding additional upside from Medicare Advantage).

2) TAM already within reach (covered lives through existing partners)
What’s more relevant for near-term execution is that Omada already sits inside a large distribution footprint:

• As of today, 20M+ individuals have benefits coverage for one or more Omada programs (assuming clinical need).

• Separately, Omada highlights that its existing health plan partners collectively cover 156M lives across their networks, which speaks to the expansion headroom available even before adding new partners.

This framing is important because it shifts the story from “can Omada find customers?” to “can Omada increase penetration and enrollment inside coverage it already has?”

A very different (and usually more efficient) growth problem.

How Omada gets paid

Omada’s revenue model is best understood by separating two questions:

1. How Omada prices its services

2. Who Omada sells to, and how those relationships are structured

Both are essential to understanding the durability and the limits of the business.

1. Pricing models: what Omada charges for

In most cases, members pay nothing out of pocket, which removes friction and improves enrollment.

Over time, Omada’s pricing has evolved toward stronger alignment with outcomes and engagement:

• Engagement-based pricing (increasingly dominant)
  Omada is paid monthly for members who meet defined engagement criteria within a backward-looking measurement window (often 3-6 months). Engagement can include activities such as app usage, messaging with care teams, or submitting biometric data.

In simple terms: Omada gets paid when members actually use the program, not just because access exists.

• Program-specific pricing: Pricing varies by condition.

Diabetes and hypertension programs are priced higher due to greater clinical intensity and device usage. Prevention and weight health programs are lower-priced but typically address larger populations. MSK care follows a more episodic model, with fees tied to utilization rather than continuous membership.

This structure protects buyers from paying for unused services while forcing Omada to stay focused on sustained engagement, one of the hardest problems in digital health. It’s also another sign of alignment between the company and buyers.

2. Who pays Omada: customers and channels

While the pricing mechanics explain how Omada earns revenue, the go-to-market structure explains why the model scales the way it does.

As shown in the image above, Omada operates across several customer types:

Employers (direct contracting)
Some large employers contract directly with Omada and offer its programs as part of employee benefits. A commonly cited example is Costco.

• Employer pays Omada

• Employees enroll as members at no or minimal cost

• Omada is accountable for engagement and outcomes

This channel is attractive but relatively selective, as it requires employers willing to actively manage healthcare benefits.

Health plans, PBMs, and platform resellers (core growth engine)
This is Omada’s most important channel.

Health plans and PBMs, such as Cigna and Express Scripts, either:

• Resell Omada to employers with self-insured populations, or

• Cover Omada directly for fully insured members

This channel dramatically expands Omada’s reach, embeds the platform into existing benefits workflows, and positions Omada as part of healthcare infrastructure rather than a discretionary wellness perk. Because these partners are financially responsible for medical spend, Omada’s ability to demonstrably lower total healthcare costs is central to the relationship.

Health systems (patient populations)
Omada also works with health systems such as Intermountain Healthcare, where the focus is supporting patients alongside traditional care delivery.

Overall, putting pricing and distribution together highlights several structural strengths:

• Low incremental CAC
  Omada relies on partner-driven outreach, not on the typical paid consumer marketing.

• High customer retention (90%+)
  Once integrated, Omada becomes operationally and clinically embedded. Importantly, a meaningful portion of churn is structural rather than product-driven, stemming from members changing employers or health plans that do not offer Omada’s services.

• Aligned incentives
  Engagement-based pricing ties Omada’s revenue to real usage and outcomes.

• Scalability without proportional cost growth
  One platform, multiple programs, shared care teams.

The trade-offs: pricing power and customer concentration

The flip side of selling through large health plans and PBMs is limited pricing power and customer concentration.

Cigna alone, for example, represents a very meaningful portion of Omada’s revenue (as of Q3 2025, 34% from one affiliate and 32% from another). Large buyers have negotiating leverage, and contracts are scrutinized carefully.

However, two mitigating factors matter:

1. Economic alignment
   Omada’s programs are designed to reduce total healthcare costs. When they work, partners benefit financially, which supports long-term relationships.

2. Equity alignment
   In this particular case, Cigna is also a shareholder in Omada (~6% stake), aligning long-term incentives and reducing the risk of purely extractive pricing behavior.

