Digital And AI Advances Will Expand Global Eye Care Markets

Key Takeaways

• Growth in recurring procedure and service revenues, powered by product launches and portfolio integration, drives higher margins and sustained outperformance versus expectations.
  
• Expansion in digital, AI-enabled solutions and emerging market access positions the company to benefit from growing eye care demand and improved earnings stability.
  
• Mounting cost pressures, digital disruption, geopolitical risks, and intensified competition threaten profitability, revenue stability, and technological competitiveness for Carl Zeiss Meditec.

Catalysts

Operates as a medical technology company in Germany, rest of Europe, North America, and Asia.

• Analyst consensus highlights VISUMAX 800's strong launch in China as a catalyst, but with recurring procedure revenue now over 50% of group sales and a mid-double-digit growth rate in premium SMILE-related procedures, VISUMAX 800 adoption could drive not just higher ASPs but also an accelerated replacement cycle and upsell opportunities, significantly boosting recurring revenues and gross margin well above expectations.
  
• Analysts broadly agree the DORC consolidation will drive U.S. and global recurring revenue, but early double-digit growth in DORC's installed base and consumables, together with portfolio bundling and increasing workflow integration, could create a flywheel of recurring sales and synergistic cataract-retina cross-selling, materially outperforming margin and revenue growth estimates.
  
• With a rapidly aging global population and rising incidence of chronic eye diseases like diabetic retinopathy and cataracts, the structural expansion of procedure volumes directly feeds into Carl Zeiss Meditec's broad diagnostic, refractive, and surgical portfolio, offering multi-year double-digit organic top-line growth potential as access and treatment rates increase, especially in underpenetrated emerging markets.
  
• The incoming CEO's deep track record in Chinese market building and digital innovation, combined with an enhanced solutions-based, digital and AI-enabled product strategy, positions the company to capture a disproportionate share of the digital and telehealth transformation in eye care, accelerating margin expansion through high-value software, connectivity, and workflow platforms.
  
• The company's stable order backlog, plateauing after pandemic distortions, in combination with a higher share of subscription
• and service-driven revenue, points to a structurally lower risk profile and greater earnings resilience, allowing for steady EBITA margin improvements toward or above the 16–20 percent range as operational leverage kicks in.

Carl Zeiss Meditec Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Carl Zeiss Meditec compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Carl Zeiss Meditec's revenue will grow by 9.2% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 7.2% today to 13.2% in 3 years time.
• The bullish analysts expect earnings to reach €373.3 million (and earnings per share of €4.2) by about July 2028, up from €155.9 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 21.3x on those 2028 earnings, down from 29.2x today. This future PE is lower than the current PE for the GB Medical Equipment industry at 22.8x.
• Analysts expect the number of shares outstanding to decline by 2.85% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 5.62%, as per the Simply Wall St company report.

Carl Zeiss Meditec Future Earnings Per Share Growth

Risks

• Intensifying global cost pressures, including volume-based procurement and pricing controls in large markets like China, are eroding premium pricing and compressing gross margins, which may result in lower future profitability.
  
• Accelerating digital disruption and competition from AI-driven diagnostics and other tech-based health solutions threaten the relevance of Carl Zeiss Meditec's hardware-focused business, potentially slowing revenue growth and making the company more vulnerable to margin erosion as new business models take hold in the medical sector.
  
• Ongoing geopolitical instability, specifically uncertainties related to US-EU-China trade tariffs, are creating persistent risks to the company's global supply chains and pricing, which could elevate costs and dampen both revenue and net margin over the long term.
  
• The company's dependence on rapid innovation cycles and effective R&D is highlighted by reduced R&D investment for cost control; this could lead to falling behind competitors technologically, undermining future market share, revenue, and earnings quality.
  
• Rising competition from lower-cost manufacturers, potential commoditization of core products, and increasing bargaining power of large healthcare group customers may lead to price wars, further margin contraction, and inconsistent revenue streams for Carl Zeiss Meditec.

Valuation

• The assumed bullish price target for Carl Zeiss Meditec is €84.4, which represents two standard deviations above the consensus price target of €63.03. This valuation is based on what can be assumed as the expectations of Carl Zeiss Meditec's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €86.5, and the most bearish reporting a price target of just €41.0.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be €2.8 billion, earnings will come to €373.3 million, and it would be trading on a PE ratio of 21.3x, assuming you use a discount rate of 5.6%.
  
• Given the current share price of €52.05, the bullish analyst price target of €84.4 is 38.3% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.