Align Technology (ALGN) Q3 2025: Profits Plunge Amid Rising Costs & Restructuring

Align Technology (ALGN), the company behind the widely known Invisalign clear dental aligners, recently filed its quarterly report for the period ending September 30, 2025. This document gives us a chance to look under the hood and see how the company is performing financially. Let's dive into the key numbers from their latest 10-Q filing to understand the story they tell.

For the third quarter of 2025, Align Technology reported a modest 1.8% increase in net revenues, growing to $995.7 million from $977.9 million in the same period last year. However, this slight uptick in sales did not translate into higher profits. In fact, the company's profitability saw a significant decline. Net income plummeted by over 50%, falling to $56.8 million from $116.0 million in Q3 2024.

To better visualize how the company's revenue flows through its various costs and expenses to arrive at its net income for the quarter, the following flow diagram provides a clear breakdown.

A Tale of Two Segments

Align Technology operates through two primary business segments: Clear Aligner, which includes its flagship Invisalign products, and Systems and Services, which covers its iTero intraoral scanners and related software services.

• The Clear Aligner segment, the company's main revenue driver, saw sales increase by 2.4% to $805.8 million. This was fueled by a healthy 4.9% growth in case shipments, indicating continued demand for their aligners.
• The Systems and Services segment experienced a slight contraction, with revenues dipping 0.6% to $189.9 million.

While the growth in aligner volume is a positive sign, a closer look reveals a concerning trend: shrinking profit margins. The gross margin for the Clear Aligner segment fell sharply from 70.3% to 64.9% year-over-year. A similar trend hit the Systems and Services segment, where gross margin dropped from 67.5% to 61.3%. This means that despite selling more products in its core business, the company is making less profit on each sale.

The Culprits: Rising Costs and Restructuring

So, what caused this dramatic drop in profitability? The income statement points to two main factors.

First, the cost of net revenues surged by over 20% to $356.5 million, significantly outpacing revenue growth. This increase directly eroded the company's gross profit, which fell from $681.8 million to $639.2 million.

Second, Align recorded $31.8 million in "Restructuring and other charges" during the quarter, an expense that was absent in the same period last year. According to the filing's notes, this is part of a new restructuring plan initiated in 2025. These charges delivered a substantial blow to the company's operating income, which fell to $96.3 million from $162.3 million a year ago.

On a more positive note, the company demonstrated some cost discipline in its sales, general, and administrative (SG&A) expenses, which decreased by $16.3 million. It also continued to invest in its future, with research and development (R&D) spending rising to $93.3 million.

Final Thoughts

Align Technology's third-quarter results present a mixed picture. The continued growth in Invisalign case volume shows that its core product remains popular. However, the severe pressure on profit margins from rising costs and new restructuring efforts is a major headwind.

The company is also actively returning capital to shareholders, having repurchased over 523,000 shares for approximately $71.6 million during the quarter. Looking ahead, investors will be closely watching whether Align's restructuring plan can successfully streamline operations and if the company can regain control over its costs to bring profitability back in line with its revenue growth.