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    ALGN
    Earnings call· Jun 2026(Q2 FY26)

    ALIGN TECHNOLOGY Q2 FY26 earnings call ALGN

    Jul 29, 2026 Source

    Executive summary

    Align Technology Q2 FY26 — Record Clear Aligner Volumes and Strong Margin Expansion

    Align Technology delivered a solid second quarter with record Clear Aligner volumes and strong non-GAAP operating margin expansion, despite persistent softness in the capital equipment market and slower North American retail demand. The company is strategically evolving its scanner business model to expand access and drive long-term recurring revenue, while also initiating a comprehensive strategic review and increasing its share repurchase commitment to enhance shareholder value and execution.

    Highlights

    5

    • Record revenues of $1.06 billion, up 4.3% year-over-year.

    • Record Clear Aligner volumes of 692,000 cases, up 7.4% year-over-year.

    • Non-GAAP operating margin of 22.9%, exceeding expectations and up 1.6 points year-over-year.

    • Clear Aligner revenue growth of 8.2% year-over-year, driven by volume and price increases.

    • Record scanner placements to new doctors, increasing double digits year-over-year, and active scanner units growing 11% year-over-year.

    Concerns

    5

    • Systems and Services revenue down 10.8% year-over-year to $185.3 million due to capital equipment market softness and shift to lower-priced scanners/leasing models.

    • North America retail demand remained slower, offsetting strength in orthodontic and DSO channels.

    • GAAP net income per diluted share down $0.20 year-over-year to $1.51, unfavorably impacted by $0.23 from foreign exchange.

    • U.K. VAT liability of $37.5 million recorded in Q2 FY26 due to overturned VAT-exempt decision.

    • Q3 FY26 GAAP gross margin expected to be 67.5% to 68.5%, down sequentially due to $20M-$30M in one-time charges.

    Guidance & targets

    21
    CategoryTargetConfidence
    Worldwide revenues
    $1 billion to $1.020 billion
    high materiality
    High
    Clear Aligner volume growth
    mid-single digits year-over-year
    medium materiality
    High
    Clear Aligner ASPs
    down sequentially
    medium materiality
    High
    Systems and Services revenue
    down sequentially and year-over-year
    medium materiality
    High
    GAAP gross margin
    67.5% to 68.5%
    medium materiality
    High
    non-GAAP gross margin
    approximately 71%
    medium materiality
    High
    GAAP operating margin
    between 13.5% and 15%
    high materiality
    High
    non-GAAP operating margin
    approximately 24%
    high materiality
    High
    Worldwide revenue growth
    up 3% to 4% year-over-year
    high materiality
    High
    Clear Aligner volume growth
    up approximately 6% year-over-year
    high materiality
    High
    Clear Aligner ASP
    flat to slightly down from 2025
    medium materiality
    High
    Systems and Services revenue growth
    down 6% to 8% year-over-year
    high materiality
    High
    iTero scanner shipments
    up double digits year-over-year
    medium materiality
    High
    GAAP gross margin
    approximately 70.2% to 70.5%
    medium materiality
    High
    non-GAAP gross margin
    up approximately 100 basis points over 2025 non-GAAP gross margin
    medium materiality
    High
    GAAP operating margin
    approximately 15.1% to 15.6%
    high materiality
    High
    non-GAAP operating margin
    approximately 23%
    high materiality
    High
    Capital expenditures
    $125 million to $150 million
    medium materiality
    High
    Share repurchase commitment
    $400 million to $500 million
    high materiality
    High
    GAAP operating margin increase
    at least approximately 100 basis points year-over-year
    high materiality
    Medium
    non-GAAP operating margin increase
    at least approximately 100 basis points year-over-year
    high materiality
    Medium