As healthcare costs rise, particularly with GLP-1 therapies, solutions that help manage utilization and improve outcomes tend to become more strategic, not less.

Essentially, Omada’s business model is not optimized for short-term monetization per user. It’s designed to:

• Earn trust through evidence

• Scale through existing healthcare distribution

• Align interests with its partners

In healthcare, who pays you often matters more than how much they pay you, and Omada has chosen its payers deliberately.

Evidence as a Competitive Advantage

It’s reasonable to be skeptical about how differentiated Omada’s services really are.

At a surface level, much of what Omada offers does not look impossible to replicate. The digital health landscape is crowded with apps promising better nutrition, weight loss, or chronic disease management, often with slick interfaces and aggressive marketing. From the outside, it can feel like a space where features are easy to copy and claims are hard to verify.

That skepticism is understandable, and it’s exactly why Omada’s early strategic choices matter so much.

Being founded in 2011, Omada was a pioneer in digital chronic care, long before the category became crowded. Instead of using that head start to chase fast user growth through DTC channels, the company made a counterintuitive decision: it prioritized evidence and credibility in order to build a durable B2B2C model over time.

Omada invested years into building clinical and economic proof, funding studies, publishing peer-reviewed research, and earning accreditations from respected healthcare bodies. The goal was not to win consumers’ attention, but to convince the most skeptical buyers in healthcare: employers, health plans, and PBMs that are financially responsible for outcomes.

Today, Omada has published roughly 30 peer-reviewed studies demonstrating improvements across key metrics such as weight, blood glucose, blood pressure, musculoskeletal pain, and, critically, total healthcare costs. These studies are not just marketing, they underpin Omada’s credibility with large health plans and employer benefit structures and help explain why the company is embedded within them in the first place.

However, this does not mean Omada is the only company pursuing an evidence-based approach. There are credible competitors, such as Virta Health in diabetes care, the legacy Livongo platform within Teladoc, or Hinge Health in MSK care, that have also published peer-reviewed outcomes and earned payer trust within more narrowly defined clinical areas. Other players, including Noom in weight management and Lark Health in AI-enabled chronic care, have published academic research supporting behavior change and clinical improvements, though often with different study designs, populations, or go-to-market models. Evidence-based digital care is therefore not unique to Omada, but it remains relatively rare, expensive to build, and difficult to scale across multiple conditions simultaneously, particularly in a way that meets the evidentiary standards required by large employers, health plans, and PBMs.

As a result, Omada’s body of evidence still functions as a meaningful barrier to entry, particularly in the short to medium term. In theory, another company can build an app with similar features. In practice, replicating a decade of longitudinal data, peer-reviewed research, payer relationships, and operational integration is extremely difficult, time-consuming, and costly.

In a sector where features are easy to copy, Omada’s real advantage is not the app itself, but the trust it has earned from buyers over time.

Unit economics at the member level: front-loaded costs, improving returns

The economics of an Omada member are front-loaded on cost. During the first months of enrollment, Omada typically incurs its highest expenses: connected device fulfillment for cardiometabolic programs and more intensive Care Team support as members onboard and establish new behaviors. As the company explains in its S-1, this dynamic is the primary reason gross margins are seasonally lower during periods of heavy new enrollment, particularly in the first quarter.

Over time, however, the economics improve materially. After the early phase:

• Members generally require less Care Team intensity

• No additional devices are shipped unless a new program is added

• Ongoing revenue continues to be recognized as care is delivered

As a result, gross margin tends to improve over the life of a member, a pattern that is visible both seasonally within each year and structurally YoY.

Crucially, this improvement is supported by durable engagement. Omada has disclosed that roughly 55% of members remain engaged at the end of the first year, and about 50% are still engaged in year two. This means that once a member reaches the one-year mark, the likelihood of remaining engaged into the second year is high. For a behavior-change driven healthcare model, this level of engagement persistence is notable and helps explain why older cohorts are structurally more profitable than newly enrolled ones.

Importantly, Omada has also demonstrated that the cost to support each member is declining over time. The S-1 explicitly attributes recent gross margin expansion to lower personnel costs per total member, driven by improved Care Team workflows, better time management, and the expanded use of internal technology tools that help clinicians operate more efficiently, without removing the human element from care delivery.

