Chapter 6

Segment Economics

Sonova reports two segments, but only one earns money. Hearing Instruments is 93% of continuing sales and about 98% of normalized operating profit; Cochlear Implants is 7% of sales, roughly 2% of profit, and posted a reported operating loss in FY2025/26. Inside Hearing Instruments, a high-margin Wholesale franchise gaining share organically is being partly offset by a lower-margin retail roll-up whose deal-driven growth is fading. That mix — not just the franc — shapes the reported margin.

Two segments, one profit engine

On the continuing basis Sonova reports today (Consumer Hearing reclassified to discontinued operations), the Hearing Instruments segment reached CHF 3,353.8 million of sales in FY2025/26 [1] against CHF 252.1 million for Cochlear Implants [2]. The profit split is more lopsided than the sales split. Hearing Instruments generated normalized EBITA of CHF 793.7 million at a 23.7% margin; Cochlear Implants contributed CHF 17.2 million at a 6.8% margin, and on a reported basis Cochlear Implants was a CHF 34.6 million operating loss after legal and legacy product-liability charges [3].

Sources: derived from segment sales and normalized EBITA, Annual Report 2025/26 [4] [5] (group normalized EBITA CHF 811.2 million [6]).

The three-year sales picture makes the asymmetry visible: the Hearing Instruments segment grew every year while Cochlear Implants, roughly flat for years, dropped sharply in FY2025/26.

Source: Hearing Instruments = Wholesale + Retail businesses; segment and business sales per FY2023/24, FY2024/25 and FY2025/26 filings [7] [8] [9].

For a cold reader, the practical translation is simple: to understand Sonova's economics is to understand its Hearing Instruments segment. Cochlear Implants matters for the narrative and for a piece of the growth rate, but it is close to a rounding error in the profit that supports the valuation.

Inside Hearing Instruments: two very different businesses

From FY2025/26 Sonova relabelled its two hearing-aid businesses: the manufacturing-and-distribution arm (Phonak, Unitron, Advanced Bionics wholesale) is now the Wholesale business, and the owned store network (AudioNova and related banners) is the Retail business [10]. They sit in one segment but earn their growth in opposite ways.

Source: Wholesale (Hearing Instruments business) and Retail (Audiological Care business) sales, FY2023/24–FY2025/26 filings [11] [12] [13].

Wholesale is the franchise and it is accelerating. Wholesale sales grew 0.7% in local currencies in FY2023/24 — held back by the non-renewal of a large contract — then 8.5% in FY2024/25 and 9.5% in FY2025/26 as the Phonak Audéo Infinio and Sphere Infinio platforms shipped [14] [15] [16]. Against a market Sonova sizes at 4–6% structural growth, high-single-digit and, in the second half of FY2025/26, double-digit Wholesale growth is share being taken. This is the part of Sonova that owns the chip, the deep-learning audiology and the professional channel — and its growth is almost entirely organic.

Retail grows by buying, and that engine is slowing. The AudioNova store network grew 9.2% in local currencies in FY2023/24, 6.4% in FY2024/25 and 5.1% in FY2025/26 — decelerating even as Wholesale sped up [17] [18] [19]. More telling is the split between organic and bought growth: acquisitions added 4.5 points of Retail growth in FY2023/24, 3.1 in FY2024/25 and just 1.3 in FY2025/26, while organic growth ran 4.7%, 3.3% and 3.8% [20] [21] [22]. Group-wide, bolt-on acquisitions added only 0.6 points to Hearing Instruments growth in FY2025/26, or CHF 18.7 million of sales [23]. So the reassuring answer to a question a value investor asks first — how much of the top line is bought rather than earned — is: very little, and less each year.