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    Clear Aligners
    Growth was broad-based across customer channels, patient segments, and geographies (double-digit expansion in APAC, EMEA, Latin America, stable North America). Driven by adoption across orthodontists and GP dentists, adult, teen, and growing patient segments, and DSOs. ASP impacted by price increases, lower net deferrals, favorable FX, partially offset by mix shift to lower-priced countries/products and higher discounts. Gross margin improved due to higher ASPs and operational efficiencies, partially offset by higher freight costs.
    Volume: 692,000 casesVolume growth YoY: 7.4%Average per case shipment price: $1,260Average per case shipment price growth YoY: 0.8% ($10)Doctors submitting cases: 89,200Doctors submitting cases growth YoY: 3.4%Doctor utilization growth: 3.8%Shipments to orthodontists growth YoY: 7.8%Shipments to GP dentists growth YoY: 6.6%Teen and growing patients treatment starts: 240,000 casesTeen and growing patients treatment starts growth YoY: 7.2%
    		$870.9 million8.2%—71.4% gross margin
    Systems and Services
    Revenue decline due to persistent softness in the capital equipment market, shift toward lower-priced scanners (iTero Lumina PC, certified preowned), and flexible acquisition models (leasing, rental programs). Partially offset by double-digit growth in unit placements, especially to new doctors. Gross margin improved due to operational efficiencies and tariff refund, partially offset by lower ASPs.
    Active scanner installed base growth YoY: 11%Restorative, wellness, and orthodontic scans performed: 12.4 millionScans performed growth YoY: 16%
    		$185.3 million-10.8%—73.3% gross margin

    Operational metrics

    28
    Total Revenues
    $1,056.2 millionup 4.3% year-over-year
    Q2 FY26

    In line with Q2 expectations.

    FX Impact on Total Revenues
    $12.5 millionfavorable year-over-year
    Q2 FY26
    FX Impact on Clear Aligner Revenues
    $10.6 millionfavorable year-over-year
    Q2 FY26
    FX Impact on Systems and Services Revenues
    $1.9 millionfavorable year-over-year
    Q2 FY26
    Overall Gross Margin
    71.7%up 1.8 points year-over-year
    Q2 FY26
    Non-GAAP Overall Gross Margin
    72.3%up 1.8 points year-over-year
    Q2 FY26

    Excludes stock-based compensation, amortization of intangibles, depreciation expense on assets disposed, restructuring and other non-GAAP charges.

    Clear Aligner Gross Margin
    71.4%up 1.3 points year-over-year
    Q2 FY26

    Margin expansion driven by lower refinement rates, improved treatment predictability, and higher manufacturing throughput.

    Systems and Services Gross Margin
    73.3%up 3.9 points year-over-year
    Q2 FY26
    Operating Expenses
    $603.4 millionup 10.7% year-over-year
    Q2 FY26
    Non-GAAP Operating Expenses
    $521.5 millionup 4.8% year-over-year
    Q2 FY26

    Excludes stock-based compensation, legal settlements and contingencies, restructuring and other charges, and amortization of acquired intangibles.

    Operating Income
    $154 million
    Q2 FY26
    Operating Margin
    14.6%down approximately 1.5 points year-over-year
    Q2 FY26
    Non-GAAP Operating Margin
    22.9%up 1.6 points year-over-year
    Q2 FY26

    Excludes stock-based compensation, legal settlements and contingencies, restructuring and other charges, and amortization of acquired intangibles.

    GAAP Effective Tax Rate
    27.2%compared to 28.2% in Q2 2025
    Q2 FY26
    Non-GAAP Effective Tax Rate
    20%
    Q2 FY26

    Reflects long-term projected tax rate.

    GAAP Net Income Per Diluted Share
    $1.51down $0.20 compared to prior year
    Q2 FY26
    Non-GAAP Net Income Per Diluted Share
    $2.64up 6% year-over-year
    Q2 FY26
    Cash and Cash Equivalents
    $1,102.6 millionup $201.4 million year-over-year
    as of June 30, 2026
    Shares Repurchased
    393,400 shares
    Q2 FY26

    Made pursuant to $200 million open market repurchase plan announced April 29, 2026, expected to be completed by October 2026.

