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ALIGN TECHNOLOGY INC (ALGN)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 revenue was $1.0124B, up 3.4% q/q but down 1.6% y/y; non-GAAP EPS was $2.49. FX tailwinds added ~$26.4M to revenue and lifted margins modestly; nevertheless results were below management’s prior Q2 outlook due to weaker case conversion late in June .
  • Versus S&P Global consensus, ALGN delivered a miss on revenue ($1.012B vs $1.061B*) and a slight miss on non-GAAP EPS ($2.49 vs $2.57*). Q1 2025 had been a modest beat on both revenue and EPS*.
  • Systems & Services performed well (wand upgrades), but full iTero Lumina system sales fell short; Clear Aligner revenue declined y/y on lower ASPs and mix shift to non-comprehensive products despite flat volumes .
  • FY 2025 guidance was lowered: revenue growth now flat to slightly up (from +3.5–5.5%), GAAP operating margin 13–14% (down 1–2 pts vs 2024) due to $150–170M H2 restructuring/asset write-downs; non-GAAP OM ~22.5% unchanged .
  • Potential stock reaction catalyst: lowered FY guide and announced cost actions; near-term Q3 guide implies sequential revenue decline ($965–985M) and sizable GAAP margin compression from one-time charges .

What Went Well and What Went Wrong

What Went Well

  • Systems & Services revenue rose 13.9% q/q and 5.6% y/y, driven by stronger-than-expected iTero Lumina wand upgrades and services as doctors transitioned platforms .
  • Non-GAAP operating margin expanded 230 bps q/q to 21.3% (FX favorable ~120 bps sequentially), with non-GAAP EPS up $0.36 q/q to $2.49 .
  • Management highlighted continued consumer interest: “we continued to see strong consumer interest in Invisalign treatment, as reflected by iTero scans and Invisalign doctor case submissions” .

What Went Wrong

  • Clear Aligner revenue fell 3.3% y/y on lower ASPs (discounts and mix shift to lower-priced products) despite flat volumes; Americas volumes were slightly down y/y .
  • Case conversion weakened late in June, leading to below-outlook revenue and margins; management cited “U.S. tariff turmoil… less affordable financing options” and lower elective procedure traffic as contributing factors .
  • Full iTero Lumina system sales were “lower-than-expected,” with upgrade wands dominating the mix (lower revenue per sale) .

Financial Results

Consolidated Results vs Prior Periods

MetricQ4 2024Q1 2025Q2 2025
Revenue ($USD Millions)$995.2 $979.3 $1,012.4
GAAP Diluted EPS ($)$1.39 $1.27 $1.72
Non-GAAP Diluted EPS ($)$2.44 $2.13 $2.49
GAAP Gross Margin (%)70.0% 69.5% 69.9%
GAAP Operating Margin (%)14.5% 13.4% 16.1%
Non-GAAP Operating Margin (%)23.2% 19.1% 21.3%

Actual vs S&P Global Consensus

MetricQ1 2025 ConsensusQ1 2025 ActualQ2 2025 ConsensusQ2 2025 Actual
Revenue ($USD Millions)975.8*979.3 1,061.2*1,012.4
Primary EPS ($)1.99*2.13 2.57*2.49

Values marked with * retrieved from S&P Global.

Segment Breakdown

Segment Revenue ($USD Millions)Q4 2024Q1 2025Q2 2025
Clear Aligner$794.3 $796.8 $804.6
Imaging Systems & CAD/CAM Services$200.9 $182.4 $207.8

KPIs

KPIQ4 2024Q1 2025Q2 2025
Clear Aligner Shipments (Cases)628,730 642,305 644,370
Revenue per Case ($)$1,265 $1,240 $1,250
Doctors Shipped To (Count)85,685 85,275 86,250
Utilization Rate (Cases per Doctor)7.3 7.5 7.5

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Worldwide Revenue GrowthFY 2025+3.5% to +5.5% y/y Flat to slightly up y/y Lowered
Clear Aligner Volume GrowthFY 2025Mid-single digits y/y Low-single digits y/y Lowered
Clear Aligner ASPFY 2025Down y/y (mix, FX) Down y/y (mix; emerging markets; FX partially offsets) Maintained
Systems & Services Revenue GrowthFY 2025Faster than Clear Aligners Faster than Clear Aligners Maintained
GAAP Gross MarginFY 2025N/A (Q1 detailed Q2 only)67–68% (down ~2–3 pts y/y on one-time charges, lower volume) New detailed range
Non-GAAP Gross MarginFY 2025Flat to slightly lower vs 2024 Flat to slightly lower vs 2024 Maintained
GAAP Operating MarginFY 2025~2 pts above 2024 13–14% (1–2 pts below 2024 due to $150–170M one-time charges) Lowered
Non-GAAP Operating MarginFY 2025~22.5% Slightly above 22.5% Slightly raised
CapexFY 2025$100–150M $100–125M Narrowed lower
Q3 RevenueQ3 2025N/A$965–985M New
Q3 GAAP Gross MarginQ3 2025N/A64–65% (down ~5–6 pts q/q on $45–55M one-time charges; lower volume) New
Q3 GAAP Operating MarginQ3 2025N/A10.5–11.5% (down ~5–6 pts q/q) New
Q3 Non-GAAP Operating MarginQ3 2025N/A~22% New

