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Align Technology (ALGN) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Health Care· Jul 29, 2026

Source: earnings call transcript

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

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

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

ALGN operating KPIs by quarter

ALGN operating KPIs stated on its earnings calls, by fiscal quarter
KPI Mar 2026 Q1 FY26This call Jun 2026 Q2 FY26Change vs prior quarter
Clear Aligner shipments
686K Clear Aligner shipments reached a record 686,000 cases, increasing 6.7% year-over-year, reflecting double-digit growth across our international businesses, and continued stability in North America. Source: earnings call transcript
692K We delivered a solid second quarter with record revenues of $1.06 billion, up 4.3% year-over-year, driven by record Clear Aligner volumes of 692,000 cases and 8.2% Clear Aligner revenue growth. Source: earnings call transcript
+0.9%
Doctors submitting Invisalign cases
88K+ During the quarter, more than 88,000 doctors submitted Invisalign cases globally a year-over-year increase of 3% or an additional 3,000 orthodontists and GP driven primarily by increases in APAC and the Americas, led by Latin America. Source: earnings call transcript
89.2K During the quarter, a record 89,200 doctors submitted Invisalign cases, up globally 3.4% year-over-year, while doctor utilization increased 3.8%, reflecting growth across all regions. Source: earnings call transcript
—
Clear Aligner average per case shipment price
$1,250 Q1 Clear Aligner average per case shipment price of $1,250, increased 1% or $10 per case on a year-over-year basis, primarily due to favorable foreign exchange, price increases and lower net deferrals, partially offset by higher discounts and mix shift to lower-priced countries and products mentioned previously. Source: earnings call transcript
$1,260 Q2 Clear Aligner average per case shipment price of $1,260 increased 0.8% or $10 per case on a year-over-year basis, primarily due to price increases, lower net deferrals, favorable foreign exchange, partially offset by mix shift to lower-priced countries and products and higher discounts. Source: earnings call transcript
+0.8%

Operating figures the company stated on at least two of the calls shown, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Product announcements

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

Deals & partnerships

Elliott Management Strategic 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

Capital equipment market softness Q2 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 models Q2 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 demand Q2 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-imposition Effective 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 impact Q2 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 depreciation Q3 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

North America retail growth

Next quarter
Current Slower retail demand
Target Consistent 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.

Find out whether ALGN delivers this. Inve re-checks your case every morning.

Q&A highlights

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 read 6 chapters

Detailed narrative

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.

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.

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.

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.

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.

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.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.