Owlet Q2 2026 earnings: Subscription growth lifts underlying margins

Owlet (NYSE: OWLT) reported Q2 2026 revenue of $33.9 million for the quarter ended June 30, up 29.9% from $26.1 million, while diluted EPS was -$0.05 versus -$2.35 a year earlier. A one-time tariff refund materially lifted reported profitability, although subscription growth and a 54.0% gross margin excluding the refund also indicate underlying improvement.

Core earnings data

Gross profit increased faster than operating expenses, allowing Owlet to move from an operating loss to operating income. The year-over-year improvement in net loss was larger, but that comparison was also affected by a $34.8 million warrant liability adjustment in Q2 2025.

GAAP gross margin and adjusted EBITDA include the tariff refund benefit. The prior-year figures reflect the revised financial information presented in the earnings release.

Business and segment performance

Hardware remained Owlet’s largest business, with revenue rising to $30.6 million from $25.2 million. That represents growth of about 21.4% and accounted for most of the dollar increase in total revenue.

Subscription revenue rose to $3.2 million from $0.9 million and represented about 9.4% of total revenue, compared with approximately 3.4% a year earlier. Subscription gross margin was 68.4%. Management attributed the broader gross-margin improvement, excluding the refund, partly to Owlet360 subscription growth, along with favorable product mix and better fixed-cost absorption.

The tariff refund boosted reported margins, but underlying profitability also improved

Owlet recognized a one-time $3.5 million tariff refund benefit in cost of revenue. This lifted GAAP gross margin to 64.4%; excluding the refund, gross margin was 54.0%, still 270 basis points above the prior-year period.

The same distinction applies to adjusted EBITDA. The reported figure was $6.7 million, including a $3.75 million tariff refund impact, while adjusted EBITDA excluding that benefit was $2.9 million. The underlying result therefore improved by $2.4 million from Q2 2025 even without the one-time item.

Owlet also said net loss would have been $4.4 million without the $3.75 million tariff-related impact, rather than the reported loss of $0.6 million. Investors therefore need to separate the nonrecurring refund from improvements driven by subscription revenue, product mix, and operating leverage.

Profitability, cash flow and balance sheet

Operating expenses increased 33.1% to $20.1 million from $15.1 million, slightly faster than revenue. Management attributed the increase primarily to higher marketing spending because Prime Day promotional activity shifted from Q3 into Q2, as well as severance costs that included stock-based compensation.

Gross profit nevertheless increased by $8.4 million, more than the $5.0 million increase in operating expenses, producing $1.7 million of operating income. Below the operating line, Owlet recorded a $2.2 million loss on debt extinguishment and $0.7 million of net interest expense. The prior-year net loss included a much larger $34.8 million expense from the common stock warrant liability adjustment, compared with $0.1 million in Q2 2026.

Cash flow remained negative on a year-to-date basis. For the six months ended June 30, operating cash outflow was $5.3 million, improving from an $8.3 million outflow in the first half of 2025. Cash and cash equivalents declined to $30.9 million from $35.5 million at the end of 2025, while the line of credit increased to $17.1 million from $6.9 million. Accounts receivable rose to $33.1 million from $22.9 million, while inventory was comparatively stable at $15.7 million.

Prior-period financial statement revisions

Management identified errors primarily related to overstated stock-based compensation caused by valuation miscalculations in the employee stock purchase plan. Owlet determined that the errors were not material to previously issued periods, but correcting all of them in Q2 2026 would have been material to the quarter.

The company will therefore revise Q1 2026, quarterly and year-to-date periods in 2025, and the annual periods ended in 2025 and 2024. The Q2 release already reflects revised comparative information for the periods presented.

2026 outlook

Owlet maintained its full-year revenue range. Gross-margin and adjusted EBITDA guidance increased, but management said those changes reflected only the tariff refund and that underlying annual expectations were essentially unchanged.

The company described its second-half assumptions as measured. Because the profitability increases come entirely from the refund already recognized in Q2, the updated outlook does not signal a corresponding improvement in underlying second-half expectations.

Management perspective

Management identified subscriber growth as Owlet’s central strategic priority. Its longer-term framework calls for attracting approximately one million new customers annually, retaining families for at least two years, and eventually building a recurring base of more than one million subscribers.

CEO Kurt Workman also cited international expansion, pediatric telehealth, market-share gains, and Owlet’s pediatric dataset as growth levers. These statements are strategic goals rather than quantified 2026 financial guidance, and the release did not provide subscriber counts or retention data against which to measure progress.

Recent insider transactions

The supplied six-month summary reports 1,123,660 shares classified as purchases across seven transactions and 90,688 shares sold across three transactions, resulting in net purchases of 1,032,972 shares. Because the detailed records include stock awards, the aggregate should not be interpreted as purely discretionary open-market buying.

The supplied detailed records report transaction values but do not provide the number of shares for each individual transaction.

Risks investors should watch

• The tariff benefit is not recurring: The refund added $3.5 million to gross profit and $3.75 million to adjusted EBITDA. Reported margins and profitability will not receive the same benefit in subsequent periods unless another similar item occurs.
• Expense growth remains elevated: Operating expenses increased faster than revenue in Q2 because of promotional timing and severance costs. Sustaining operating profitability will depend on gross-profit growth continuing to outpace these expenses.
• Subscription execution must be demonstrated: Subscription revenue grew rapidly, but Owlet did not disclose subscriber or retention figures. Management’s long-term recurring-revenue strategy depends on customer acquisition, retention, and successful scaling of Owlet360.
• Cash generation remains negative: First-half operating cash flow was still an outflow, cash declined, and use of the line of credit increased. These trends remain important even though quarterly operating income turned positive.
• Financial statement revisions affect comparability: The stock-compensation errors were deemed immaterial to prior periods, but their correction would have been material if recorded entirely in Q2. Investors should monitor the revised filings and future control disclosures.

Summary

Owlet’s Q2 2026 results combined 29.9% revenue growth, expanding subscription revenue, and a move to positive operating income. The tariff refund substantially amplified reported gross margin and adjusted EBITDA, but the refund-adjusted figures also improved from a year earlier. The main follow-up points are whether subscription growth can continue, whether operating profitability persists without the one-time benefit, and whether Owlet can convert improving earnings into positive cash flow.