Align Technology Q3 Earnings Call Highlights

Key Points

• Q3 revenue rose 1.9% to $1.015 billion, driven by a 6.6% increase in clear aligner shipments to a record 691,000. International markets, higher utilization and record doctor submitters helped offset weak discretionary dental spending and lower-priced product and geographic mix.
• Clear aligner revenue increased 4.2%, while systems and services revenue declined 7.6%; however, scanner placements grew at a double-digit rate and the installed base surpassed 157,000 systems. Non-GAAP operating margin improved to 24.4%, and adjusted EPS rose 7.3% to $2.80.
• Align narrowed its 2026 revenue outlook to $4.11 billion–$4.13 billion and expects about 23.7% non-GAAP operating margin. CEO Joe Hogan will step down, with Jennifer Davis becoming president and CEO on Dec. 31.

Align Technology NASDAQ: ALGN reported third-quarter 2026 revenue of $1.015 billion, up 1.9% from a year earlier, as higher clear aligner volumes and international growth helped offset continued pressure in discretionary dental spending and capital-equipment purchasing.

Clear aligner shipments increased 6.6% year over year to 691,000, reaching the high end of the company’s anticipated mid-single-digit growth range. Chief Executive Officer Joe Hogan said the quarter included record doctor submitters, record third-quarter aligner shipments and improved utilization. A record 91,000 doctors submitted Invisalign cases, up more than 3% from a year earlier, while overall utilization rose 3.4%.

“We delivered solid Q3 performance with record third quarter clear aligner shipments, record doctor submitters, improved utilization, continued expansion of our iTero customer footprint, and stronger operating performance,” Hogan said.

Clear aligners grow as systems revenue declines

Clear aligner revenue rose 4.2% to $839.3 million, while revenue per case shipment declined 2.3% to $1,215. CFO John Morici attributed the lower revenue per case primarily to a mix shift toward lower-priced countries and products, as well as higher discounts. Price increases and lower net deferrals partly offset those pressures.

Systems and services revenue fell 7.6% to $175.5 million. The company said reported revenue reflected a greater mix of lower-priced scanner configurations and flexible acquisition models such as leasing, financing, rentals and certified pre-owned systems. Morici said like-for-like scanner pricing stabilized during the quarter.

Despite the revenue decline in the segment, scanner placements grew. Align said the number of scanner units placed, including leased, rented and certified pre-owned systems, increased by double digits year over year, taking its global installed base to more than 157,000 systems.

The company said its flexible scanner acquisition options are intended to reduce the upfront cost for customers and broaden adoption of its digital workflow platform. In a limited pilot involving 11 dental service organization practice locations, Align said integration of iTero Lumina with the Invisalign Practice App increased new-patient exam capacity by about 15% without added staffing or longer operating hours.

International markets support volume growth

Hogan said performance varied by market and customer channel. Clear aligner shipments in the Americas rose about 1.5% year over year, with strong double-digit growth in Latin America offsetting continued pressure in North American general-practitioner retail accounts.

North American orthodontic shipments increased year over year for the first time in six quarters, aided by dental service organizations. North American DSO shipments grew at a double-digit rate across orthodontist and general-practitioner customers, while orthodontist retail shipments improved sequentially.

In Latin America, clear aligner volume increased at a double-digit rate across channels. EMEA shipments also posted double-digit growth, supported by orthodontist and general-practitioner utilization, DSO growth and an 8% increase in retail shipments. In APAC, retail shipments grew 16% year over year, with double-digit growth among both orthodontists and general-practitioner customers. Teen shipments increased at a double-digit rate, led by China.

Hogan said younger patients remain a key growth opportunity, supported by products including Invisalign First, Invisalign Palatal Expander and mandibular advancement with occlusal blocks. The company also said volume for its Zero Additional Aligner offering rose at a triple-digit rate year over year during the quarter.

Management repeatedly cited affordability as a barrier to treatment starts in the current consumer environment. Align is expanding financing programs, including its collaboration with Healthcare Finance Direct and a new CareCredit pilot. Morici said the company is also working with financing partners more broadly outside the U.S. to help patients manage treatment costs.

Margins and capital returns

GAAP operating income was $169.2 million, producing an operating margin of 16.7%, up about seven percentage points from the prior-year quarter. Non-GAAP operating margin was 24.4%, above the company’s outlook, as disciplined expense management and productivity improvements offset a modest shortfall in gross margin.

Non-GAAP gross margin was 70.4%, slightly below Align’s approximately 71% forecast. Morici cited lower clear aligner average selling prices, product and geographic mix, systems and services mix, and higher transportation costs. Manufacturing productivity, automation and lower refinement rates provided partial offsets.

Third-quarter GAAP diluted earnings per share were $1.90, compared with $0.78 a year earlier. Non-GAAP diluted earnings per share rose 7.3% to $2.80. Foreign exchange reduced both GAAP and non-GAAP earnings per share by about $0.24 year over year, according to the company.

Align ended the quarter with $1.145 billion in cash and cash equivalents. It generated $183.2 million in operating cash flow and approximately $138 million in free cash flow. During the quarter, the company repurchased about 627,000 shares for $103.3 million and said it expects to repurchase about $500 million in stock during fiscal 2026.

Outlook and leadership transition

For the fourth quarter, Align expects revenue of $1.0 billion to $1.02 billion, with clear aligner volume up in the low single digits year over year. The company expects clear aligner average selling prices to decline about 1% and systems and services revenue of $170 million to $180 million. It forecast non-GAAP operating margin of about 26%.

For fiscal 2026, Align narrowed its revenue outlook to approximately $4.11 billion to $4.13 billion. It continues to expect clear aligner volume and revenue growth of roughly 5% to 6%, while forecasting systems and services revenue of $715 million to $725 million. The company expects non-GAAP operating margin of about 23.7%, a roughly 100-basis-point improvement from 2025.

Looking to 2027, Morici said Align expects revenue growth and at least another 100 basis points of non-GAAP operating-margin improvement, assuming market conditions remain broadly similar to current levels. Management expects systems and services revenue to return to growth in 2027 as scanner pricing stabilizes and recurring leasing and rental revenue builds.

Align also announced that Hogan will step down as CEO. Jennifer Davis will join the company Nov. 2 as CEO-elect and a board member, and is scheduled to become president and CEO on Dec. 31. Hogan said Davis brings 33 years of leadership experience, including leading Procter & Gamble’s global healthcare business.

The company additionally said it will begin a U.S. pilot of Invisalign Sports Guard, a custom direct 3D-printed sports mouth guard made from an iTero digital scan and offered through participating Invisalign providers.

About Align Technology (NASDAQ:ALGN)

Align Technology, Inc is a global medical device company focused on digital orthodontics and restorative dentistry. Founded in 1997, the company is best known for the Invisalign system, a series of clear, removable aligners designed to gradually move teeth and treat a range of orthodontic conditions.

Align's products and services also include digital scanning and dental practice solutions. Its iTero intraoral scanners create digital impressions for orthodontic and restorative procedures, while its exocad business develops computer-aided design and computer-aided manufacturing software used by dental laboratories, clinicians and other dental professionals.

The company serves orthodontists, dentists, dental laboratories and patients in numerous markets worldwide.

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