Align Technology (ALGN)
Turning the frown upside down
Align Technology makes Invisalign, which consists of clear plastic aligners that straighten teeth instead of metal braces. They just reported their second-quarter results for 2025, and things didn’t go well. The company’s revenue dropped slightly compared to last year; they’re selling about the same number of aligners as before (basically no growth), and their stock price fell by more than a third. Wall Street analysts who follow the company are much more pessimistic about its future.
Here’s what’s happening: fewer people are getting their teeth straightened overall, and when they do, more are choosing old-fashioned metal braces because they’re cheaper. Align still dominates the clear aligner market (about 80% of the North American business), but they’re feeling real pressure. The economy has people thinking twice about spending money on cosmetic dental work, and dentists are having trouble converting patient consultations into actual sales.
The money picture: holding steady but not growing
Align brought in just over $1 billion in the quarter, which sounds impressive, but it was down 1.6% from last year and fell short of what analysts expected. Their main business (the clear aligners themselves) brought in about $805 million (down 3.3%), while their scanner and services business did better with $208 million (up 5.6%).
The good news is they’re still making healthy profits. Their profit margins actually improved slightly because they’ve been managing costs well. They made $1.72 per share, which beat last year’s $1.29. However, the price they’re getting for each set of aligners dropped from $1,295 to $1,250. That’s happening because they’re selling more of their simpler, cheaper products and expanding into markets where prices are naturally lower.
Who’s buying and who’s not
Align sold about 644,000 sets of aligners in the quarter (barely any change from last year or the previous quarter). The geographic breakdown shows an interesting pattern: their Americas business (mainly the US) weakened, Europe grew modestly, and Asia-Pacific (especially China) showed solid growth.
One bright spot: teenagers and kids. Over 223,000 young people started treatment in the quarter, a record for any second quarter. That’s important because it shows parents are still investing in their children’s dental health even when budgets are tight.
Here’s a concerning detail, though: Align now has a record 86,250 dentists trained to use Invisalign, but each dentist does only about 7.5 cases on average. That’s pretty low. It suggests either the market is getting too crowded with providers or dentists aren’t finding it as easy to convince patients to choose Invisalign over traditional braces.
What Align is doing about it
The company isn’t sitting still. It’s launching new products that can handle more complex dental issues (like aligners that help young people’s jaws develop properly and expanders that widen the upper jaw). It also has a new scanner that allows dentists to create better treatment plans.
On the business side, they’re making significant changes. They announced a major restructuring that will cost $150-170 million but should save money going forward. They’re moving manufacturing closer to customers to cut shipping costs and planning to use more automation. The goal is to improve their profit margins by at least one percentage point next year.
The company still believes there’s enormous growth potential. They estimate 600 million people worldwide could benefit from clear aligners, and they’ve reached less than 4% of that market. They’re spending $300 million a year on research and development to stay ahead of competitors, and they even invested $30 million in Smile Doctors, the country’s largest orthodontics practice chain, to strengthen relationships with providers.
What to expect going forward
Management’s projections for the rest of 2025 are pretty cautious. They expect the third quarter to be weaker than the second (which is normal for the summer months), and for the whole year, they’re predicting essentially flat to slightly positive growth.
The restructuring costs will temporarily hurt profits in the second half of this year, but the company expects to be in better shape by 2026. They’re continuing to invest in the business (planning to spend $100-125 million on equipment and facilities), and they’re buying back their stock, which shows they think the current low price won’t last forever. In August, the CEO bought nearly $1 million of shares, putting his money where his mouth is.
Wall Street’s cold reception
Financial analysts reacted harshly. Major firms downgraded the stock from “buy” to “hold” or equivalent ratings. Morgan Stanley cut its price target from $249 to $154 (a 38% reduction). Other firms made similar cuts, ranging from 20% to 40% reductions in what they think the stock is worth.
The average analyst now thinks the stock is worth about $186, compared to its current trading price of around $126. That suggests there could be some upside, but it’s a far cry from expectations before these results came out.
The stock’s immediate reaction was brutal (it fell more than 35% on the day of the announcement). Analysts pointed to three main worries: weak demand as fewer patients commit to treatment, economic uncertainty, including potential tariff impacts, and competition from traditional metal braces as cost-conscious practices and patients look for cheaper options.
The bottom line
Align Technology is going through a tough transition. They’re still the clear leader in their market with good products and a strong position, but they’re no longer the high-growth company they once were. Instead, they’re facing the reality of being in a mature market where growth is hard.
The following year or two will be about executing their restructuring plan, defending their market share, and waiting for better economic conditions. At today’s depressed stock price, some investors might see an opportunity (essentially betting that the company will successfully cut costs and eventually return to growth). But anyone hoping for rapid expansion should probably wait for more evident signs that demand is improving and their turnaround efforts are working.
This company is at a crossroads, shifting from “how fast can we grow?” to “how efficiently can we operate?” The answer will determine whether today’s stock price is a bargain or reflects a new, more modest reality.
Checks
ALGN is Sharia-compliant according to Zoya.
The closing price of $126.19 has a 5-star rating on Morningstar.
This post is for educational and informational purposes only and does not constitute financial, investment, or other professional advice. All information presented is based on personal opinion and should not be relied upon solely to make any investment decisions. You should always do your own research and consult with a licensed financial advisor, attorney, or other professional before making any financial decisions. Past performance is not indicative of future results.