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The limited understanding of the heterogeneity in the treatment response to antidiabetic drugs contributes to metabolic deterioration and cardiovascular complications1,2, stressing the need for more personalized treatment1. Although recent attempts have been made to classify diabetes into subgroups, the utility of such stratification in predicting treatment response is unknown3. We enrolled participants with type 2 diabetes (n = 239, 74 women and 165 men) and features of severe insulin-deficient diabetes (SIDD) or severe insulin-resistant diabetes (SIRD). Participants were randomly assigned to treatment with the glucagon-like peptide 1 receptor agonist semaglutide or the sodium–glucose cotransporter 2 inhibitor dapagliflozin for 6 months (open label). The primary endpoint was the change in glycated haemoglobin (HbA1c). Semaglutide induced a larger reduction in HbA1c levels than dapagliflozin (mean difference, 8.2 mmol mol−1; 95% confidence interval, −10.0 to −6.3 mmol mol−1), with a pronounced effect in those with SIDD. No difference in adverse events was observed between participants with SIDD and those with SIRD. Analysis of secondary endpoints showed greater reductions in fasting and postprandial glucose concentrations in response to semaglutide in participants with SIDD than in those with SIRD and a more pronounced effect on postprandial glucose by dapagliflozin in participants with SIDD than in those with SIRD. However, no significant interaction was found between drug assignment and the SIDD or SIRD subgroup. In contrast, continuous measures of body mass index, blood pressure, insulin secretion and insulin resistance were useful in identifying those likely to have the largest improvements in glycaemic control and cardiovascular risk factors by adding semaglutide or dapagliflozin. Thus, systematic evaluation of continuous pathophysiological variables can guide the prediction of the treatment response to these drugs and provide more information than stratified subgroups (NCT04451837).