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024)Previous Mentions (Q1 2025)Current Period (Q2 2025)Trend
Case Conversion / DemandStability in NA adults; strong EMEA/LATAM teens Highest y/y growth in adult/teen since 2021; strong interest metrics Weak late-June conversion; uneven patient case acceptance; consumer hesitancy Deteriorating conversion late in Q2
Tariffs & MacroTariff commentary baseline and strategy USMCA compliance; tariff fluidity; estimated scanner tariff impact No material change; referenced Q1 materials; cited tariff “turmoil” impacting behavior Persistent risk; behavioral impact elevated
Systems & Services (iTero Lumina)Momentum in iTero scanners Launch of restorative software end-March Wand upgrades strong; full systems below expectations Mixed: upgrade-led strength; full systems soft
Product Mix & ASPMix shift to lower-priced products ASP down from FX and mix; price increase offset ASP down y/y on discounts/mix; slight q/q uptick from FX Continued ASP pressure y/y
Regional TrendsEMEA/APAC strength; NA seasonal softness Strength across all regions; NA growth NA soft; EMEA/APAC mixed; Latin America teens strong NA weakened; APAC/EMEA uneven
Regulatory (UK VAT)CE/registrations; no VAT topic UK tribunal VAT exemption ruling; appeal window HMRC appeal permitted; invoicing adjusted Aug 1; simultaneous price adjustment Ongoing appeal; pricing actions
Manufacturing/RestructuringQ4 ’24 restructuring charges Restructuring tailwind to 2025 margins H2 ’25 cost actions; footprint optimization; asset write-downs Expanded restructuring program

Management Commentary

  • “Our second quarter results were mixed… a slight year-over-year decrease in Clear Aligner revenues driven primarily by lower-than-expected volumes in Europe and North America… we experienced uneven patient case conversion” — Joe Hogan, CEO .
  • “We expect… actions will incur one-time charges of approximately $150 million to $170 million… allow us to achieve a GAAP operating margin of approximately 13.0%–14.0% and a non-GAAP operating margin slightly above 22.5% in FY 2025” — John Morici, CFO .
  • “We’re doubling down on the levers within our reach: innovation, efficiency, and execution… expanding new product offerings… piloting integration of X-ray diagnostics with iTero Lumina” — CEO .

Q&A Highlights

  • Case conversion softness concentrated in North America (and France/Germany in Europe), with consumer financing/affordability cited; late-June weakness carried forward into Q3 outlook .
  • Mix-shift to wires/brackets within ortho practices under macro uncertainty; Align aims to support conversion at point-of-care and financing solutions; DSOs/OSOs showed more resilience .
  • Systems & Services: Lumina uptake positive via wands; full-system purchases constrained by low capital willingness; company remains optimistic on broader second-half system mix improvement .
  • Restructuring confidence tied to regionalizing manufacturing, lowering freight, and upgrading technologies; creates capacity for future direct printing initiatives .
  • Sequential Q4 2025 math: management expects S&S up and targeted conversion programs/products (Invisalign First, IPE, MAO) to support sequential Q3-to-Q4 improvement despite the Q3 guide .

Estimates Context

  • Q2 2025: Revenue $1,012.4M vs $1,061.3M consensus* (miss); Primary EPS $2.49 vs $2.57 consensus* (miss). Drivers: weaker case conversion, lower ASPs from discounts/mix; full iTero system softness, partially offset by FX tailwinds .
  • Q1 2025: Revenue $979.3M vs $975.8M consensus* (beat); Primary EPS $2.13 vs $1.99 consensus* (beat).
  • Forward: Q3 2025 guide $965–985M and GAAP OM 10.5–11.5% embeds $50–60M one-time charges; non-GAAP OM ~22% . Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

  • Near-term setup is cautious: Q3 revenue/margin guide reflects one-time charges and seasonality; FY 2025 GAAP margin cut (13–14%) due to restructuring, though non-GAAP ~22.5% remains intact .
  • Structural actions should support medium-term margins (≥100 bps y/y improvement in FY 2026) via manufacturing optimization, automation, and lower freight costs .
  • Systems & Services strength is upgrade-driven; watch for full-system uptake recovery as capital spending improves and restorative workflows scale .
  • Clear Aligner ASP pressure persists from mix and discounts; FX provides a modest tailwind q/q but not enough to offset y/y declines .
  • Demand is present but conversion is the bottleneck; company is intensifying point-of-care marketing and financing support—monitor DSOs/OSOs as the more resilient channel .
  • Regulatory (UK VAT) pricing/invoicing changes effective Aug 1 could be neutralized by simultaneous price adjustments; outcome of HMRC appeal remains a watch item .
  • Trading implications: results below consensus and lowered FY guide are negative near term; execution on cost actions and conversion initiatives, plus mix normalization in iTero systems, are key to a recovery in H2/FY 2026 .