Multi-condition adoption further strengthens unit economics. When an existing member enrolls in an additional program, such as combining diabetes, hypertension, or MSK care, Omada can increase revenue per member without repeating the same acquisition and onboarding costs. Management has consistently highlighted multi-condition growth as a key driver of operating leverage, and this trend is already visible in the company’s improving margins and FCF generation.

Taken together, the picture that emerges is of a model where older cohorts are structurally more profitable than new ones, and where scale amplifies efficiency rather than eroding it.

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Catalysts

With the business model and competitive positioning established, the next question is what could accelerate adoption, financial performance, or market perception over the next 12-24 months.

1. GLP-1s

Omada’s GLP-1 Care Track addresses the buyer’s biggest fear: paying $1,000+ per month for a drug only to see members discontinue, regain weight, and restart a few months later. The company reports that members of its Enhanced GLP-1 Care Track achieved 28% greater weight loss at 16 weeks versus similar GLP-1 users not in the track, alongside stronger habit formation metrics such as more weigh-ins, healthier meals, and higher activity levels. More importantly, Omada has shown promising discontinuation data: members who stopped GLP-1s and stayed engaged with Omada experienced minimal average weight change, about 0.8% at 12 months compared with ~11-12% regain reported in key clinical trials without ongoing lifestyle support. If these patterns hold at scale, the value proposition for employers, plans, and PBMs is straightforward: fewer “stop-restart” cycles translate into less wasted GLP-1 spend and materially better long-term ROI.

You and I might be skeptical about the improvements coming from Omada’s services, but the ones who truly need to be convinced are its partners, and they seem to be.

GLP-1 therapies are therefore likely to remain a meaningful catalyst, particularly as the market evolves beyond injectables. Two developments stand out.

First, oral GLP-1s are expected to materially expand adoption by lowering friction for both patients and employers. Broader usage increases the need for behavioral support, adherence management, and post-discontinuation care, areas where Omada is already embedded.

Second, Omada is preparing to prescribe GLP-1s directly, but in a deliberately constrained and disciplined way. Management has indicated it will work only with branded GLP-1s from Eli Lilly and Novo Nordisk, signaling alignment with the dominant manufacturers rather than attempting to compete on price or commoditize access.

Importantly, prescribing is also structured to be economically attractive. Medications will be fulfilled through the member’s existing pharmacy, and prescribing will be priced as an incremental service on top of Omada’s existing programs, rather than a loss leader. Management has explicitly framed this initiative as accretive to both revenue and margins.

As discussed earlier, some of Omada’s partners already require enrollment in Omada’s programs as a condition for GLP-1 reimbursement. As coverage expands, this effectively turns GLP-1 adoption into a distribution funnel for Omada. While GLP-1s are not the entire investment case, currently representing only ~12-18% of total members (exact figure not disclosed), they clearly function as a powerful member acquisition catalyst layered on top of an existing platform.

A formal partnership with GLP-1 manufacturers, similar to arrangements seen with other telehealth platforms, would be a logical next step. While not guaranteed, such an announcement would likely be viewed very positively by the market.

2. PBM Expansion and New Programs

PBMs remain one of Omada’s most underappreciated growth levers.

Recent contracts demonstrate that PBMs are no longer viewing Omada as an optional wellness add-on, but as infrastructure for managing drug spend. Each new PBM relationship expands Omada’s eligible population by millions of covered lives without requiring employer-by-employer selling.

Just as important as signing new PBMs is expanding the scope of programs offered within existing PBM relationships.

3. Expansion Within Existing Coverage

One of the cleanest catalysts is also one of the least speculative: higher penetration inside existing coverage.

Today, more than 20M individuals are estimated to have benefits coverage for at least one Omada program, yet only a small fraction is enrolled as members. Growth does not require new logos to remain strong, it requires:

• Better outreach

• Higher conversion

• More programs per customer

This is particularly relevant as multi-condition customers continue to increase, which raises revenue per account and strengthens retention. Selling additional programs into an existing relationship is operationally simpler, faster, and cheaper than acquiring a new customer.

Importantly, as mentioned earlier, one of the cheapest and most efficient marketing strategies Omada uses is targeted email outreach. In 2024, the average email enrollment rate increased by more than 60% YoY compared to 2023.

