Earnings call transcript: Cochlear lifts cash flow, stock rises after H2 2026

Cochlear Limited reported a 2% rise in full-year sales revenue to AUD 2.3 billion for FY 2026, with underlying net profit hitting AUD 322 million. The stronger second-half performance and improved cash flow helped offset weaker gross margins and uneven demand across regions. The stock surged 7.19%, reaching $140.69, driven by improved free cash flow, steady guidance for FY 2027, and the successful rollout of the Nexa platform.

Despite a modest revenue growth and declining gross margin in FY 2026, the company highlighted progress in cash generation, cost control, and product adoption. The global cochlear implant market grew by 5% in volume, but revenue remained flat due to lower prices in emerging markets. Developed markets performed unevenly, with the U.S. growing 4% and Western Europe shrinking 8%.

Asia Pacific led with a 7% increase, driven by Australia and Korea, while emerging markets declined by 2%, primarily due to China and the Middle East. Cochlear's FY 2026 results fell short of initial expectations from August but met the upper end of revised guidance from April. Investors were more focused on the company's momentum and cash flow improvements than on whether earnings surpassed published estimates.

For FY 2027, Cochlear anticipates low-single-digit revenue growth, underlying net profit of AUD 330 million to AUD 350 million, and a gross margin of 70% to 71%. The company expects modest growth in developed markets, supported by direct-to-consumer programs and Nexa benefits, while emerging markets are projected to grow slightly, with China remaining flat and the Middle East struggling.

Cochlear aims to spend AUD 100 million in capital spending and AUD 60 million after tax to finalize its cloud computing and manufacturing systems program.