Despite meeting half-year earnings expectations, Australian hearing aid group Cochlear (ASX: COH) reported a 12 per cent drop in services revenue due to cost-of-living pressures in the US, sending its shares falling as much as 10.81 per cent this morning and wiping $2.1 billion off its market capitalisation.

The group’s implant and acoustics revenue grew by 13 per cent to $725 million and 22 per cent to $140 million respectively, while services fell to $305 million compared to $349 year-on-year. The fall in services revenue was a sharp drop compared to a previous uptick of 29 per cent in HY24.

Cochlear attributed cost of living pressures in the US as a reason why people have been delaying the replacement of their Cochlear Nucleus 7 sound processors, since “many recipients incur out-of-pocket expenses to fund their new sound processor.”

The company also noted that continued “high satisfaction” with the Nucleus 7 sound processor may have resulted in less interest in the latest generation of implants.

Cochlear’s sales revenue rose by five per cent to $1.17 billion for the half. The group will play its interim dividend of $2.15 per share, up from the $2 payout given to investors on April 2024.  

“Cochlear implant trading conditions continue to be solid across most markets, with continuing strong growth in adult referral rates across the developed markets. We are preparing for the release of our next generation cochlear implant, which is expected to be commercially available from mid-2025 (subject to local regulatory approvals),” the company said in a presentation to shareholders.

“Services growth has slowed since launching the Nucleus 8 Sound Processor in FY23. We had expected modest growth in revenue for FY25 and now expect a single-digit decline.

"We continue to work on initiatives to improve identification and connection with recipients who could benefit from the latest sound processing technology.”

The company noted there was a strong uptake of the Cochlear Osia - a bone conduction hearing implant that helps people hear better in noisy situations - across existing markets and expansion into new countries such as France and Italy, as well as several emerging markets.

The implant units surged by more than 50 per cent in the US, which the group attributed to market share gains, a continuing shift to active implants and the introduction of the new technology in HY24. Cochlear anticipates that acoustics growth rates will be strong, with continuing geographic expansion of the Osia.

Looking ahead, the group said it is aiming to help more than 50,000 people to hear with a cochlear or acoustic implant in FY25, with underlying net profit expected to sit at the lower end of the $410 million to $430 million guidance posted six months ago.

“Cochlear implant trading conditions continue to be solid across most markets, with continuing strong growth in adult referral rates across the developed markets. We are preparing for the release of our next generation cochlear implant, which is expected to be commercially available from mid-2025 (subject to local regulatory approvals).

“We continue to expect solid market growth rates to drive cochlear implant unit growth of around 10 per cent in FY25.”

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