Detailed narrative
Record quarter driven by CooperSurgical leverage
Consolidated revenue rose 8% to $1.08B (5% organic) with non-GAAP EPS up 26% to $1.21, marking the 10th consecutive quarterly consensus beat. Operating income increased 19% to a 27.5% operating margin as operating expenses rose just 1%, reflecting last year's reorganization.
Leverage was most visible at CooperSurgical, where expenses fell year-over-year for a second consecutive quarter. Gross margin of 68.1% was roughly flat as positive currency offset higher costs including tariffs.
CooperSurgical strategic review advancing
Cooper initiated a strategic review to unlock shareholder value and, having settled substantially all embryo culture media recall claims, has moved into round two of a process for CooperSurgical. Management reports robust indications of interest on both the entire business and individual pieces, but is proceeding with the entire business given sufficient interest at high enough levels.
Al White called the current valuation 'absurd' and noted private investors may pay a premium over public markets. A more definitive update is expected soon, possibly before the September earnings call. Sale proceeds would largely fund share buybacks.
Asia Pac weakness drives guidance cut
Asia Pac contact lens revenue fell 6%, hit by greater-than-expected consumer softness🌐 in Japan and China (Korea to a lesser extent) plus ongoing rationalization of legacy hydrogel products — roughly half of the decline was market-driven. Management is about halfway (fifth inning) through hydrogel rationalization, which may pressure results through 2027.
New regional leadership (a new regional head and country managers in Japan, Korea and China) is in place. Cooper cut CooperVision full-year organic guidance ~100 bps to 3.5%-4.5%, framing the softness as regional and temporary; it expects to be roughly in line with market by Q4 and into 2027.
CooperVision product momentum outside Asia Pac
The Americas grew 7% and EMEA 6%, both led by premium daily silicone hydrogel demand. Daily silicone hydrogel grew 8% with flagship MyDay up double digits; Biofinity grew 5% organically supported by its broad parameter range (6x the prescription options of all other monthly brands combined).
MiSight myopia control grew 24% to $32M, with Japan exceeding expectations and MyDay MiSight performing strongly in Europe. clariti was slightly weaker, awaiting toric/multifocal launches in Japan and next-gen multifocal launches in EMEA and Asia Pac to reposition against premium demand.
Fertility rebound and market backdrop
Fertility grew 10% organically to $144M, led by capital equipment strength in the U.S. and global momentum from the Witness automated lab tracking system, plus late-quarter Middle East distributor buy-in as airspace reopened. Management guided fertility back to mid-single-digit growth in H2, noting the 10% benefited from lumpy capital and one-time📎 restocking.
Secular drivers remain intact: 2025 U.S. births fell to a low of 3.6 million, women 30+ now comprise 53% of births, and California now mandates IVF coverage for large group plans.
Litigation charge and capital allocation
Cooper recorded a $271.6M net litigation charge ($324.1M accrued settlement less $52.5M insurance recoveries) for the December 2023 embryo culture media recall, settling over 95% of claimants; the charge was excluded from non-GAAP results, with the majority of payouts expected in fiscal 2026.
Buybacks were limited to ~$13M during the quarter due to the strategic process, but management expects to be much more aggressive going forward⏳. FCF was $96M and net debt was reduced to $2.3B; the FY26 FCF outlook was raised to ~$650M, aided by inventory reduction from a new AI-enhanced inventory control system.