Grove Q2 FY2026 earnings: Cost cuts narrow losses despite a 16.9% revenue decline

Grove Collaborative (NYSE: GROV) reported fiscal Q2 2026 net revenue of $36.6 million, down 16.9% year over year, while GAAP diluted EPS improved to -$0.03 from -$0.10. Lower operating expenses narrowed the net loss to $0.9 million and lifted adjusted EBITDA to positive $0.5 million, despite continued customer contraction and a lower gross margin.

Core earnings data

Revenue declined primarily because Grove entered the year with fewer active customers. Management attributed that smaller base to reduced advertising investment under its profitability-first strategy and customer attrition following ecommerce platform disruptions in 2025; higher DTC revenue per order provided only a partial offset.

Profitability improved because operating expenses fell faster than gross profit. Adjusted EBITDA was positive for a third consecutive quarter, and quarterly operating cash flow remained positive.

Adjusted EBITDA is a non-GAAP measure and should be considered alongside Grove’s GAAP net loss.

Customer and channel performance

Net revenue increased 1.0% from the first quarter of 2026. Growth through non-DTC channels, mainly QVC and Amazon, drove the sequential improvement, while DTC revenue declined slightly.

The DTC business continued to show a sharp gap between order volume and order value. Fewer active customers drove a 23.6% decline in orders, while a higher-priced product mix and more efficient promotions increased revenue per order by 6.1%.

The higher order value was not enough to offset the decline in customers and orders. Grove said category expansion increased the mix of higher-priced products, while its Grove Green Rewards program helped make promotional spending more targeted. The comparison also benefited from a prior-year test that had temporarily generated more low-value orders.

Grove launched a new subscription experience during the quarter, completing the final major element of its early-2025 technology migration. Management plans to shift its focus from foundational platform work toward customer-facing improvements.

Lower costs offset customer contraction, but not the revenue decline

Operating expenses decreased by approximately $7.5 million, exceeding the roughly $4.8 million decline in gross profit. That difference explains why the operating loss and net loss narrowed even as revenue remained well below the prior-year level.

The expense reduction came from lower personnel costs following headcount reductions, lower fulfillment expenses due to fewer orders and lower outbound shipping rates, and reduced advertising spending. These measures supported near-term profitability, but lower advertising investment was also one reason Grove entered 2026 with fewer active customers and repeat orders.

Gross margin moved in the opposite direction, falling to 53.6%. Grove attributed the decline primarily to one-time inventory disposals and the absence of a prior-year benefit from selling inventory that had previously been reserved. A more targeted promotional strategy partially offset those pressures, indicating that the quarter’s profitability improvement was driven mainly by lower expenses rather than stronger product margins.

Cash flow and balance sheet

Quarterly operating cash flow increased to $1.3 million, supported by favorable working-capital movements, including lower inventory during the quarter, and the addition of non-cash expenses back to the net loss.

Cash, cash equivalents and restricted cash totaled $11.4 million at June 30, 2026, up from $10.4 million at March 31. Positive operating cash flow drove the increase, partly offset by higher capitalized spending on ecommerce platform enhancements.

Full-year guidance

Grove reaffirmed its fiscal 2026 outlook after reporting Q2 results consistent with the expectations underlying the guidance raised in the prior quarter. The company also continues to expect sequential revenue improvement in both remaining quarters of 2026.

Risks investors should watch

• Continued customer contraction: DTC active customers and orders declined by more than 23%, and the increase in revenue per order did not offset that lower volume.
• Trade-off between advertising and growth: Reduced advertising is helping control expenses, but management also identified it as a cause of fewer new customers and repeat orders.
• Gross-margin pressure: One-time inventory disposals and the absence of a prior-year inventory benefit reduced gross margin, making current profitability gains more dependent on expense reductions.
• Execution of the sequential growth plan: Full-year guidance assumes revenue improves sequentially in both remaining quarters, while Q2’s 1.0% sequential increase came from non-DTC channels and DTC revenue still declined slightly.
• Customer-experience recovery: Grove is relying on its new subscription experience and completed technology migration to support future growth, but the reported Q2 customer metrics do not yet show a DTC recovery.

Summary

Grove’s fiscal Q2 2026 results showed improving profitability and positive cash generation despite a substantial year-over-year revenue decline. Expense reductions and higher DTC order values helped narrow losses, but the smaller active-customer base, lower order volume and weaker gross margin remain the central operating challenges. The next indicators to monitor are whether the new subscription experience can stabilize DTC activity and whether Grove delivers the sequential revenue gains embedded in its reaffirmed full-year outlook.