Align Technology (NASDAQ:ALGN) reported record second-quarter revenue of $1.06 billion, up 4.3% from a year earlier, as record clear aligner volumes and higher revenue in that business offset continued weakness in its systems and services segment.
Chief Executive Officer Joe Hogan said second-quarter results were supported by clear aligner shipments of 692,000 cases, a 7.4% year-over-year increase. Clear aligner revenue rose 8.2% to $870.9 million, while the company’s average per-case shipment price increased 0.8% to $1,260.
Clear aligner growth led by international markets
Align said clear aligner volume growth was driven by double-digit expansion in Asia-Pacific, Europe, the Middle East and Africa, and Latin America, while North American performance was relatively stable. The company cited continued adoption among orthodontists, general-practice dentists and dental service organizations, or DSOs.
Record 89,200 doctors submitted Invisalign cases in the quarter, a 3.4% increase from a year earlier, while doctor utilization rose 3.8%. Shipments to orthodontists increased 7.8%, and shipments to general-practice dentists rose 6.6%.
Teen and growing-patient treatment starts increased 7.2% to 240,000 Invisalign cases, with growth led by China, Japan, Turkey, India and Brazil. Hogan said adoption of Invisalign First, the Invisalign Palatal Expander and Invisalign mandibular advancement with occlusal blocks continued to strengthen doctor confidence in the company’s offerings for younger patients.
During the question-and-answer session, Hogan described North American conditions as stable but uneven by region. He said growth in the DSO channel has helped offset weaker retail demand, while the company is seeking to improve North American retail performance through financing, clinical support, education and workflow initiatives.
Management said it is not assuming an improvement in the broader macroeconomic environment in its outlook. Instead, it pointed to patient financing, doctor subscription programs, lower-cost offerings and product innovation as drivers of future case volumes.
Scanner strategy weighs on reported systems revenue
Systems and services revenue declined 10.8% year over year to $185.3 million. The segment includes iTero imaging systems, exocad CAD/CAM software and Align X-Ray Insight software.
Chief Financial Officer John Morici said the decline reflected lower scanner average selling prices, lower scanner wand sales and a strategic shift toward lower-cost scanner configurations, certified pre-owned units, leases and rentals. These options produce less upfront revenue than traditional scanner purchases but are intended to broaden access to the company’s digital workflow platform.
Despite the revenue decline, placements to new doctors reached a record and increased at a double-digit rate year over year. Align’s active scanner install base grew about 11%, while more than 12.4 million restorative, wellness and orthodontic scans were completed during the quarter, up 16%.
Hogan said the company views the lower upfront economics as a deliberate trade-off. Align expects a larger installed base to support recurring revenue and increase opportunities for Invisalign and restorative treatment adoption over time.
Exocad revenue grew at a double-digit rate during the quarter. The company also introduced exocad ART, or Advanced Restorative Treatment, which combines tooth alignment and restorative treatment planning within exocad software.
Margins, cash flow and shareholder returns
Align’s GAAP operating income was $154 million, representing an operating margin of 14.6%, down about 1.5 percentage points from the prior year. GAAP diluted earnings per share were $1.51, down $0.20 year over year.
On a non-GAAP basis, operating margin rose 1.6 percentage points to 22.9%, and diluted earnings per share increased 6% to $2.64. The company said its non-GAAP results exclude items including stock-based compensation, certain legal settlements and contingencies, restructuring charges, and amortization of acquired intangible assets.
Overall gross margin was 71.7%, up 1.8 percentage points year over year, driven by operational efficiencies, a tariff refund and higher clear aligner average selling prices. Morici said lower refinement rates, improved treatment predictability and manufacturing throughput have supported margin expansion.
Cash and cash equivalents totaled $1.10 billion at June 30. The company generated $192.8 million in operating cash flow and $157.1 million in free cash flow during the quarter. Align repurchased about 393,400 shares for $67 million during the period.
The company now plans to repurchase approximately $400 million to $500 million of stock during 2026, including purchases under its previously announced $200 million open-market plan.
VAT charge, strategic review and outlook
Align recorded an estimated $37.5 million liability, including interest, following a U.K. Upper Tribunal ruling that clear aligners do not qualify as VAT-exempt dental prostheses. The company said it will begin including 20% U.K. VAT on applicable Invisalign aligners and Vivera retainers on invoices beginning Sept. 7, while holding its list prices unchanged. Align intends to appeal the ruling.
The company also announced initiatives following discussions with Elliott Management, including plans to add three independent directors and conduct a comprehensive strategic and operating-model review with a global consulting firm. Hogan said the review will examine commercial execution, organizational effectiveness, scalability and resource optimization.
For the third quarter, Align forecast revenue of $1 billion to $1.02 billion. It expects clear aligner volumes to rise by the mid-single digits year over year, while clear aligner average selling prices are expected to decline sequentially due to geographic mix and foreign exchange effects.
Align expects third-quarter non-GAAP operating margin of approximately 24%, while GAAP operating margin is projected at 13.5% to 15%, reflecting anticipated restructuring, accelerated depreciation and other one-time charges.
For full-year 2026, the company maintained its forecast for revenue growth of 3% to 4%. It now expects clear aligner volume growth of approximately 6%, clear aligner average selling prices to be flat to slightly down, and systems and services revenue to decline 6% to 8%.
Morici said Align is not issuing formal 2027 guidance but is targeting at least 100 basis points of year-over-year improvement in both GAAP and non-GAAP operating margin next year, following its expected approximately 100-basis-point non-GAAP margin improvement in 2026.
About Align Technology (NASDAQ:ALGN)
Align Technology, Inc (NASDAQ: ALGN) pioneered the use of digital technology in orthodontics through the development of the Invisalign system, a series of clear, removable aligners that provide an alternative to traditional metal braces. Since its founding in 1997 by Zia Chishti and Kelsey Wirth, the Tempe, Arizona–based company has expanded its focus to include intraoral scanners, CAD/CAM software for dental laboratories and comprehensive digital dentistry solutions.
The company’s signature Invisalign system leverages 3D imaging and computer-aided design (CAD) to create customized aligners that gradually reposition teeth, improving patient comfort and treatment predictability.
