Callaway Golf Raises 2026 Outlook as Q3 Margins Expand

Callaway Golf Company (NYSE: CALY) raised its full-year 2026 outlook after third-quarter adjusted EBITDA increased despite lower sales, as gross-margin initiatives and reduced overhead helped offset weaker quarterly revenue. The golf-focused company now expects annual net sales of $2.065 billion to $2.078 billion and adjusted EBITDA from continuing operations of $272 million to $280 million.

The previous outlook called for net sales of $2.045 billion to $2.070 billion and adjusted EBITDA of $246 million to $260 million. Callaway attributed the higher forecasts to its third-quarter performance, expected fourth-quarter revenue flow-through and an improved margin outlook.

Third-quarter net sales fell 6% year over year to $436.9 million, while adjusted EBITDA rose 17% to $35.9 million. Non-GAAP net income from continuing operations was $22.9 million, or $0.12 per diluted share, compared with a loss of $11.1 million, or $0.06 per share, a year earlier.

Non-GAAP gross margin expanded by approximately 520 basis points to 45.0%. Callaway said the improvement primarily reflected continued progress on its gross-margin initiatives, along with a 110-basis-point benefit from lower tariff rates. GAAP gross margin was 51.9%, including the effect of tariff refunds that were excluded from the company’s non-GAAP results.

For the first nine months of 2026, net sales increased 3% to $1.74 billion. Adjusted EBITDA rose 31% to $324.5 million, while non-GAAP net income from continuing operations increased to $208.5 million from $84.9 million. Non-GAAP diluted earnings per share reached $1.10, compared with $0.45 in the prior-year period.

Operating cash flow from continuing operations, excluding $44 million associated with tariff refunds, increased 45% to $228 million through September.

Equipment sales decline in the quarter, remain higher year to date

Golf Equipment revenue decreased 8% to $281.5 million in the third quarter. Golf club sales fell 9% to $213.3 million, while golf ball revenue declined 4% to $68.2 million. For the first nine months, however, Golf Equipment revenue increased 3%, including 3% growth in clubs and 5% growth in golf balls.

Apparel, Gear and Other revenue slipped 1% to $155.4 million in the quarter. Apparel revenue rose 3% to $99.5 million, supported by growth at TravisMathew, while Gear and Other sales declined 7% to $55.9 million. Callaway said TravisMathew grew in both the quarter and year-to-date period and performed slightly ahead of its expectations.

Profitability improved in both operating segments. Golf Equipment segment operating income increased 17% to $27.2 million, with its margin rising 210 basis points to 9.7%. Apparel, Gear and Other operating income grew 42% to $19.5 million, and its margin expanded 380 basis points to 12.5%.

Callaway also pointed to market-share gains in selected categories. U.S. golf ball market share increased 163 basis points through September, with green-grass share slightly above 23%. In Japan, the Odyssey TRTL putter helped lift the company’s putter market share to 40% following its August launch. Estimated U.S. golf equipment sell-through was up 1% through September and nearly 8% on a two-year stacked basis.

Regionally, third-quarter sales declined 3% in the United States, 17% in Europe and 12% in Asia, while Rest of World revenue increased 6%. On a constant-currency basis, Europe declined 16% and Asia fell 7%. Through nine months, revenue increased 3% in the United States, 7% in Europe and 10% in Rest of World, while Asia decreased 5% on a reported basis and was flat in constant currency.

Fourth quarter expected to reflect launch and retail changes

For the fourth quarter, Callaway expects net sales of $328 million to $341 million, compared with $368 million in the same period of 2025. Adjusted EBITDA from continuing operations is projected to be a loss of $53 million to $45 million, versus a $25 million loss a year earlier.

Management said the fourth-quarter sales outlook reflects strategic changes in product-launch timing and SKU and retail rationalization. The adjusted EBITDA forecast also incorporates the company’s strategic initiatives and lower dividend income. For the full year, Callaway expects sales growth despite those launch and assortment changes, while margin initiatives and lower corporate overhead are expected to support adjusted EBITDA.

The company’s full-year assumptions include an approximately $43 million gross tariff impact, about $40 million of capital expenditures and a non-GAAP tax rate of roughly 23%.

Balance sheet and capital returns

Callaway has refocused on golf after selling Jack Wolfskin and a majority interest in Topgolf. Over the past 18 months, it also repaid $1.2 billion of term debt and $258 million of convertible notes.

At September 30, the company had $433.5 million of unrestricted cash and $76 million of debt principal and equipment-financing lease liabilities, resulting in a net cash position of $357.5 million. A year earlier, total net debt was $620.7 million. Callaway expects to finish 2026 with net cash leverage.

The company repurchased $135 million of common stock through September. Of its $200 million authorization, $70 million remained available. Its capital-allocation priorities include reinvesting in the business, managing leverage and returning capital through buybacks. Callaway has also announced a $15 million investment in a U.S. 3D-printing facility.

The outlook remains subject to uncertainties including foreign-exchange movements, tariffs and the effectiveness of mitigation efforts, consumer demand, product-launch schedules, industry conditions and the execution of profitability initiatives. Callaway also noted that its forward-looking non-GAAP projections cannot be reconciled to comparable GAAP measures without unreasonable effort because several potential adjustments cannot be predicted with sufficient certainty.