4. Operating Leverage and Inflection Point

Omada is approaching a clear inflection point. Margins have been steadily improving, and the company has now reached adj. EBITDA and FCF profitability, earlier than many expected.

Looking ahead, 2026 is likely to be the first year of consistent profitability, marking an important transition from investment mode to scalable execution. That shift alone can act as a catalyst for multiple expansion.

As we’ll discuss later, it’s worth emphasizing that margins have a lot of room to expand as operating leverage continues to materialize.

5. Continued Execution vs. Conservative Expectations

Since its IPO, Omada has delivered two consecutive quarters with revenue beats of 10%+, while accelerating revenue growth to 49% YoY in Q3. Despite that, consensus estimates assume a sharp deceleration to ~20% growth in 2026 and 2027. That appears overly conservative. There is no clear fundamental reason for growth to slow that aggressively.

For context, when Omada went public roughly five months ago, 2026 revenue estimates were around $265M. After just two strong quarters, those estimates have already moved up to roughly $311M. Continued execution alone could force further upward revisions, acting as a steady, fundamentals-driven catalyst.

Even after raising expectations by ~24% over the past five months, analysts still expect only $69M in revenue for Q4, implying just a 1.5% QoQ increase. Given that the company has consistently grown at much faster rates, I’m expecting another strong beat.

6. Increased Awareness

Omada’s IPO came at a relatively poor moment for digital health. As a result, I believe it remains under-discussed relative to its execution. If the company continues to deliver strong growth while demonstrating improved profitability, awareness is likely to increase organically. In that scenario, a multiple re-rating does not require exuberance, only recognition that Omada is structurally different from many prior digital health failures like Teladoc or GoodRx.

There are early signs this dynamic may be shifting. Recently, Morgan Stanley named Omada a top pick within healthcare technology and raised its price target from $30 to $32 (~100% upside from here), reiterating an Overweight rating. However, this call came around the same time the IPO lockup expired, meaning any potential positive impact on sentiment was likely overshadowed by that selling pressure.

7. Lockup Expiration as a Technical Overhang

Finally, there is a near-term technical factor worth noting.

The expiration of the IPO lockup period recently added pressure to the stock. This is not unusual, and in many cases stocks stabilize or rebound once that supply is absorbed. While not a fundamental driver, the removal of this overhang can act as a short-term catalyst if fundamentals remain intact.

In general, none of these catalysts relies on a single breakthrough. Instead, they reflect multiple, overlapping mechanisms that could unlock value already embedded in Omada’s model.

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Numbers and Valuation

At this point, the numbers speak for themselves.

Membership growth has been consistently strong and is accelerating. Members grew 50%+ YoY in recent quarters (52% in Q2 and 53% in Q3), with growth increasingly driven by expansion within existing partners rather than new logo additions.

Revenue growth has followed the same trajectory, running close to ~50% YoY (~49% in both Q2 and Q3), while consensus expectations still assume a sharp deceleration over the next two years. So far, there is little in the fundamentals to justify that level of pessimism, particularly given the PBM channel expansion and GLP-1-related tailwinds already underway.

On profitability, the operating leverage is becoming visible:

• Gross margins have continued to improve as the platform scales, now at 66.3% GAAP and counting (up from 57.0% in 2023).

• Adj. EBITDA turned positive last quarter at $2.4M, improving from double-digit negative margins YoY.

• FCF has turned meaningfully positive earlier than many expected.

A particularly important metric is multi-condition adoption, which continues to rise as a percentage of customers (now at 31%). Each additional program sold into an existing relationship increases revenue per customer while leveraging the same sales motion, platform, and much of the care infrastructure.

Longer term, a 20-25% EBITDA margin profile is easily achievable and already outlined by management. Given Omada’s capital-light model and efficient cash conversion, that should translate into 20%+ FCF margins at scale.

Something I found pretty interesting is that out of the $22.4M in Revenue that Omada increased from Q3 2024 to Q3 2025, roughly $9.1M went directly to Operating Cash Flow (~40%). While this figure is influenced by several timing and working capital factors, it nonetheless highlights the operating leverage embedded in the model as the business scales.

