This article first appeared on GuruFocus .
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Net Revenue:Declined 25% year over year to $181 million in Q2 2026, at the favorable end of guidance.
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First Order Revenue:Declined approximately 40% year over year in Q2, driven by IL MAKIAGE.
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Repeat Order Revenue:Declined approximately 20% year over year in Q2.
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Average Order Value (AOV):Declined approximately 8% year over year in Q2, largely due to IL MAKIAGE.
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Gross Margin:68.7% in Q2, down from 72.3% in the prior year, a compression of approximately 360 basis points.
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Adjusted EBITDA:$13 million in Q2, ahead of the $8 million to $10 million outlook.
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Adjusted Diluted EPS:$0.20 for the quarter.
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Free Cash Flow:Increased by $14 million in Q2 but decreased by $8 million in the first half of the year.
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Cash Position:$561 million in cash, cash equivalents, and investments at quarter end; $350 million credit facilities remain undrawn.
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Share Repurchases:Repurchased 5.6 million shares for $80 million in Q2; 11.7 million shares for $163 million year-to-date, reducing ordinary shares outstanding by approximately 20%.
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Q3 2026 Outlook:Net revenue expected to decline approximately 5% year over year; adjusted EBITDA expected between $18 million and $20 million.
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Full-Year 2026 Outlook:Net revenue expected to decline approximately 19% year over year; adjusted EBITDA expected between $30 million and $32 million.
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SpoiledChild Revenue:On track to grow at least 35% in 2026 and approach $350 million in net revenue.
Release Date: September 09, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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SpoiledChild delivered a strong quarter and is on track to grow at least 35% in 2026, approaching $350 million in net revenue.
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METHODIQ, launched only months ago, is showing promising early results and is expected to exceed SpoiledChild's first-year revenue.
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ODDITY's integrated platform, including ODDITY LABS and computer vision technology, is driving innovation in hyperpigmentation and other categories.
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The company maintains a strong liquidity position with $561 million in cash and investments, and continues to repurchase shares opportunistically.
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Management expects sequential improvement in revenue decline, with Q3 net revenue projected to decline only 5% year-over-year, indicating the worst may be behind.
Negative Points
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IL MAKIAGE continues to suffer from an ad account dislocation with its largest advertising partner, leading to sharply higher customer acquisition costs.
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ODDITY's Q2 net revenue declined 25% year-over-year, driven by a significant drop in IL MAKIAGE sales.
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Gross margin compressed by 360 basis points year-over-year due to lower AOV and product mix shift.
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The company faces compounding effects from lost repeat sales, with repeat order revenue declining 20% in Q2.
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Full-year 2026 revenue is expected to decline approximately 19%, and Q4 guidance implies a potential slowdown from Q3, reflecting ongoing uncertainty.
Q & A Highlights
Q: Assuming the ad dislocation issue is resolved by year-end, should we anticipate a more typical revenue growth year for IL MAKIAGE in 2027, or could the issue linger or compound? Additionally, can you discuss international plans for SpoiledChild now that the brand has scaled nicely? A: Oran Holtzman (Co-Founder and CEO): We believe that once we solve the problem, we plan to go back to growth with IL MAKIAGE. We have amazing products in the pipeline that are ready to play. We are not there yet, but we are closer than before based on data suggesting an audience drift from the algorithm that we are trying to retrain. For SpoiledChild, we will continue to expand it internationally, with more than eight products and categories planned for next year.
Q: Can you elaborate on the assumptions behind the EBITDA and revenue guidance, specifically regarding seasonality and repeat revenue rates versus historical trends? A: Lindsay Drucker Mann (Global CFO): There is no broad-stroke change to how we think about the business seasonality. The first half of the year tends to be stronger for acquisition, with repeat flowing through in the second half. This year is unique because much of our acquisition activity was spent towards testing. Repeat trends remain very strong, with company-level net revenue repeat rates well in excess of 100% over 12 months, which supports the sequential improvement expected in the second half.
Q: What learnings have you had from the remediation process, and what changes might be needed to make the business more resilient going forward? A: Oran Holtzman (Co-Founder and CEO): We have learned a lot and are now very deep in the details of how the algorithms work. We are increasing efforts to fix the problem and make the business more resilient by expanding distribution and channels. The key to the business is data, and a big portion must remain D2C. We are happy with the ad partner's commitment to helping us solve this. Lindsay Drucker Mann (Global CFO): The resiliency of our model is evident, as we have many great things to discuss regarding SpoiledChild and METHODIQ despite the IL MAKIAGE challenges. We have more brands, categories, and products to rely on than in the past.
Q: The annual revenue growth guide of negative 19% implies a Q4 deterioration to negative 10% to 11% from negative 5% in Q3. What accounts for that, and what drove the 8% increase in the "other" revenue line? A: Lindsay Drucker Mann (Global CFO): For Q3, we are guiding to a 20-point sequential improvement because we believe the worst of the acquisition-driven dislocation is behind us, with more repeat in the base business and strong SpoiledChild performance. For Q4, we are being conservative due to unknowns around budget allocation towards testing, which is inefficient for revenue generation. The "other" revenue line is Israel, which has been volatile due to the war dynamics and our store base there.
Q: How has your marketing and customer acquisition strategy changed for SpoiledChild since the disruption, and what are the investment needs and growth targets for METHODIQ in 2027? A: Oran Holtzman (Co-Founder and CEO): SpoiledChild is seeing great demand despite the dislocation's lesser impact, and we are generating nice returns on spend. METHODIQ, launched less than a year ago, is expected to deliver higher first-year revenue than SpoiledChild. We launched with 30 products and have been surprised by our ability to drive demand for both prescription and non-prescription products. For 2027, we are excited about longevity and metabolic health, planning to deliver legally available prescription injectable and peptide therapies.
Q: Beyond the near-term marketing hiccup, how should we think about the progression of the business, including Brand 4 and the progress of AI within ODDITY Labs? A: Oran Holtzman (Co-Founder and CEO): We continue to grow SpoiledChild and METHODIQ, with SpoiledChild having an amazing pipeline for new categories next year. Brand 4 is planned to launch in 2027. ODDITY Labs has made great progress, and we are leveraging AI to speed up molecular discovery. We are very bullish on the potential and speed it can bring to the business.
Q: What did you learn from SpoiledChild's ramping that informs your view for METHODIQ's year two, and is it too early to see repeat rate trends for METHODIQ? A: Oran Holtzman (Co-Founder and CEO): For us, the first few months are always about testing, finding the right audience, fixing unit economics, and then scaling. We did this with SpoiledChild and plan to do the same with METHODIQ. We are not planning to have constraints on METHODIQ's growth next year, but we must account for the costs associated with the first few years of any brand.
Q: What is the current mix of try-before-you-buy versus buy, and is the Q2 gross margin compression structural or recoverable? A: Lindsay Drucker Mann (Global CFO): We have shifted part of our acquisition away from try and towards buy without notable impact on unit economics, and we believe we can move 50% or more of acquisition to buy. We have no plans to eliminate the try-before-you-buy model. The gross margin compression is not structural; it was driven by lower AOV. Once the acquisition dislocation improves, we will optimize for AOV again, which should support gross margin. Oran Holtzman (Co-Founder and CEO): We haven't optimized METHODIQ's gross margin yet, so we expect meaningful improvement there as well.
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
