ODDITY Q2 2026 Earnings: Revenue Falls 25% amid IL MAKIAGE Dislocation

ODDITY (NASDAQ: ODD) reported Q2 2026 net revenue of $180.5 million, down 25% from $241.1 million a year earlier, while GAAP diluted EPS fell to $0.24 from $0.79. The advertising-algorithm dislocation affecting IL MAKIAGE weighed on results, offsetting double-digit growth at SpoiledChild and early contributions from METHODIQ.

Core Financial Results

Revenue contraction was accompanied by a sharper decline in gross profit and a 3.6-percentage-point reduction in gross margin. Selling, general and administrative expenses increased despite lower revenue, causing the company to swing from a $57.1 million operating profit to a $1.3 million operating loss.

The 25% revenue decline was at the favorable end of ODDITY’s previous guidance for a 25% to 30% decline. Adjusted EBITDA of $12.9 million was also above the company’s prior range of $8 million to $10 million.

Adjusted EBITDA and adjusted diluted EPS are non-GAAP measures. Financial results are rounded, which may affect calculated percentage changes.

Business and Channel Performance

IL MAKIAGE remained the main source of pressure. ODDITY described the issue as a technical dislocation in the advertising algorithm operated with its largest advertising partner. The company has been testing ways to correct signal distortion and retrain the algorithm, and management believes the account is progressing toward normalization.

The newer brands performed differently. SpoiledChild generated double-digit Q2 revenue growth and remains on track, according to management, to grow at least 35% from 2025 and approach $350 million in 2026 net revenue. METHODIQ’s early performance led ODDITY to expect its first-year revenue to exceed SpoiledChild’s first-year result, although no quarterly METHODIQ revenue was disclosed.

Online direct-to-consumer revenue, which accounted for 96% of total revenue, declined about 26% to $174.1 million from $235.2 million. Revenue from other channels increased to $6.5 million from $6.0 million, but represented only 4% of the total and therefore could not materially offset the decline in the core online channel.

Profitability, Cash Flow, and the Balance Sheet

Cost of revenue declined more slowly than sales, contributing to the lower gross margin. At the same time, SG&A expense rose about 6.8% to $125.2 million from $117.3 million. This combination explains the sharp operating deterioration even though the company remained profitable on a GAAP net-income basis.

Positive net income was supported by $16.5 million of net financial income. The quarter included a $13.5 million gain from repurchasing exchangeable notes, which ODDITY excluded when calculating adjusted net income. As a result, GAAP net income of $12.9 million was higher than adjusted net income of $10.7 million despite the small operating loss.

ODDITY did not disclose quarterly cash flow separately. For the six months ended June 30, operating cash flow was negative $5.9 million, compared with positive $101.4 million a year earlier, while free cash flow was negative $7.5 million versus positive $99.4 million. Inventory increased to $152.2 million from $135.2 million at the end of 2025.

Cash, cash equivalents, and investments totaled $561.2 million, down from $776.0 million at year-end. First-half financing outflows included $162.8 million of share repurchases and $35.1 million used to repurchase exchangeable notes. ODDITY retired $50 million of note principal, leaving approximately $550 million outstanding, while its $350 million of credit facilities remained undrawn.

During Q2, the company repurchased approximately 5.6 million shares for $80 million. First-half repurchases totaled approximately 11.7 million shares for $163 million, reducing ordinary shares outstanding by about 20%. Approximately $87 million remains available under the current authorization.

Earnings Guidance

ODDITY expects the year-over-year revenue decline to narrow substantially in Q3 as SpoiledChild and METHODIQ grow and the effect of the IL MAKIAGE account dislocation moderates. The outlook represents an improvement in the year-over-year trend rather than a return to overall revenue growth.

The Q3 guidance covers the quarter ending September 30, 2026, while the full-year guidance covers the year ending December 31, 2026. Adjusted EBITDA guidance is non-GAAP, and the company did not provide a reconciliation to projected GAAP net income.

Recent Insider Transactions

The supplied insider data shows 291,859 shares acquired across 10 transactions and 201,261 shares sold across eight transactions during the past six months, resulting in a reported net acquisition of 90,598 shares. Insiders held approximately 3.84 million shares, with net purchases equivalent to about 2.4% of that total.

Seven recent records contained both a clear transaction type and reported value. All involved Global CFO Lindsay Drucker Mann and included several derivative exercises followed by sales.

The supplied transaction records did not include share quantities for these entries and do not establish the insider’s motivation.

Risks Investors Should Monitor

• IL MAKIAGE’s advertising dislocation: A slower-than-expected technical resolution could continue to pressure customer acquisition, online revenue, and the pace of overall recovery.
• Operating deleverage: Lower revenue, gross-margin compression, and higher SG&A expense pushed operations into a loss. A sustained revenue decline could keep adjusted profitability below prior-year levels.
• Cash conversion and inventory: First-half operating cash flow turned negative while inventory increased, making working-capital trends important to monitor.
• Dependence on newer-brand growth: The expected improvement relies partly on SpoiledChild and METHODIQ offsetting weakness at IL MAKIAGE. Their absolute quarterly contributions were not disclosed.
• Reduced liquidity following capital allocation: ODDITY retains $561 million of cash and investments and undrawn credit facilities, but buybacks and note repurchases contributed to a sizable first-half cash reduction while approximately $550 million of note principal remains outstanding.

Summary

ODDITY’s Q2 2026 results reflected a steep IL MAKIAGE-driven revenue contraction, lower gross margin, and a swing to an operating loss, while SpoiledChild and METHODIQ provided partial offsets. The main questions for coming quarters are whether the advertising algorithm normalizes as expected, whether the Q3 revenue decline narrows to about 5%, and whether improved sales trends restore operating cash generation and profitability.