    Remaining Share Repurchase Authorization
    $733.3 million
    as of June 30, 2026

    Under $1 billion stock repurchase program announced April 2025.

    Accounts Receivable Balance
    $1,148.4 million
    Q2 FY26
    Days Sales Outstanding
    98 daysdown 1 day as compared to Q2 2025
    Q2 FY26
    Capital Expenditures
    $35.7 million
    Q2 FY26
    U.K. VAT Liability
    $37.5 million
    Q2 FY26

    Recorded following U.K. Upper Tribunal overturning decision that Clear Aligners qualify as VAT-exempt. Company intends to appeal.

    One-time Charges
    $20 million to $30 million
    Q3 FY26

    Expected to impact Q3 GAAP gross margin.

    One-time Charges
    $35 million to $50 million
    Q3 FY26

    Expected to impact Q3 GAAP operating margin.

    One-time Charges
    $30 million to $40 million
    FY26

    Expected to impact FY26 GAAP gross margin.

    One-time Charges
    $90 million to $100 million
    FY26

    Expected to impact FY26 GAAP operating margin.

    Industry KPIs

    8
    MetricValueDetails
    Tariff impacttariff refund
    System utilization16%%
    Pricing realized price$1,260USD
    New product launch rampexocad ART
    Procedure volume growth16%%
    FCF conversion leverage guidanceapproximately 23%%
    Installed base system placementsdouble digits%
    Segment franchise organic growth7.4%%

    Product announcements

    2
    ProductTypeDetails
    exocad ART (Advanced Restorative Treatment)launch
    Invisalign Palatal Expander platform, integrated buttons, custom trim lines, specific 3D-printed attachmentsupdate

    Deals & partnerships

    1
    Elliott ManagementStrategic initiatives and value creation

    Follows constructive discussions with Elliott Management. Includes adding 3 new independent directors to the Board and initiating a comprehensive strategic and operating model review.

    Risks & headwinds

    6
    Capital equipment market softnessQ2 FY26, continued in H2 FY26

    Systems and Services revenue down 10.8% year-over-year to $185.3 million.

    Mitigation: Offering lower-cost configurations (iTero Lumina PC, certified preowned) and flexible acquisition models (leasing, rental programs) to expand access and drive long-term recurring revenue.

    Shift to lower-priced scanners and flexible acquisition modelsQ2 FY26, continued in H2 FY26

    Meaningfully affected reported revenue and profitability in Systems and Services segment.

    Mitigation: Intentional strategic evolution to expand access to care, grow recurring revenue, and strengthen the Align Digital Platform, accepting near-term revenue/profitability impact for long-term benefits.

    Slower North America retail demandQ2 FY26, ongoing

    Offsetting continued strength in orthodontic and DSO channels.

    Mitigation: Focus on customer-focused initiatives: patient financing solutions, DSP, clinical education and support, and DSO collaboration to drive consistent growth.

    U.K. VAT re-impositionEffective September 7, 2026

    Estimated liability of approximately $37.5 million recorded in Q2 FY26. Invoices will include 20% U.K. VAT effective September 7, 2026.

    Mitigation: Intends to appeal the ruling. List prices remain unchanged, VAT is a pass-through to customers. Will monitor volume impact and promote other portfolio products.

    Foreign exchange impactQ2 FY26, moderating in remaining quarters of FY26

    Unfavorably impacted Q2 GAAP and non-GAAP EPS by $0.23 year-over-year. Unfavorably impacted Q2 overall gross margin by 0.8 points and operating margin by 1.4 points.

    Mitigation: Full year 2026 revenue guidance assumes benefit from FX consistent with initial outlook, with effect moderating towards 100 bps for full year.

