ALGN Stock Falls on Q2 Earnings and Revenue Miss, Margins Down

Globe and Mail

4 days ago

Align Technology, Inc. ALGN delivered second-quarter 2025 adjusted earnings per share (EPS) of $2.49, up 3.3% from the year-ago level. However, the reported figure missed the Zacks Consensus Estimate by 3.1%.
GAAP EPS for the quarter was $1.72, reflecting a rise of 43.4% from $1.28 in the comparable period of 2024.
Following the earnings announcement, ALGN stock fell 34.2% in after-market trading yesterday.
ALGN's Q2 Revenues
The top line decreased 1.6% year over year to $1.01 billion, and missed the Zacks Consensus Estimate by 4.6%.
ALGN's Segments in Detail
The company has two reportable segments — Clear Aligner, and Imaging Systems and CAD/CAM Services (Systems and Services).
Revenues in the Clear Aligner segment fell 3.3% year over year to $804.6 million.
Clear Aligner revenues experienced a 0.6% year-over-year favorable foreign exchange impact.
Revenues from Imaging Systems & CAD/CAM Services rose 5.6% to $207.8 million in the reported quarter. The segment, too, witnessed a favorable currency impact of 0.5% year over year.
ALGN's Q2 Margins
Gross profit in the second quarter was $708.1 million, down 2% year over year. The gross margin contracted 32 basis points (bps) year over year to 69.9% despite a decrease of 0.5% in the cost of net revenues.
SG&A expenses fell 0.8% to $448.7 million, while R&D expenses rose 4.6% to $96.4 million.
Operating income totaled $163 million, down 8.5% year over year. The operating margin contracted 122 bps to 16.1%.
Financial Details of ALGN
The company exited the second quarter with cash and cash equivalents of $901.2 million compared with $873 million at the end of the first quarter.
The net cash provided by operating activities was $181.3 million compared with $188.5 million at the end of the second quarter of 2024.
Stock Repurchase
During the reported quarter, the company repurchased approximately 585.1 thousand shares of common stock at an average price of $164.14 per share, completing the $225.0 million open market repurchase initiated in the first quarter of 2025. This marked the completion of the $1.0 billion stock repurchase program, approved in January 2023, in its entirety.
In April 2025, its board of directors authorized a plan to repurchase up to $1.0 billion of common stock, expected to be completed over a period of up to three years.
ALGN's Outlook
Align Technology provided its sales outlook for full-year 2025. It has also provided guidance for the third quarter of 2025.
For the full year, ALGN expects Clear Aligner revenue growth to be flat to slightly up from 2024, assuming foreign exchange at current spot rates. Systems and Services revenues are anticipated to grow faster than Clear Aligner revenues. The Zacks Consensus Estimate for 2025 revenues is pegged at $4.16 billion, suggesting 3.9% growth year over year.
Align Technology, Inc. Price, Consensus and EPS Surprise
Align Technology, Inc. price-consensus-eps-surprise-chart | Align Technology, Inc. Quote
The 2025 GAAP gross margin for the full year is expected to be 67-68%. The GAAP operating margin is anticipated to range between 13% and 14%.
To support continued expansion, the company expects to invest $100-$125 million in capital expenditures, primarily related to technology upgrades as well as maintenance.
For the third quarter, ALGN anticipates worldwide revenues to be in the band of $965-$985 million. The Zacks Consensus Estimate is pegged at $1.04 billion.
Our Take on ALGN
Align Technology exited the second quarter of 2025 with weaker-than-expected results, wherein both earnings and revenues missed the Zacks Consensus Estimate. Also, revenues deteriorated on a year-over-year basis due to a decline in the Clear Aligner segment's sales.
On a positive note, Clear Aligner volume grew in APAC and EMEA regions, driven by increased utilization across both orthodontists and general practitioners (GP) dentist channels, with strength in the adult segment. Additionally, ALGN's Imaging Systems & CAD/CAM Services business segment reported strong growth on a year-over-year basis, primarily due to iTero Lumina wand upgrades and increased services as more doctors transition to iTero Element 5D Plus.
During the quarter, Align Technology achieved a record number of teen cases, with over 6 million teens and kids having been treated with the Invisalign system globally.
Further, contraction of both the gross and operating margins is a matter of concern.
ALGN's Zacks Rank and Other Key Picks
Align Technology currently carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks from the broader medical space are Boston Scientific BSX, Cardinal Health CAH and Cencora COR.
Boston Scientific, carrying a Zacks Rank #2 at present, reported a second-quarter 2025 adjusted EPS of 75 cents, which beat the Zacks Consensus Estimate by 4.2%. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Revenues of $5.06 billion topped the Zacks Consensus Estimate by 2.3%. BSX has a long-term earnings growth rate of 14% compared with the industry's 14.2%.
Cardinal Health, carrying a Zacks Rank #2 at present, posted third-quarter fiscal 2025 adjusted EPS of $2.35, which exceeded the Zacks Consensus Estimate by 9.3%. Revenues of $54.88 billion missed the Zacks Consensus Estimate by 0.3%.
CAH has an estimated long-term earnings growth rate of 10.9% compared with the industry's 9.9%.
Cencora currently carries a Zacks Rank #2. The Zacks Consensus Estimate for third-quarter fiscal 2025 adjusted EPS is currently pegged at $3.78 and the same for revenues is pinned at $80.33 billion.
COR's earnings yield of 5.4% compares favorably with the industry's 4.1%.
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