A useful comparison: Hinge Health

Hinge Health provides a useful benchmark, not because the businesses are identical (Hinge is primarily focused on MSK conditions), but because the underlying operating dynamics are comparable. Both companies sell covered, outcomes-driven digital care through a B2B2C model, and both went public in 2025, with few relevant public comparables.

Hinge operates at a meaningfully larger scale today and has already achieved substantially higher margins. However, at a similar revenue level to where Omada is currently, Hinge’s margins were much closer to Omada’s present profile. It was only after roughly doubling revenue again that Hinge began to see sharp margin expansion as fixed costs across technology, clinical infrastructure, and go-to-market were leveraged.

There is no guarantee Omada follows the same trajectory, but the comparison is instructive. The pattern suggests that once a certain scale threshold is reached, incremental growth can translate disproportionately into profitability, and Omada appears to be approaching that phase.

Valuation

As I often say, if a stock requires a complex DCF model to prove it is cheap, it usually isn’t cheap enough. In Omada’s case, the issue is different: analyst estimates are, in my opinion, too conservative, which distorts valuation multiples.

A few examples illustrate this clearly:

• At IPO, 2026 revenue estimates were ~$265M. After just two strong quarters with 10%+ beats, those estimates have already increased to ~$311M.

• At IPO, analysts expected negative $11M in FCF in 2026. Today, that same year is modeled at +$3.6M.

• In Q3 alone, Omada generated $8.1M in FCF, representing a ~12% FCF margin for the quarter.

Yes, quarterly FCF can be affected by working capital timing and reimbursement dynamics, but the direction is clear. Current estimates still assume a slower ramp than what the business is already demonstrating, not only in terms of revenue growth but also operating leverage.

For even more context, analysts expect ~$16M in FCF by 2027. Based on current momentum, it is reasonable to believe Omada could easily exceed that as early as 2026.

That said, management has positioned 2026 as a deliberate investment year, particularly around GLP-1 prescribing capabilities, enhanced GLP-1 support, and broader AI integration. These initiatives could temporarily weigh on near-term FCF, but they represent long-term investments in scalability and competitiveness. Given Omada’s exceptionally strong balance sheet, this trade-off is not a concern to me.

Rather than anchoring on short-term consensus estimates, it’s more useful to focus on where the business can reasonably land at scale as operating leverage continues to materialize.

First scenario:

• Revenue CAGR: ~30% over the next 3 years

• Normalized FCF margin: ~20%

That would imply roughly $112M in FCF by 2028.

Omada has ~$200M in cash and no debt, so on that basis the implied EV/FCF would be ~6x.

Second scenario (more aggressive):

• Revenue CAGR: ~35%

• FCF margin: ~25%

That scenario implies roughly $157M in FCF, which would put the stock at closer to ~4.5x EV/FCF. Ambitious, but not unrealistic given the combination of catalysts and operating leverage already emerging.

The stock recently touched ~$14/share after the expiration of the IPO lockup period, which could prove to be a meaningful bottom. From current levels, downside appears limited if execution remains consistent with recent quarters. That caveat matters: Omada’s public market track record is still short, and nothing here is guaranteed.

This is not a perfect or revolutionary business. But at current multiples, with conservative expectations baked in, I believe the valuation risk-reward looks compelling.

It reminds me of HIMS at a stage when few people were paying attention. At the time, the stock did not look that cheap on consensus numbers, until actual results consistently came in far above expectations. Once that happened, perception shifted quickly. As you know, I was buying HIMS at single digits and sold later at an average selling price of ~$40, so I wouldn’t mind if this proves to be a similar situation.

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Risks to Mention

While the upside case for Omada is compelling, it’s important to be clear about what could go wrong. In my opinion, none of these risks invalidate the thesis on their own, but they do explain why the opportunity is not risk-free and why execution matters.

1. Execution risk in a still-young public company

Omada has only been public for two quarters. While execution so far has been strong, the public market track record is still short. Sustaining fast levels of growth while simultaneously expanding margins is difficult, especially as the company scales into larger, more complex customer relationships.

2. Customer concentration and pricing power

As outlined in the Business Model section, Omada’s go-to-market strategy prioritizes large employers, health plans, and PBMs. That brings scale and efficiency, but it also creates customer concentration risk and limits pricing power. Large buyers are sophisticated and have leverage in contract negotiations. If one or two major partners were to reduce scope, renegotiate pricing aggressively, or delay expansion plans, near-term growth and margins could be impacted.

