It has been about a month since the last earnings report for Align Technology (ALGN). Shares have lost about 8.4% in that time frame, underperforming the S&P 500.
But investors have to be wondering, will the recent negative trend continue leading up to its next earnings release, or is Align Technology due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its latest earnings report in order to get a better handle on the important catalysts.
ALGN Q2 Earnings and Revenues Beat, Margins Rise
Align Technology reported second-quarter 2026 non-GAAP earnings of $2.64 per share, up 6.0% year over year. The figure beat the Zacks Consensus Estimate by 3.1%. Revenues increased 4.3% to $1.06 billion and topped the consensus mark by 0.4%.
ALGN’s Clear Aligner Business Drives Growth
Clear Aligner revenues increased 8.2% year over year to $870.9 million. This growth reflected higher shipment volumes, price increases, lower net deferrals and favorable foreign exchange. These gains were partly offset by higher discounts and a mix shift toward lower-priced products and countries.
Shipments to orthodontists and general practitioner dentists rose 7.8% and 6.6%, respectively. A record 89,200 doctors submitted Invisalign cases, while doctor utilization increased 3.8% year over year. International momentum was led by double-digit growth across EMEA and APAC, along with record second-quarter shipments in Latin America.
ALGN’s Systems Revenues Face Pricing Pressure
Imaging Systems and CAD/CAM Services revenues declined 10.8% year over year to $185.3 million. Persistent softness in the capital equipment market and a shift toward lower-priced scanners, rentals and leasing programs weighed on reported revenues.
However, scanner unit placements increased by double digits, with placements to new doctors reaching a record. The active scanner installed base grew approximately 11%, while restorative, wellness and orthodontic scans increased 16% to more than 12.4 million. Exocad revenues also posted double-digit growth.
Align’s Margins Expand Despite Higher Expenses
The second-quarter gross margin expanded 180 basis points year over year to 71.7%, driven by operational efficiencies, a tariff refund and higher Clear Aligner average selling prices. Non-GAAP gross margin also increased 180 basis points to 72.3%.
Operating expenses rose 10.7% to $603.4 million, mainly due to a U.K. value-added tax accrual and higher employee compensation. GAAP operating margin contracted 150 basis points to 14.6%, while non-GAAP operating margin expanded 160 basis points to 22.9%.
ALGN Boosts Cash Flow and Repurchase Plans
Align ended the second quarter with $1.10 billion in cash and cash equivalents, up from $1.06 billion at the end of the first quarter. Operating cash flow totaled $192.8 million, while free cash flow amounted to $157.1 million after capital expenditures of $35.7 million.
The company repurchased roughly 393,400 shares for $67 million during the quarter. Management increased its 2026 repurchase commitment to $400-$500 million. ALGN had $733.3 million remaining under its existing $1 billion authorization at quarter-end.
Align Sets Q3 View and Reaffirms 2026 Outlook
For the third quarter of 2026, Align expects worldwide revenues of $1.00-$1.02 billion. The Zacks Consensus Estimate for revenues is currently pegged at $1.01 billion, implying 1.4% growth.
For 2026, management continues to expect worldwide revenue growth of 3-4%. Clear Aligner volume is now projected to increase approximately 6%, while average selling prices are expected to be flat to slightly lower year over year. The Zacks Consensus Estimate for 2026 revenues is currently pinned at $4.17 billion, projecting 3.3% growth.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
VGM Scores
Currently, Align Technology has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. However, the stock has a score of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Interestingly, Align Technology has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Align Technology belongs to the Zacks Medical - Dental Supplies industry. Another stock from the same industry, West Pharmaceutical Services (WST), has gained 1.9% over the past month. More than a month has passed since the company reported results for the quarter ended June 2026.
West Pharmaceutical reported revenues of $872.3 million in the last reported quarter, representing a year-over-year change of +13.8%. EPS of $2.37 for the same period compares with $1.84 a year ago.
For the current quarter, West Pharmaceutical is expected to post earnings of $2.18 per share, indicating a change of +11.2% from the year-ago quarter. The Zacks Consensus Estimate has changed -0.4% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #2 (Buy) for West Pharmaceutical. Also, the stock has a VGM Score of F.
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Align Technology, Inc. (ALGN): Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).