Goldman Sachs downgraded EssilorLuxottica to Neutral, primarily because of moderating growth expectations for AI glasses.

Overview

This is a Goldman Sachs rating-change report on EssilorLuxottica. Its core conclusion is that AI glasses are accelerating the company's near-term revenue growth, but this driver faces a higher comparison base, more competitors entering the market and uncertainty surrounding changes to Meta's glasses business model in the second half of FY26. Goldman Sachs therefore lowered its growth assumptions, target price and rating.

Core views

Goldman Sachs continues to recognize the long-term opportunity in AI glasses, but believes current market expectations for growth from the second half of FY26 through FY28 are too high. The report estimates that 7 million AI glasses were sold in FY25, generating approximately €1.6bn of revenue, or about 6% of group revenue. However, part of the strong growth in Q4 25 came from channel stocking by third parties and is difficult to repeat in Q4 26. Goldman Sachs' model indicates group constant-currency revenue growth of +5% in H2 26e and +3% in Q4 26e, below Visible Alpha consensus of +8% and +6%, respectively.

Analysis framework

The report uses three main analytical approaches: first, comparison-base analysis and segment-growth decomposition to assess the marginal contribution of AI glasses to group revenue growth; second, tracking the launch schedules of new products from Google, Samsung, Apple, Snap and potential Chinese manufacturers to evaluate competitive pressure; and third, analyzing differences in functionality, pricing and value-chain allocation between Meta glasses and Ray-Ban Meta to assess the impact of business-model changes on revenue and margins. For valuation, the report weights DCF and relative valuation equally and references the growth-adjusted valuation relationships of MedTech and Luxury peers.

Methodology notes

• Valuation methodsBlended DCF and P/E relative valuation

  The target price is derived from an equal-weighted blend of DCF and multiple-based valuation.

  The 12-month target price of €200 is derived from an equal-weighted blend of DCF intrinsic value of €202.7 and multiple-based value of €197.8. The DCF uses a 9.3% WACC and +3.0% terminal growth rate, while the multiple-based method uses a 24x P/E multiple.

• Earnings forecastsConstant-currency revenue growth versus consensus

  Revenue, EBIT and EPS are compared between GSe and Visible Alpha consensus.

  Goldman Sachs lowered its FY26/27/28e constant-currency revenue growth forecast to an average of +7.9%, noting that its forecast is approximately 100-200bps below consensus.

• Industry and competitionAI-glasses product-cycle analysis

  Growth sustainability is assessed through product launch timing, price points and value-chain allocation.

  The report focuses on Google Android XR, Samsung Galaxy smart glasses, potential entry by Apple, and the impact of Meta's own lower-priced glasses on the Ray-Ban Meta and Wearables portfolios.

• Factor explanationGS Factor Profile

  Goldman Sachs characterizes stock attributes using Growth, Financial Returns, Multiple and Integrated factors.

  Growth is based on forward sales, EBITDA and EPS growth; Financial Returns is based on ROE, ROCE and CROCI; Multiple is based on valuation metrics including P/E, P/B and EV/EBITDA.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• EssilorLuxottica (ESLX.PA)

  Core coverage name; downgraded from Buy to Neutral.

  Strengths

  Owns Ray-Ban Meta, Oakley Meta, lenses, optical retail channels and a MedTech product portfolio. AI glasses and innovative products such as Nuance Audio and Stellest provide medium- to long-term growth optionality.

  Weaknesses

  The AI-glasses comparison base rises significantly in the second half of FY26, potentially reducing its growth contribution; lower revenue-growth estimates have led to reductions in the target price and valuation multiple.

  Comparison

  Goldman Sachs' FY26/27/28e constant-currency revenue growth forecast is approximately 100-200bps below Visible Alpha consensus, while the 24x target P/E is also below the previous 28x.

  Risks

  AI glasses fail to become a mass-market category, competition intensifies, product launches are delayed, the core business slows, or operating leverage falls below expectations.

• META PLATFORMS INC

  Party involved in the AI-glasses partnership and potential value-chain changes.

  Strengths

  Meta glasses offer similar functionality at a lower price, potentially expanding the AI-glasses user base and product coverage.

  Weaknesses

  Meta glasses frames are manufactured by third parties such as Goertek, while EssilorLuxottica's role may shift toward lenses and distribution, reducing its revenue share of the overall value chain.

