Oddity Tech sales drop 26% on advertising partner dislocation

Oddity Tech (NASDAQ:ODD) reported a 26% decline in first-quarter net revenue as a severe dislocation with its largest digital advertising partner drove customer acquisition costs sharply higher and eroded media efficiency.

The parent company of online beauty brands IL MAKIAGE and SpoiledChild posted net revenue of $197.9 million for the quarter ended March 31, 2026, down from the same period last year.

The sudden surge in marketing expenses pushed the consumer platform into a net loss of $21.4 million, while adjusted EBITDA fell to negative $7.0 million.

Profitability metrics also compressed, with the company's gross margin dropping to 69.7% compared to 74.9% in the prior-year period.

Management attributed the top-line contraction directly to higher customer acquisition costs (CPA), which significantly restricted first-order volume and lowered media efficiency during a peak user-acquisition window.

However, the company signaled that remediation efforts are showing early signs of progress.

In May, customer acquisition costs for its core IL MAKIAGE brand fell by an estimated 28% sequentially from April, suggesting that the advertising inefficiencies are beginning to ease.

Looking ahead, Oddity issued a cautious outlook for the current quarter but maintains an expectation of full-year profitability.

Net revenue for the second quarter of 2026 is projected to fall between 25% and 30% year-over-year.

Adjusted EBITDA for the second quarter is expected to rebound to between $8 million and $10 million, and management anticipates generating positive adjusted EBITDA for the full fiscal year.

The company maintains a substantial capital buffer to navigate the near-term operational headwinds.

Total liquidity stood at $667.4 million, comprising cash, cash equivalents, and short-term investments, supplemented by $350 million in entirely undrawn credit facilities.

Capitalizing on its strong balance sheet, Oddity's board authorized a $200 million share repurchase program.

During the first quarter, the company deployed $82.3 million to buy back approximately 6.1 million Class A shares, shrinking its outstanding Class A share count by roughly 10.6% and leaving $167.3 million available under the current authorization.