Align Technology (ALGN) Q3 2025: DSOs Drive 20%+ Growth Amid North America Softness

October 29, 2025 | By EarningsIQ Research

Align’s Q3 showed clear aligner volume growth fueled by EMEA, APAC, and DSO, dental service organization, strength, even as North American retail channels lagged. Strategic innovation in digital workflow and AI-powered tools underpinned record doctor engagement, while management doubled down on operational restructuring and global expansion. Looking ahead, margin expansion is prioritized, but regional and product mix shifts will remain a key variable for investors.

Summary

  • DSO Channel Outpaces Retail: Dental service organizations delivered double-digit growth, offsetting North America retail weakness.
  • Digital Platform Innovation Accelerates: AI-driven tools and iTero scanner adoption deepened competitive moat and drove record doctor engagement.
  • Margin Expansion Targeted for 2026: Management commits to at least 100bps improvement, but regional mix and restructuring charges remain watchpoints.

Performance Analysis

Q3 results highlight Align’s geographic and channel diversification as key strengths. Clear aligner revenues and volumes grew year-over-year, led by robust gains in EMEA and APAC, both up double digits, and by continued expansion in Latin America. North America, particularly the retail doctor channel, remained a headwind, but was partially offset by DSO strength, which now accounts for roughly 25% of the business and delivered over 20% growth in some areas. Systems and services revenue declined sequentially, reflecting expected capital equipment seasonality and product cycle maturity, but saw sequential scanner sales growth among GPs in North America and steady expansion of the iTero, intraoral scanner, installed base to over 120,000 units globally.

Gross margin was pressured by restructuring and non-cash charges, including asset impairments and inventory write-offs, but operational efficiency gains and favorable FX provided partial offsets. Non-GAAP margins remained stable, reflecting cost discipline and ongoing restructuring. Product mix, with increased sales in lower ASP, average selling price, regions like China, diluted headline ASPs, but like-for-like pricing in the US and EMEA was up. Free cash flow was healthy, supporting continued share repurchases and capital investment in manufacturing and technology upgrades.

  • Channel Mix Shift: DSO growth outpaced retail, driving stability in overall aligner volumes.
  • Regional Volume Divergence: EMEA and APAC delivered double-digit case growth, while North America retail volumes declined mid-single digits.
  • Gross Margin Compression: Restructuring and inventory actions weighed on GAAP margins, but non-GAAP margins held steady.

Align’s operational execution enabled the company to outperform its own outlook on clear aligner volumes and non-GAAP margins, though the ongoing North America retail drag and product mix shifts will require close monitoring into Q4 and 2026.

Executive Commentary

"While the North American retail doctor channel remains mixed, we continue to see strength in our other key geographies and areas of our portfolio, including teens and kids and digital workflow innovation as demonstrated by continued strong double-digit year-over-year growth by our DSOs."

Joe Hogan, President and CEO

"We are nearing completion of the restructuring actions that are intended to sharpen operational focus, reduce ongoing costs, and enhance capital efficiency. For fiscal 2026, we expect these restructuring actions as well as other initiatives to improve our GAAP and non-GAAP operating margins by at least 100 basis points year over year."

John Marucci, Chief Financial Officer

Strategic Positioning

1. DSO Channel as Growth Engine

Dental Service Organizations (DSOs), multi-location dental practices, have emerged as Align’s most resilient and fastest-growing channel, now representing about 25% of the business. DSOs’ scale, digital workflow adoption, and aggressive patient financing (HFD partnership) have enabled double-digit case growth, even as retail volumes in North America remain challenged. Management highlighted DSOs’ ability to scan most patients, leverage visualization tools, and offer competitive pricing, driving higher conversion and utilization rates.

2. Regional Diversification and Expansion

EMEA and APAC regions delivered robust double-digit clear aligner volume growth, with China, India, and Turkey cited as standouts. New product introductions, such as Invisalign First and Pallet Expander for teens and kids, fueled case growth across geographies. Latin America contributed steady gains, further insulating the business from North America softness. Management’s focus on expanding reach in Tier 3 and Tier 4 China cities signals continued international opportunity, though ASP dilution remains a byproduct.

3. Digital Platform and Product Innovation

Align continues to invest in AI-powered treatment planning, next-generation iTero scanners, and integrated digital workflows, with new launches like ClinCheck Live Plan (15-minute automated treatment plans) and ExoCAD ART (restorative treatment planning). These tools drive faster case conversion, enhance doctor efficiency, and improve patient engagement, supporting higher case starts and deeper ecosystem lock-in. Over 88,000 doctors submitted cases in Q3, a new record, underscoring the platform’s growing adoption.

