Dental technology company Align Technology (NASDAQ:ALGN) met Wall Street’s revenue expectations in Q1 CY2025, but sales fell by 1.8% year on year to $979.3 million. The company expects next quarter’s revenue to be around $1.06 billion, coming in 0.8% above analysts’ estimates. Its non-GAAP profit of $2.13 per share was 7.1% above analysts’ consensus estimates.
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Align Technology (ALGN) Q1 CY2025 Highlights:
- Revenue: $979.3 million vs analyst estimates of $975 million (1.8% year-on-year decline, in line)
- Adjusted EPS: $2.13 vs analyst estimates of $1.99 (7.1% beat)
- Adjusted Operating Income: $186.7 million vs analyst estimates of $183.2 million (19.1% margin, 1.9% beat)
- Revenue Guidance for Q2 CY2025 is $1.06 billion at the midpoint, roughly in line with what analysts were expecting
- Operating Margin: 13.4%, down from 15.5% in the same quarter last year
- Market Capitalization: $13.01 billion
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.
Sales Growth
A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Over the last five years, Align Technology grew its sales at a decent 10.6% compounded annual growth rate. 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 3.7% over the last two years was below its five-year trend. 
This quarter, Align Technology reported a rather uninspiring 1.8% year-on-year revenue decline to $979.3 million of revenue, in line with Wall Street’s estimates. Company management is currently guiding for a 3.1% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 4.2% over the next 12 months, similar to its two-year rate. This projection is underwhelming and implies its newer products and services will not catalyze better top-line performance yet.
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Adjusted Operating Margin
Adjusted operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies because it excludes non-recurring expenses, interest on debt, and taxes.
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 22.8%.
Looking at the trend in its profitability, Align Technology’s adjusted operating margin decreased by 1.9 percentage points over the last five years, but it rose by 1.5 percentage points on a two-year basis. Still, shareholders will want to see Align Technology become more profitable in the future.
In Q1, Align Technology generated an adjusted operating profit margin of 19.1%, in line with the same quarter last year. This indicates the company’s overall cost structure has been relatively stable.
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 remarkable 11.3% annual EPS growth over the last five years aligns with its revenue performance. This tells us it maintained its per-share profitability as it expanded.
In Q1, Align Technology reported EPS at $2.13, down from $2.14 in the same quarter last year. Despite falling year on year, this print beat analysts’ estimates by 7.1%. Over the next 12 months, Wall Street expects Align Technology’s full-year EPS of $9.33 to grow 9.5%.
Key Takeaways from Align Technology’s Q1 Results
It was encouraging to see Align Technology beat analysts’ EPS expectations this quarter. We were also glad its revenue guidance for next quarter slightly exceeded Wall Street’s estimates. Overall, this quarter had some key positives. The stock traded up 10.3% to $191 immediately after reporting.
So do we think Align Technology is an attractive buy at the current price? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.