A maker of the nearly invisible teeth-straightening trays known as Invisalign, plus iTero scanners and exocad software that let dentists plan treatment on screen instead of using metal braces. Founded in 1997 by two Stanford business students, the idea grew from co-founder Zia Chishti noticing that a series of custom retainers could gradually move teeth. Its name blends "invisible" and "align," and its trays have treated more than twenty million patients worldwide.
Clear Aligner revenue rose 8.2% on volume and pricing gains, but a $38.7M legal and VAT charge cut into operating income.
returned to growth on both volume and price. Total revenue rose 4.3% to $1,056.2 million and expanded 1.8 points to 71.7%, driven by higher aligner ASPs and tariff refunds, but fell 5.5% as a $38.7 million charge for legal settlements and a UK VAT absorbed the gain. The core business strengthened while one-off charges masked the improvement.
Key takeaways
rose 8.2% to $871 million, with case volume up 7.4% and higher average selling prices aided by favorable foreign exchange.
fell 10.8% to $185 million as a mix shift toward lower-priced products and lower scanner wand sales more than offset higher system volume.
widened 1.8 points to 71.7%, benefiting from tariff refunds, the roll-off of accelerated on disposed manufacturing assets, and higher ASPs.
Section summaries
Management's Discussion and Analysis
Q2 FY2026 revenue rose 4.3% to $1,056M driven by Clear Aligner volume and ASP gains, while a $37.5M UK VAT liability weighed on operating income.
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Total net revenues increased 4.3% to $1,056 million, driven by an 8.2% rise in revenues to $871 million on 7.4% higher case volume and favorable FX.
declined 5.5% to $154.0 million as a $38.7 million charge for legal settlements and a UK VAT outweighed the improvement.
rose 49.8% to $192.8 million, and rose 46.6% to $157.1 million, partly because the prior-year quarter included a $79.2 million UK VAT payment.
The company disclosed a new European Commission antitrust investigation opened June 29, 2026, into and practices in the EEA, and new U.S. Section 301 tariffs imposed July 24, 2026, on products manufactured in Mexico.
What changed
Q1 2026 flagged the sustainability of the 70.8% rebound: Q2 delivered 71.7%, confirming the improvement as restructuring charges stayed cleared and tariff refunds provided an additional lift.
ASP trajectory was flagged after Q1's pricing improvement: Q2 showed the gain persisted, with higher ASPs and favorable FX driving the 8.2% increase, a reversal from the ASP declines that ran through most of FY2025.
growth was flagged after Q1 to see if the could sustain momentum: it did not — fell 10.8% as the mix shift toward lower-priced products and lower wand sales reversed the prior quarter's gain.
The risk of tariff-driven cost increases on Mexico-manufactured aligners, flagged in Q1, materialized in part through new U.S. Section 301 tariffs imposed July 24, 2026, though Q2 itself benefited from tariff refunds.
The European Commission antitrust investigation, disclosed as a new risk factor, was not flagged in any prior filing and represents a new regulatory exposure for the EEA business.
What to watch
Q3 2026 and ASP to see if the 8.2% growth and pricing improvement hold as the new U.S. Section 301 tariffs on Mexican imports take effect.
Q3 2026 to determine whether the 10.8% decline is a one-quarter mix-driven reset or the start of a sustained contraction in scanner sales.
Q3 2026 to see if the 71.7% level can be maintained without the tariff refunds that aided Q2, as Section 301 tariffs begin to pressure costs.
Developments in the European Commission antitrust investigation opened June 29, 2026, and any estimate of potential fines or mandated practice changes.
revenues fell 10.8% to $185 million due to a mix shift to lower-priced products and lower scanner wand sales, partially offset by higher system volume.
Total expanded 180 to 71.7%, benefiting from tariff refunds, the roll-off of accelerated , and higher ASPs.
declined to $154 million (14.6% margin) as a $38.7 million charge for legal settlements and a UK VAT contingency loss more than offset profit improvements.
was $344 million for the first half; the company plans $125–$150 million in 2026 and a multi-year $200 million investment in a new India manufacturing facility.
Management cited macroeconomic uncertainty, tariff volatility, and a consumer shift toward wires and brackets as ongoing headwinds that may continue to pressure demand.
Quantitative and Qualitative Disclosures About Market Risk
Interest rate risk is immaterial; a 10% FX shift could be material; private-company equity investments rose to $327.8M.
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An immediate 10% change in interest rates would not materially affect operating results or cash flows, and the company had no line-of-credit borrowings or marketable securities as of June 30, 2026.
Foreign-currency exposure is partially naturally hedged because international sales and local operating expenses are both denominated in local currencies.
The company uses one-month foreign-currency (primarily EUR, GBP, CAD, PLN, ILS) to offset short-term asset/liability remeasurement gains and losses; these are not designated as accounting hedges.
A 10% aggregate change in foreign exchange rates relative to the U.S. dollar could have a material impact on results of operations and financial position.
Inflationary pressures may not be fully offset by price increases, and future results could be adversely affected.
Investments in privately held companies, carried at $327.8 million under the , are subject to equity price risk; the increase from $216.2 million was driven by an additional Heartland investment and observable-transaction adjustments.
The information set forth in Note 6 “Legal Proceedings” of the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q is incorporated herein by reference.
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The information set forth in Note 6 “Legal Proceedings” of the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q is incorporated herein by reference.
Macroeconomic pressures, geopolitical trade disruptions, and a new EU antitrust investigation are the most emphasized risks this quarter.
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New U.S. Section 301 tariffs imposed July 24, 2026, with no statutory rate cap or fixed expiration, create uncertain costs for products manufactured in Mexico and sourced globally.
The European Commission opened a formal antitrust investigation on June 29, 2026, into Invisalign and practices in the EEA, which could lead to substantial fines and business practice changes.
Military conflicts involving Israel, Iran, and the U.S. that escalated in 2025-2026 threaten operations headquartered in Israel and disrupt global energy prices and consumer spending.
Inflation, high interest rates, and weak consumer confidence continue to reduce discretionary spending on elective orthodontic procedures and dental capital equipment.
Competition is intensifying from DTC clear aligner brands, manufacturing custom aligners, and AI-enabled digital dentistry platforms that could commoditize the company's products.
The company's dependence on sole-source suppliers and a concentrated manufacturing footprint in Mexico exposes it to supply chain disruptions from tariffs, natural disasters, and geopolitical instability.