4. Operational Restructuring and Margin Focus

Restructuring actions are on track to deliver at least 100bps margin improvement in 2026, with most one-time charges being non-cash. Cost reductions, capital efficiency, and technology upgrades remain priorities, with management signaling further automation and process optimization to support long-term profitability.

5. Product and Geographic Mix Dynamics

Shift toward lower-ASP geographies (notably China) and product mix (non-comprehensive aligners) continues to impact reported pricing, though underlying pricing power in core markets is intact. Management expects Q4 ASPs to rebound as European volumes seasonally increase, partially reversing Q3 mix effects.

Key Considerations

Q3 reinforced Align’s ability to balance global growth with operational discipline, but the interplay of channel, region, and product mix will remain critical for investors to monitor heading into 2026.

Key Considerations:

  • DSO Penetration Expands: DSOs now represent roughly 25% of total business, with double-digit growth and best-in-class digital adoption.
  • Retail Channel Remains Soft: North America retail volumes are pressured by macro uncertainty and consumer confidence, with no material improvement in case conversion rates.
  • AI and Digital Workflow Adoption: New AI-powered tools (ClinCheck Live Plan) and scanner innovation drive record doctor engagement and operational leverage.
  • Restructuring and Cost Controls: Operational restructuring is on track, with margin expansion targeted for 2026 and most charges non-cash in nature.
  • Product and Geographic Mix Volatility: Lower-priced emerging markets and non-comprehensive products dilute ASP, but core market pricing remains resilient.

Risks

North America retail channel weakness remains a material risk, with little evidence of near-term recovery in consumer demand or case conversion. Geographic and product mix shifts may continue to pressure ASPs and reported margins. Regulatory uncertainty, especially in China (VBP policy), and macroeconomic volatility in major markets could further disrupt growth or pricing. Execution on restructuring and technology adoption is critical to delivering promised margin gains.

Forward Outlook

For Q4 2025, Align guided to:

  • Worldwide revenues of $1.25 billion to $1.45 billion, up sequentially
  • Sequential increases in clear aligner volume and ASP, driven by favorable geographic mix
  • Systems and services revenue up sequentially, consistent with Q4 seasonality
  • GAAP gross margin of 65.5% to 66%, non-GAAP gross margin ~71%
  • GAAP operating margin of 15.3% to 15.8%, non-GAAP operating margin ~26%

For full-year 2025, management expects:

  • Clear aligner volume growth in the mid-single digits
  • Revenue growth flat to slightly up versus 2024
  • GAAP operating margin 13.6% to 13.8%, non-GAAP operating margin slightly above 22.5%

Management highlighted that restructuring actions are nearly complete and will drive at least 100bps margin improvement in 2026, with most charges non-cash and capital expenditures focused on technology upgrades.

Takeaways

Investors should focus on channel mix, regional growth drivers, and margin execution as Align navigates a bifurcated global market.

  • DSO Growth Offsets Retail Drag: DSOs’ digital adoption and financing solutions are driving robust case volume growth, insulating overall performance from North America retail softness.
  • Innovation Powers Engagement: AI-powered treatment planning and digital workflow tools are deepening doctor engagement and supporting record case submissions.
  • Margin Expansion Hinges on Execution: Successful restructuring and stabilization of product/geographic mix will be key to delivering on margin improvement targets in 2026.

Conclusion

Align’s Q3 2025 results underscore the company’s ability to leverage global diversification, DSO channel strength, and digital innovation to offset regional and channel headwinds. Margin expansion and continued product adoption will be critical as the company enters a period of operational transition and market normalization.

Industry Read-Through

DSO channel strength and digital workflow adoption are reshaping the dental and orthodontics landscape, with multi-practice organizations outpacing traditional retail channels in both volume and technology integration. AI-driven treatment planning and patient engagement tools are rapidly becoming table stakes, raising the bar for competitors and accelerating the shift toward data-driven, chairside decision-making. Regional mix volatility and macro-driven consumer softness in North America are likely to remain sector-wide themes, with companies best positioned for global diversification and operational flexibility set to outperform. Capital discipline, restructuring, and targeted innovation will be key differentiators as the dental industry navigates ongoing transformation.

ALGN Healthcare Medical Devices Digital Dentistry DSO AI Orthodontics Restructuring