Shareholders are suing the hearing implant giant over its FY26 earnings guidance after a dramatic downgrade in April sent its shares plunging more than 40% in a day.
Cochlear is facing a shareholder class action over its FY26 profit forecasts, after the hearing implant giant slashed its earnings guidance in April and suffered the biggest one-day share price fall in its history.
The proceeding, filed in the Supreme Court of Victoria, covers investors who acquired interests in Cochlear shares between 15 August 2025 and 21 April 2026 inclusive. Cochlear confirmed the action on Tuesday, saying the claim related to its forecast of underlying net profit for FY26.
The claim is being conducted by Echo Law and supported by litigation funder CASL, which says the proceeding alleges Cochlear breached continuous disclosure and misleading conduct laws during the period.
The claim period begins on 15 August 2025, when Cochlear released its FY25 results and forecast FY26 underlying net profit of $435 million to $460 million—growth of 11% to 17% — saying it expected “strong revenue growth in developed markets from the launch of the new Nucleus Nexa implant”.
CASL says the class action alleges Cochlear’s FY26 earnings guidance and related market disclosures did not adequately reflect factors affecting its expected performance, including slower growth in key hearing healthcare markets, declining US consumer sentiment and challenges associated with the Nucleus Nexa rollout in the US and Germany.
The class period ends on 21 April this year. The following day Cochlear issued a trading update cutting its FY26 underlying net profit guidance to between $290 million and $330 million.
Cochlear said at the time that trading conditions for cochlear implants in developed markets had been “softer than expected” since January, with second-half sales growth expected to be just 2% to 6% at constant currency.
It also cited uncertainty over Middle East sales, potential provisions for receivables, lower gross margins, restructuring expenses and the stronger Australian dollar in reducing its profit forecast.
The downgrade triggered a 40.7% fall in Cochlear’s share price, which closed at $99.58 on 22 April—its biggest one-day fall since listing and its lowest level in about a decade.
CASL says compensation is being sought on the basis that the matters identified in the claim affected the “achievability and reliability” of Cochlear’s FY26 earnings forecasts and guidance, resulting in investors paying more for the company’s securities than they otherwise would have.
Cochlear has rejected the allegations.
“Cochlear denies the allegations set out in the claim and will be defending the proceedings,” the company said in its ASX announcement.
Look who is on the way back
CSL shares have continued their extraordinary recovery since the biotech giant reported a $US2.58 billion full-year loss in August, with major fund managers piling back into the stock on expectations that the worst of its earnings troubles may be behind it.
The company’s shares closed at $157.82 on 18 August, when CSL reported its first annual loss since listing on the ASX in 1994, after jumping almost 18% on the result. They have since pushed above $180, extending a recovery that began after the stock fell to about $90 in early June.
The August result included $US5.42 billion in after-tax restructuring and impairment expenses, including a $US4.1 billion writedown of CSL Vifor. Underlying net profit after tax and amortisation remained at about $US3.1 billion, down 2% at constant currency.
Interim chief executive and managing director Gordon Naylor said at the time CSL was positioned to return to sustainable growth, supported by the plasma market, a simplified business and targeted investment.
Investors appear increasingly willing to back that assessment.
The Australian Financial Review reported this week that CSL has become the top-held position among 62 Australian equity funds tracked by Morgan Stanley, following a buying spree by local fund managers over the past month.
Centennial Asset Management portfolio manager Michael Carmody told the AFR his firm bought CSL following the August result, which he believed reduced the risk of further earnings downgrades after a prolonged period of disappointment.
Confidence has also been helped by signs Mr Naylor has stabilised CSL’s core plasma business, while investors who had abandoned or reduced their exposure to the company have been attracted back by a valuation well below CSL’s historic highs.
Merlon Capital’s Neil Margolis told the AFR that repeated broker downgrades had eventually created what he described as an “absolute best-case scenario”, with both the share price and earnings expectations pushed low enough for positive news to produce a sharp rebound.
The turnaround was accelerated when analysts began upgrading earnings forecasts after CSL’s shares reached about $90, catching quantitative funds that had positioned themselves underweight in the stock.
The recovery has been dramatic. CSL shares rose about 40% during August alone, according to fund manager Ten Cap, while the stock has roughly doubled from its early-June low.
CSL has also been buying its own shares. The company announced a further $A1.1 billion buyback alongside its full-year results and has lodged a series of buyback updates through September. CSL’s ASX announcements show buyback updates on 8, 15, 16, 17, 18, 22, 23 and 24 September.
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But the recovery remains a long way from restoring CSL to its former market valuation. Its shares traded above $300 around two years ago, and Carmody cautioned that the company would need to rebuild credibility in its business model and earnings before attracting the valuation investors were once prepared to pay.
For now, however, the market’s response since August suggests investors have interpreted CSL’s multibillion-dollar statutory loss less as another deterioration in the business than as a potential clearing of the decks after a bruising run of downgrades, impairments and falling expectations.
Healius sells off another limb
Healius has cleared another non-pathology business from its books, potentially opening the way for private equity bidders to pursue what is now largely a pure-play pathology company.
The group announced last week it would sell clinical research business Agilex Biolabs to Novotech for $160 million, including debt, with the transaction expected to deliver Healius about $155 million in net cash proceeds after separation and transaction costs.
Healius bought Agilex for $301 million in 2021, while the latest sale values the business at 19.8 times its FY26 earnings before interest, tax, depreciation and amortisation.
Healius chief executive Paul Anderson said the sale delivered “attractive value for Healius shareholders” and would allow the company to continue focusing on growing and improving its core pathology business.
That focus could also make Healius a simpler takeover proposition.
The Australian reported that three groups, believed to be private equity firms, are circling the company, including a US-based suitor advised by Goldman Sachs, while Sydney-based Pacific Equity Partners has also been linked to potential interest.
At least one prospective buyer has already approached Healius about acquisition talks but was told the company would not engage until the Agilex sale process had concluded, according to the report.
The sale leaves Healius overwhelmingly focused on pathology, where it is Australia’s second-largest operator behind Sonic Healthcare, with about a quarter of the market. Australian Clinical Labs is the third-largest provider.
It is the latest in a series of major divestments by the company.
Healius sold its primary healthcare operations to BGH Capital for about $500 million in 2020 and its diagnostic imaging business to Affinity Equity Partners for $965 million in 2024.
The potential takeover interest comes as Healius continues to argue that parts of Australia’s pathology network require greater government support. The company is lobbying the Commonwealth for increased funding for regional pathology services, warning some services are financially unsustainable and could close without additional funding.
Healius shares have fallen about 50% over the past year amid difficult conditions for pathology operators, although the stock rose 2c to 38c following news of the Agilex transaction, valuing the company at about $272 million.