    One-time charges for restructuring and accelerated depreciationQ3 FY26 and full year FY26

    Expected $20M-$30M in Q3 FY26 impacting GAAP gross margin; $35M-$50M in Q3 FY26 impacting GAAP operating margin; $30M-$40M in FY26 impacting GAAP gross margin; $90M-$100M in FY26 impacting GAAP operating margin.

    Mitigation: These are one-time charges related to the strategic and operating model review, aimed at enhancing long-term efficiency and profitability.

    What to watch in Q3 FY26

    5

    North America retail growth

    Next quarter
    CurrentSlower retail demand
    TargetConsistent growth

    Why it matters

    Returning North America retail to consistent growth is a top priority and critical for overall volume expansion.

    North America remained relatively stable overall with continued strength in orthodontic and DSO channels, helping to offset softer retail demand. That said, returning North America retail to consistent growth remains a top priority, and we're working to make that happen.

    Q&A highlights

    5

    Given strong Q2 case starts and macro concerns, what drives confidence in maintaining momentum?

    Joe Hogan highlighted the strong global business mix, with double-digit growth in APAC, EMEA, and Latin America, and robust DSO performance in North America. This geographic and channel diversity provides resilience against macroeconomic headwinds.

    “As we talked about, we have a good mix around the world. It's a strong global business. We see APAC at double-digit growth. We're seeing double-digit growth that we have in Europe in different sections and areas. Our DSO businesses are very strong in North America overall.”

    asked by Michael Cherny · answered by Joseph Hogan

    2 min read6 chapters

    Detailed Narrative

    01

    Strategic and Operating Model Review

    Align initiated a comprehensive strategic and operating model review with a global consulting firm to enhance commercial execution, organizational effectiveness, scalability, and resource optimization. This initiative, stemming from discussions with Elliott Management, aims to position the company for significant growth opportunities while improving profitability and long-term value creation. Management emphasized that the strategy remains intact, focusing on growth and technology leadership, with all areas under consideration for optimization.

    02

    Board Refreshment and Governance

    As part of ongoing governance efforts, Align plans to add three new independent directors to its Board. These additions will strengthen expertise in healthcare technology, innovation, operations, and scaling global businesses, aligning with the evolving needs of the company and reflecting a continuous process of evaluating Board skills and experiences.

    03

    Scanner Business Model Evolution

    The Systems and Services segment is undergoing a strategic evolution, shifting towards lower-priced scanners and flexible acquisition models like leasing and rentals. While this creates a near-term headwind📎 to revenue and profitability, it is an intentional strategy to lower upfront costs, expand access to intraoral scanning for new doctors, and grow recurring revenue by strengthening the Align Digital Platform and increasing the funnel for orthodontic and restorative treatment.

    04

    U.K. VAT Ruling Impact

    The U.K. Upper Tribunal overturned a prior decision, ruling that Clear Aligners do not qualify as VAT-exempt dental prostheses. Align recorded an estimated liability of $37.5 million in Q2 FY26 and will re-impose a 20% VAT on applicable Invisalign aligners and Vivera retainers starting September 7, 2026. The company intends to appeal the decision, noting potential negative impacts on U.K. dentistry and patients.

    05

    North America Market Dynamics

    North America remained relatively stable overall, with continued strength in the DSO (Dental Service Organization) and orthodontic channels offsetting softer retail demand. Management acknowledged that returning North America retail to consistent growth is a top priority, with ongoing efforts focused on patient financing, DSP (Doctor Subscription Program), clinical education, and DSO collaborations.

    06

    Innovation and Digital Platform

    Align continues to invest in innovation, introducing new capabilities like integrated buttons, custom trim lines, and specific 3D-printed attachments to improve patient engagement, treatment planning, and workflow efficiency within the Align Digital Platform. The exocad CAD/CAM business also launched exocad ART (Advanced Restorative Treatment) to combine tooth alignment and restorative treatments, reinforcing the integration of orthodontics and restorative dentistry.

    AI-generated summary of the company’s earnings call. Not investment advice.