Metformin, a diabetes drug with anti-aging cellular responses, has complex actions that may alter dementia onset. Mixed results are emerging from prior observational studies. To address this complexity, we deploy a causal inference approach accounting for the competing risk of death in emulated clinical trials using two distinct electronic health record systems. In intention-to-treat analyses, metformin use associates with lower hazard of all-cause mortality and lower cause-specific hazard of dementia onset, after accounting for prolonged survival, relative to sulfonylureas. In parallel systems pharmacology studies, the expression of two AD-related proteins, APOE and SPP1, was suppressed by pharmacologic concentrations of metformin in differentiated human neural cells, relative to a sulfonylurea. Together, our findings suggest that metformin might reduce the risk of dementia in diabetes patients through mechanisms beyond glycemic control, and that SPP1 is a candidate biomarker for metformin's action in the brain.