That said, this risk is partly mitigated by aligned incentives. Omada’s services are designed to lower total healthcare costs, making them strategically valuable rather than discretionary. In addition, its largest partner is also a shareholder, which helps align long-term interests. Still, concentration risk should not be ignored.

3. GLP-1 dynamics may evolve differently than expected

Key risks include:

• Slower-than-expected adoption of oral GLP-1s

• Changes in reimbursement rules that reduce the need for behavioral programs

• Employers or plans choosing alternative approaches to manage GLP-1 spend

If GLP-1 utilization grows in a way that reduces Omada’s role rather than expanding it, some of the expected upside could fail to materialize. While Omada is not a pure GLP-1 story, that momentum is part of the current narrative.

4. Competitive pressure and perceived commoditization

On the surface, Omada operates in a space that can appear crowded. New digital health vendors continue to emerge, and incumbents may attempt to bundle similar services into broader offerings. While Omada’s evidence base and payer trust currently provide relevant differentiation, competition could still pressure pricing over time, slow sales cycles, or increase buyer scrutiny around ROI.

5. Regulatory and reimbursement risk

Healthcare is heavily regulated, and reimbursement structures can change.

Shifts in employer benefits design, healthcare policy, or regulatory guidance around digital health, remote care, or data usage could affect Omada’s operating model. While Omada has so far navigated this environment well, regulatory risk is always present in healthcare services businesses.

6. Valuation might depend on continued beats

As I explained, my valuation case relies on the idea that consensus estimates are too conservative and will continue to move higher. If growth decelerates closer to current expectations, or if margin expansion stalls, the stock may not re-rate as anticipated.

In other words, the upside requires sustained execution.

Omada is not a perfect business, and it does not operate in a risk-free environment. That said, I believe the current risk-reward is attractive. Recognizing these risks is essential, not to weaken the thesis, but to clarify exactly what needs to go right for it to play out.

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Final Thoughts

I don’t think Omada is a perfect business, but I also don’t think it needs to be one for the investment case to work.

What makes the opportunity compelling today is the combination of improving fundamentals and conservative market expectations, alongside a technical setup that has likely distorted near-term pricing. Much of the recent selling pressure appears to have been driven by the expiration of the IPO lockup, a dynamic that is common in newly public companies and often creates temporary opportunities.

Reflecting that view, I initiated a position at $15.24/share.
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At the same time, the underlying business is doing the opposite of what the stock action might suggest. Revenue is growing close to 50% YoY, member growth is accelerating, and margins are expanding. Despite this, consensus estimates still assume a sharp slowdown to ~20% growth in 2026 and 2027. I find that assumption difficult to reconcile with what the company is actually executing today, particularly given the identifiable catalysts discussed earlier and the two recent 10%+ beats.

The setup is also attractive from a structural standpoint. Omada operates in a large and growing market, but more importantly, it already has distribution channels in place that allow it to scale adoption at low incremental cost. Growth does not require reinventing the go-to-market strategy or materially increasing customer acquisition spend. Instead, it relies on deeper integration and higher engagement within coverage that already exists.

The balance sheet further strengthens the risk-reward. Omada holds roughly $200M in cash and no debt, giving it flexibility and downside protection as it continues to invest through its growth phase. If the stock were to remain at current multiples as profitability becomes more visible, it would not be surprising to see management consider announcing a buyback program over time.

Another element that matters, but is harder to quantify, is leadership. Omada is founder-led, and so far Sean Duffy appears to be running the business with a disciplined, long-term mindset, prioritizing outcomes, evidence, and sustainable economics rather than short-term optics.

In my honest opinion, this is not a stock that will work particularly well if execution falters or if growth decelerates as sharply as consensus currently assumes. But if Omada continues to deliver anywhere close to what it has shown in recent quarters, the disconnect between fundamentals and expectations should narrow, and that would yield exceptional returns from here.

Very simply, Omada does not need heroic assumptions to justify upside. It just needs continued execution. If that happens, today’s valuation may ultimately reflect skepticism that proves excessive in hindsight.

That’s it. Thanks for reading!

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Disclaimer: As of this writing, M. V. Cunha holds a position in Omada Health (OMDA) at $15.24/share.