Dwarf galaxies have long provided a challenge to galaxy formation theory within the favored Lambda Cold Dark Matter cosmology. In recent years, advances in cosmological simulations of galaxies have yielded new insights into dwarf formation, pointing to the fact that baryonic physics can reconcile tensions between theory and observations. Despite these advances, new challenges related to dwarf galaxies continue to arise, particularly in matching the predicted abundance of dwarf galaxies with observations. I will discuss whether baryonic physics has the potential to also reconcile these new challenges. I will also highlight predictions that will help to improve models of dwarf galaxy formation and evolution.