Align Technology (NASDAQ:ALGN) Surprises With Q4 CY2025 Sales, Stock Soars

Dental technology company Align Technology (NASDAQ:ALGN) beat Wall Street’s revenue expectations in Q4 CY2025, with sales up 5.3% year on year to $1.05 billion. The company expects next quarter’s revenue to be around $1.02 billion, close to analysts’ estimates. Its non-GAAP profit of $3.29 per share was 10.8% above analysts’ consensus estimates.

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Company Overview

Pioneering an alternative to traditional metal braces with nearly invisible plastic aligners, Align Technology (NASDAQ:ALGN) designs and manufactures Invisalign clear aligners, iTero intraoral scanners, and dental CAD/CAM software for orthodontic and restorative treatments.

Revenue Growth

A company’s long-term sales performance is one signal of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Luckily, Align Technology’s sales grew at a decent 10.3% compounded annual growth rate over the last five years. Its growth was slightly above the average healthcare company and shows its offerings resonate with customers.

Long-term growth is the most important, but within healthcare, a half-decade historical view may miss new innovations or demand cycles. Align Technology’s recent performance shows its demand has slowed as its annualized revenue growth of 2.2% over the last two years was below its five-year trend.

We can dig further into the company’s revenue dynamics by analyzing its number of clear aligner shipments, which reached 676,855 in the latest quarter. Over the last two years, Align Technology’s clear aligner shipments averaged 4.6% year-on-year growth. Because this number is better than its revenue growth, we can see the company’s average selling price decreased.

This quarter, Align Technology reported year-on-year revenue growth of 5.3%, and its $1.05 billion of revenue exceeded Wall Street’s estimates by 1.2%. Company management is currently guiding for a 4.2% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 3.4% over the next 12 months, similar to its two-year rate. Although this projection indicates its newer products and services will fuel better top-line performance, it is still below average for the sector.

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Adjusted Operating Margin

Align Technology has been an efficient company over the last five years. It was one of the more profitable businesses in the healthcare sector, boasting an average adjusted operating margin of 23.1%.

Analyzing the trend in its profitability, Align Technology’s adjusted operating margin decreased by 5.3 percentage points over the last five years, but it rose by 1.3 percentage points on a two-year basis. Still, shareholders will want to see Align Technology become more profitable in the future.

This quarter, Align Technology generated an adjusted operating margin profit margin of 26.1%, up 3 percentage points year on year. This increase was a welcome development and shows it was more efficient.

Earnings Per Share

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Align Technology’s EPS grew at a spectacular 15% compounded annual growth rate over the last five years, higher than its 10.3% annualized revenue growth. However, this alone doesn’t tell us much about its business quality because its adjusted operating margin didn’t improve.

Diving into the nuances of Align Technology’s earnings can give us a better understanding of its performance. A five-year view shows that Align Technology has repurchased its stock, shrinking its share count by 9.7%. This tells us its EPS outperformed its revenue not because of increased operational efficiency but financial engineering, as buybacks boost per share earnings.

In Q4, Align Technology reported adjusted EPS of $3.29, up from $2.44 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Align Technology’s full-year EPS of $10.52 to grow 5.4%.

Key Takeaways from Align Technology’s Q4 Results

It was good to see Align Technology beat analysts’ EPS expectations this quarter. We were also happy its revenue narrowly outperformed Wall Street’s estimates. Overall, this print had some key positives. The stock traded up 7% to $172.64 immediately after reporting.

Align Technology put up rock-solid earnings, but one quarter doesn’t necessarily make the stock a buy. Let’s see if this is a good investment. If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here (it’s free).