Cochlear (COH) H1 2026 earnings summary

Executive summary

• Sales revenue increased 1% to $1,176 million for the half year, but declined 2% in constant currency, with underlying net profit down 9% to $195 million, reflecting delayed contracting and the global launch of the Nucleus Nexa System.

• The Nexa System, the first smart cochlear implant with upgradeable firmware, saw strong adoption in developed markets, but launch timing and contracting delays impacted first half results.

• Interim dividend was maintained at $2.15 per share, with a payout ratio of 72% and 85% franking.

• Performance was weighted to the second half, with broad Nexa availability and strong Services growth expected to drive recovery.

Financial highlights

• Gross margin declined to 73% from 75% year-over-year, mainly due to a higher mix of lower-margin emerging market business and increased costs.

• Underlying EBIT fell 11% to $254.8 million, with EBIT margin at 22% (down from 25%).

• Operating expenses declined 2%, with deliberate cost phasing into the second half.

• Free cash flow improved to $82.7 million, with operating cash flow up $26.9 million to $136.8 million.

• Net cash decreased by $103 million to $172.7 million, driven by higher working capital, tax payments, and cloud investment.

Outlook and guidance

• Full-year underlying net profit is expected at the lower end of the $435–460 million guidance range, reflecting first-half delays.

• Stronger second half anticipated, driven by full Nexa System availability, Services growth, and improved Acoustics momentum.

• FX headwinds could reduce underlying net profit by ~$30 million if current rates persist; sensitivity is ~$3 million per US cent and ~$4 million per Euro cent.

• Gross margin for FY26 expected to remain around 73%; R&D investment to be about 13% of sales revenue.

• Capital expenditure forecast at $100–120 million for capacity expansion.