  Comparison

  Compared with Ray-Ban Meta Gen 2, Meta glasses offer similar functionality at a lower price point, which could change the Wearables product mix.

  Risks

  If lower-priced Meta glasses cannibalize Ray-Ban Meta, they could weigh on EssilorLuxottica's reported Wearables growth; however, higher lens participation and margins could improve the earnings mix.

• Potential competitors including Google / Samsung / Apple / Snap

  Important variables in the AI-glasses competitive landscape over the next 18 months.

  Strengths

  New entrants could broaden awareness of the AI-glasses category and increase consumer adoption.

  Weaknesses

  A concentrated wave of product launches could weaken EssilorLuxottica's current leadership position and reduce its growth rate.

  Comparison

  The report mentions Google Android XR, Samsung Galaxy smart glasses, potential entry by Apple in 2027, Snap and potential Chinese manufacturers.

  Risks

  If EssilorLuxottica fails to become the lens partner for new platforms, expanding competition may represent greater share pressure than incremental opportunity.

Key data

• RatingNeutralEffective from 2026-07-14; downgraded from Buy.
• 12-month target price€200.00Previous target price was €230.
• Current share price€169.40Disclosed on the report cover.
• Implied upside18.1%Below the approximately 27% upside for Goldman Sachs Buy-rated stocks and the approximately 20% industry average.
• Average FY26/27/28e constant-currency revenue growth+7.9%Previously 8.9%; the report also compares it with consensus of +9.5%.
• H2 26e / Q4 26e constant-currency revenue growth forecast+5% / +3%Visible Alpha consensus is +8% / +6%.
• FY25 AI-glasses volume and revenue7 million units; approximately €1.6bnApproximately 6% of group revenue.
• FY26-28e AI-glasses revenue CAGR32%Previous assumption was 44%.
• AI-glasses contribution to group revenue growth2-3 percentage pointsPreviously 3-5 percentage points.
• WACC9.3%Raised from 8.8% due to higher beta and share-price volatility.
• Target P/E multiple24xReduced from 28x to reflect lower growth expectations.
• Market capitalization / enterprise value€77.8bn / €87.2bnKey Data on the report cover.

Impact & implications

The investment implication is that EssilorLuxottica's AI-glasses narrative remains attractive, but near-term share-price catalysts have weakened, requiring the market to recalibrate expectations for Wearables growth, margins and valuation multiples. The downgrade does not reject the category's long-term opportunity; rather, it reflects Goldman Sachs' view that the current valuation is broadly consistent with the growth outlook and that the risk/reward no longer meets the Buy threshold.

Risks

• AI glasses fail to develop from a niche product into a mass-market consumer category, causing Wearables volume and revenue to fall materially short of expectations.
• Google, Samsung, Apple, Snap and potential Chinese manufacturers accelerate the launch of competing products, weakening EssilorLuxottica's leading share.
• Ray-Ban Meta, Oakley Meta, Nuance Audio or future smart-glasses platforms face regulatory, R&D, manufacturing or regional-launch delays.
• Traditional optical and sunglass demand slows, or innovative categories partially cannibalize the core business, causing overall revenue growth to miss expectations.
• Investment requirements for emerging categories exceed expectations, or slowing revenue reduces operating leverage, weighing on EBIT, EPS and valuation multiples.
• Changes in the Meta glasses value-chain allocation cause EssilorLuxottica to assume more lens and distribution responsibilities, potentially reducing its share of Wearables revenue.

What to watch

• Comments in the H1 earnings call on Meta glasses' business model, value-chain allocation, and impact on growth and margins.
• Whether Q2 26e, H2 26e and Q4 26e constant-currency revenue growth slows as Goldman Sachs expects.
• AI-glasses volume, ASP, product mix and contribution to group revenue growth in the second half of FY26.
• Launch timing, pricing and functionality of Google Android XR, Samsung Galaxy smart glasses, potential Apple products and other competitors.
• Whether EssilorLuxottica establishes lens or distribution partnerships with new AI-glasses platforms.
• Whether Wearables gross margins and operating leverage improve under a more lens-oriented, asset-light model.
• Adoption rates, reimbursement coverage and growth contribution from MedTech products such as Nuance Audio and Stellest.