Shares of Cochlear Limited plunged sharply on Wednesday after the company issued a significant downgrade to its earnings outlook, citing weaker demand and mounting cost pressures.
The stock dropped as much as 40.4% by 2 pm AEST (4 am GMT), as investors reacted to a trading update that included a substantial reduction in full-year profit guidance and softer-than-expected implant demand across developed markets.
In an ASX announcement, the company said: “Since January trading conditions for cochlear implants in developed markets have been softer than expected, with revenue flat for the quarter in constant currency (CC).
"Near term surgical volumes have been affected by a combination of hospital capacity constraints and reduced referral activity from the hearing aid channel. Consumer sentiment has declined in key markets, reaching historic lows in the U.S.
"The decline appears to be affecting discretionary healthcare decisions in the adults and seniors segment, adding to demand uncertainty in the near term.”
Cochlear also highlighted several financial headwinds weighing on its outlook.
“Taking into account the lower-than-expected sales, the potential for provisions for receivables required due to the Middle East conflict, lower gross margin, expenses from reshaping the cost base and the impact of the stronger Australian dollar on earnings, Cochlear is reducing its published underlying net profit guidance for FY26 to A$290-330 million.”
The updated outlook represents a significant downgrade from prior guidance of $435–460 million.
The company now expects second-half FY26 sales growth of 2–6% in CC, while revenue from cochlear implants in developed markets remained flat in the most recent quarter.
Services revenue rose 13% and acoustics revenue increased 11% over the same period.
Cochlear also flagged additional profit impacts, including up to $10 million in provisions related to Middle East receivables, $20 million from lower gross margins, between $18 million and $25 million tied to cost base restructuring, and a $25 million hit from foreign exchange movements after tax.
Chief executive, Dig Howitt, sought to emphasise the long-term outlook for the business, despite near-term challenges.
“The clinical need for cochlear implants continues to grow, particularly for the adult and seniors segment. For people with severe to profound hearing loss, cochlear implants are more effective than hearing aids for indicated patients, with 95% of recipients reporting significantly higher satisfaction after switching to a bimodal hearing solution.
"Cochlear implants are also associated with a lower incidence of dementia, with dementia rates lower than in hearing aid users and comparable to those with normal hearing.
"Customer feedback indicates increasing awareness of the links between hearing loss and cognitive decline,” he said.
The company currently maintains a market capitalisation of approximately A$11.16 billion.
