Background: Cochlear is the ASX-listed medical device company that makes some of the world’s leading hearing implants. Since spinning out of CSIRO and listing on the ASX, Cochlear has sold over 750,000 units worldwide in more than 180 countries.

‍

What happened: Now, Cochlear's FY25 profit guidance is making a lot less noise than expected after downgrading profit expectations from up to $430 million down to a max of $400 million. That means they’re barely a whisper above last year’s $387 million in revenue. The slow growth was attributed to losing a bit of market share to competitors, but it has also been facing a shift towards lower-margin products in emerging markets.

‍

What else: Buuuuuut there’s hope for FY26 because Cochlear is planning to launch the world's first cochlear implant which can stream mobile calls directly to the implant devices and also has automatic firmware updates… like an iPhone in your ear. We're talking a high-margin-product again! And while Cochlear is promising this will be big, investors were still selling off Cochlear shares in the meantime.

‍

What's the key learning?

‍

💡Sales volume is vanity, profit is sanity. Cochlear is growing implant volumes by around 10%, but a lot of that growth is coming from emerging markets which typically offer lower prices per unit... and that creates margin pressure.

‍

💡In other words, the cost of making a product doesn’t change much, but the price you can charge goes down. A company might grow sales overall but end up making less money if the mix tilts towards lower-margin regions

‍

💡That’s why Cochlear’s next move is all about the premium play, hoping that its fancy new product might shift the product mix back toward premium products.