The two businesses also carry different margins, and that is the quieter story behind the group's reported compression. Retail spends more on sales and marketing per franc of revenue than the rest of Sonova, so as its share of the mix rose through FY2023/24, group sales-and-marketing costs climbed from 33.5% to 35.3% of sales [24]. Part of the four-point reported EBIT-margin step-down the report has traced (Financials and Estimates) is therefore a segment-mix effect — a bigger slice of a structurally lower-margin business — rather than erosion in the core franchise. The evidence for that reading is the Hearing Instruments segment's own margin, which rose to a normalized 23.7% in FY2025/26 from 22.6% the year before, helped by cost-efficiency measures in Retail and operating leverage in Wholesale [25].

The counter to that read: the retail roll-up also absorbs the acquisition cash and lease liabilities that dilute per-share returns, and organic Retail growth of 3–4% is barely at the market rate — so the segment mix is a genuine and probably permanent drag on group margin, not only an optical one. It is manageable, not free.

Cochlear Implants: small, and now shrinking

Cochlear Implants has been a quiet passenger for years. On the earlier reporting basis its sales sat near CHF 280–300 million for five years, then fell 11.1% in local currencies (17.1% in francs) to CHF 252.1 million in FY2025/26 [26].

Source: Cochlear Implants external segment sales, FY2021/22–FY2025/26 filings [27].

Three forces pulled it down at once. In China, the introduction of volume-based procurement (VBP) cut prices and hampered the business; excluding China, system sales were actually up 0.7% in local currencies [28]. In developed markets, the largest competitor — Cochlear Ltd — launched a new sound processor in the second half, and Sonova cited that competitive pressure directly [29]. And the upgrade cycle tapered: sales of upgrades and accessories fell 13.1% as recipients had already adopted the Marvel processor introduced in 2021 [30]. The swing is real: only a year earlier the segment grew 9.5% in local currencies on double-digit system-sales gains [31].

The profit consequence is disproportionate to the segment's size. Cochlear Implants' normalized EBITA margin halved to 6.8% from 11.4%, and on a reported basis the segment swung to a CHF 34.6 million operating loss [32] — a year earlier its adjusted EBITA had been CHF 42.8 million at a 14.1% margin [33]. That loss is why the group's reported EBITA of CHF 724.2 million sits below the Hearing Instruments segment's CHF 758.4 million [34] [35]. Cochlear Implants is a genuine structural negative — VBP pricing and a resurgent competitor are not one-off — but at 7% of sales and 2% of normalized profit, it dents the reported number more than it dents the franchise. If it were carved out, the retained business would look stronger, not weaker.

Where the growth comes from geographically

The regional cut confirms that the growth is broad and that the United States is the standout. Every region grew in local currencies in FY2025/26; the U.S. led at 9.1%, on Wholesale share gains across the commercial market and the Department of Veterans Affairs after the Virto R Infinio launch [36].

Source: Sales by region, Annual Report 2025/26 [37].

EMEA remains the anchor at 53% of sales, growing 4.8% on share gains plus bolt-on retail acquisitions in Germany, Italy and France [38]. Asia/Pacific looks weakest at 1.4%, but that number hides a split: Wholesale and Retail grew strongly in Australia and Japan and the Chinese retail business posted double-digit growth, while the Cochlear Implants headwind in China dragged the regional total down [39]. The one region-level distortion to keep in mind is currency: a strong franc cut FY2025/26 reported sales by CHF 221.0 million, six percentage points of growth, so the reported-franc figures understate the operating momentum the local-currency column shows [40].

What the segment lens adds

Broken apart, Sonova reads better than its consolidated numbers suggest, with two honest qualifications. The profit engine — Wholesale hearing instruments — is taking share, growing high-single-digits organically, and expanding its margin; the reported group weakness is substantially a shrinking, low-profit Cochlear Implants unit plus a lower-margin retail mix, neither of which impairs the core franchise. The qualifications are that Cochlear Implants faces a structural, not cyclical, squeeze, and that the retail roll-up permanently dilutes group margin while consuming acquisition cash. The three watch items that would change this read are concrete: whether Wholesale holds its share premium once competitors ship rival deep-learning platforms; whether Retail's organic growth stays above the low-single digits as acquisitions fade; and whether Cochlear Implants stabilizes ex-China or keeps sliding as Cochlear Ltd presses its developed-market launch.