Highlights

  • Cochlear (ASX:COH) reported FY26 sales Revenue of $2.343 billion, up 2% in constant currency, while underlying net profit reached $322 million at the upper end of revised guidance.
  • Cochlear implant units increased 5% to 56,692, but implant revenue was flat in constant currency at $1.4 billion as lower-priced emerging-market units represented a greater proportion of sales.
  • Gross Margin declined from 74% to 71%, while reported operating expenses increased 5%, including $69 million of transitional costs.
  • FY27 guidance calls for low single-digit constant-currency revenue growth and underlying net profit of $330 million to $350 million.

Cochlear (ASX:COH) delivered sales revenue of $2.343 billion for FY26, representing a 2% increase in constant-currency terms. Growth accelerated in the second half, with constant-currency revenue up 6%, placing the company at the upper end of the revised guidance issued in April.

Underlying net profit was $322 million, also reaching the upper end of revised guidance. However, profitability remained below the company's medium-term margin objective. Net profit margin was 14%, compared with a medium-term target of 18%, reflecting flat cochlear implant revenue, lower gross profit, transitional costs and foreign exchange movements.

Foreign exchange was a material headwind. Currency movements reduced underlying net profit by $24 million, or 8%, compared with the spot rates incorporated into the company's August 2025 Earnings guidance.

Cochlear Implant Volumes Increase Despite Flat Revenue

Cochlear implant units increased 5% to 56,692 during FY26, but implant revenue remained flat in constant currency at $1.4 billion. The difference between unit and revenue growth was linked to a higher mix of lower-priced emerging-market units.

Developed-market revenue increased 1% in constant currency. US revenue rose 4%, with direct-to-consumer surgeries increasing 10%. However, insurance approval delays and broader economic pressures affecting healthcare contributed to slower market growth and longer time to surgery.

Regional performance varied considerably. Western Europe revenue declined 8%, affected by elective surgery backlogs in the UK, industrial action in Spain and lower Market Share in Germany. Asia Pacific revenue increased 7%, supported by broader regional performance and improved market share.

Emerging-market revenue declined 2% in constant currency. Growth in Latin America and Eastern Europe was offset by declines in the Middle East and China. In China, Volume growth was offset by lower average selling prices following volume-based procurement, while reimbursement reductions in special access zones affected revenue during the second half.

Nexa System Becomes a Key Product Development

A major product milestone during FY26 was the launch of the Nucleus Nexa System. Cochlear described the platform as the first smart cochlear implant system with upgradeable firmware. By June, Nexa represented more than 95% of implant sales across developed markets, while an average 3% price increase was achieved.

The company is using Nexa as a foundation for future product development, including work on a drug-eluting electrode and a totally implantable cochlear implant. The platform is also being developed to provide additional diagnostic information and potentially support more personalised programming and patient care.

Services and Acoustics Provide Additional Revenue

Services revenue increased 6% in constant currency to $635 million. Developed-market services revenue rose 13%, supported by a larger eligible recipient base, Demand for the Nucleus 8 Sound Processor and improved awareness of eligibility and clinical benefits. Emerging-market services revenue declined, mainly because of lower pricing in China and disruption to sound processor orders in the Middle East.

Acoustics revenue increased 1% in constant currency to $273 million. After declining in the first half amid increased competitor activity in the US and UK, revenue rose 5% in the second half as the Osia System continued expanding into Western Europe and Asia Pacific.

Margins, Costs and Cash Flow

Gross margin declined from 74% to 71%. Sales mix reduced margin by 1.5 percentage points, Manufacturing variances reduced it by another 1.2 percentage points, and foreign exchange movements had a 0.6 percentage-point impact.

Comparable operating expenses declined 1%, reflecting tighter discretionary spending and early benefits from cost-flexibility measures. At the same time, R&D expenditure increased 15% as Cochlear continued investing in its product pipeline and strategic growth initiatives.

Reported operating expenses increased 5%, including $69 million of transitional costs. This consisted of $32 million in restructuring costs and $37 million related to replenishment of the short-term incentive provision.

Free Cash Flow increased by $141 million to $264 million, helped by improved working capital. Net cash, however, decreased by $88 million to $188 million after accounting for earnings, cloud investment, Capital Expenditure and dividends. The company's on-market share buyback remained inactive because net cash was below its target level of around $200 million.

FY27 Growth Priorities and Guidance

Cochlear expects low single-digit constant-currency sales revenue growth in FY27 and underlying net profit of $330 million to $350 million. The outlook assumes gradual improvement in developed-market cochlear implant performance, continued cost discipline and targeted Investment in growth initiatives.

The company has reduced fixed costs to create capacity for an additional $25 million of growth investment in FY27. These resources are intended to support referral programmes, digital candidate tools, clinical workflow improvements and evidence generation for healthcare payers and policymakers.

A major focus is improving adult referral pathways. Cochlear said medical and professional referrals currently account for 40% of adult cochlear implant referrals in the US. It is expanding initiatives designed to increase medical engagement and make referral activity more systematic across markets.

Conclusion

Cochlear's FY26 results combined modest constant-currency revenue growth with higher implant volumes, although flat implant revenue and lower margins constrained profitability. The company also recorded significant regional differences, including declines in Western Europe and emerging markets, while the US and Asia Pacific delivered growth. The Nucleus Nexa System achieved rapid adoption in developed markets, while increased R&D spending and referral initiatives indicate continued investment in the company's product and market-development programmes. For FY27, Cochlear expects low single-digit constant-currency revenue growth and underlying net profit of $330 million to $350 million, with cost reductions intended to create additional capacity for targeted growth investment.