e.l.f. Beauty Inc Earnings - Q4 2025 Analysis & Highlights
e.l.f. Beauty reported strong Q3 2026 results with 38% net sales growth and 79% adjusted EBITDA growth, driven by the rhode acquisition and organic momentum across its brand portfolio. The company raised full-year guidance, highlighted significant market share gains, and outlined aggressive expansion plans for its brands internationally while managing tariff headwinds and increased marketing investments.
Key Financial Results
Q3 net sales grew 38% year-over-year, with the rhode acquisition contributing $128 million or approximately 36 percentage points to growth.
Organic net sales (excluding rhode) were up approximately 2% year-over-year in Q3, lower than anticipated due to softer trends in the UK and Germany.
Q3 adjusted EBITDA was $123 million, up 79% versus the prior year.
Adjusted net income was $74 million, or $1.24 per diluted share, compared to $43 million or $0.74 per diluted share a year ago.
Q3 gross margin was 71%, down approximately 30 basis points compared to prior year, largely driven by tariffs and partially offset by pricing and mix.
Adjusted SG&A as a percentage of sales was 51% in Q3, compared to 54% in Q3 last year, with leverage in marketing spend offsetting ongoing team and infrastructure investments.
Marketing and digital investment for the quarter was 21% of net sales, compared to 27% in Q3 last year.
Business Segment Results
e.l.f. Cosmetics brand grew 8% on a consumption basis in the US, two times the category growth rate, and increased market share by 130 basis points, the largest share gain among over 700 cosmetics brands tracked by Nielsen.
e.l.f. SKIN consumption grew 16% in the US, also outperforming the category two times.
rhode achieved the number one brand ranking in Sephora North America and executed a record-breaking launch with Sephora in the UK.
Naturium continues to drive strong growth following its acquisition two years ago.
US net sales grew 36% year-over-year, while international net sales grew 44% in Q3.
Pricing and product mix added approximately 38 percentage points to net sales growth, while unit volumes were relatively flat year-over-year.
Capital Allocation
The company repurchased approximately $50 million of outstanding common stock during the quarter, given the disconnect between market valuation and business fundamentals.
Approximately $400 million remained available for repurchase under the previously authorized repurchase program.
Cash on hand was $197 million at quarter end, compared to $74 million a year ago.
Net debt to adjusted EBITDA remained below two times, even after the rhode acquisition.
Cash priorities for the year remain on investing behind growth initiatives and supporting strategic extensions.
Industry Trends and Dynamics
The beauty category is experiencing healthy growth, with color cosmetics up 4% and skincare up 8% in the last quarter.
Of the nearly 1,800 cosmetics and skincare brands tracked by Nielsen, only 14 have surpassed $200 million in annual retail sales, and e.l.f. Beauty owns four of these brands.
e.l.f. Cosmetics is the most productive cosmetics brand on a dollar-per-linear-foot basis with the company's largest retail customers globally.
Consumer engagement across the beauty category is strong, with particular momentum in the company's brands.
Competitive Landscape
e.l.f. Beauty has grown market share for 28 consecutive quarters, putting it in a rarefied group of only six public consumer companies out of 546 that have grown for 28 straight quarters while averaging at least 20% sales growth per quarter.
e.l.f. Cosmetics has more than doubled market share over the last five years, with significant whitespace remaining in lip (13% share) and eye (9% share) segments compared to face makeup (22% share).
The company's value proposition delivers exceptional quality at accessible price points, with the average e.l.f. Cosmetics price at $7.50 compared to approximately $9.50 for legacy mass brands and nearly $30 for prestige brands.
75% of e.l.f.'s brand product portfolio sits at $10 or less, emphasizing the company's value positioning.
e.l.f. held four of the top 10 new products in all of mass cosmetics in 2025, on top of holding six of the top 10 new products in 2024.
Macroeconomic Environment
Tariff rates have stabilized at 45% since November 10, down from as high as 170% earlier in the fiscal year.
If tariff rates remain at 45%, this becomes a tailwind for fiscal 2027 given the higher rates paid earlier in the year.
The UK is experiencing a higher promotional environment than normal, which has impacted e.l.f.'s performance in that market.
Weaker consumption has been observed in the UK and Germany, with Germany cycling the company's largest international launch to date with Rossmann.
Growth Opportunities and Strategies
International expansion represents a significant opportunity, with international currently driving approximately 20% of net sales compared to legacy peers with over 70% of sales outside the US.
rhode has significant pent-up global appetite, with international driving approximately 20% of rhode's DTC sales while 74% of the brand's social followers are from outside the US.
rhode is launching in Australia and New Zealand with Mecca this month to further its global reach.
Naturium is expanding retail presence to Walmart for the first time this spring, launching in a subset of US stores.
e.l.f. is expanding space within Ulta Beauty in the US and launching with DM in Germany in spring 2026.
The company is leveraging community-led innovation focused on democratizing access to premium quality products at extraordinary prices.
Strategic brand partnerships are driving awareness, including collaborations with Liquid Death and H&M for e.l.f.'s first fragrance launch across 27 countries.
e.l.f. is debuting a commercial at The Big Game with a total estimated campaign reach of nearly 300 million across an eight-week activation period.
Spring 2026 innovation includes the Glow Reviver Slipstick at $10 (versus prestige at $48) and the Soft Glam Satin Concealer at $5 (versus prestige at $32).
The company has significant whitespace in lip and eye segments and believes it has the innovation engine to conquest these categories.
Financial Guidance and Outlook
Full-year net sales growth is now expected at approximately 22% to 23% year-over-year, up from 18% to 20% previously.
rhode is expected to contribute approximately $260 million to $265 million in net sales to fiscal 2026, versus the prior expectation of $200 million.
On an annualized basis, rhode is expected to achieve net sales growth of approximately 70% year-over-year.
Second half net sales growth is expected at 31% to 33%.
On an organic basis (excluding rhode), net sales are expected to be up approximately 2% for the full year.
Global consumption growth is assumed at approximately 6%, similar to Q3, partially offset by a four percentage point headwind from pipeline cycling.
Full-year adjusted EBITDA is now expected at $323 million to $326 million, compared to the prior expectation of $302 million to $306 million.
Adjusted EBITDA is expected to grow 9% to 10% year-over-year, with adjusted EBITDA margins of approximately 20%.
Second half adjusted EBITDA margins are expected at approximately 19%, down approximately 300 basis points versus last year.
Marketing spend is expected to be about 27% of net sales in the second half, up about 200 basis points relative to 25% in the second half of last year.
The company expects planned investments in space expansion and team building to support significant whitespace across categories, brands, and geographies.
Brand Portfolio and Product Innovation
e.l.f. Cosmetics held four of the top 10 new products in all of mass cosmetics in 2025, demonstrating consistent innovation strength.
rhode achieved the biggest launch in Sephora North America history, 2.5 times bigger than any other brand, and the largest launch in Sephora UK history, outperforming the previous record holder by five times.
Naturium has expanded from four retail locations (Target, Amazon, Space NK, and its own website) to include Ulta Beauty in the US, Shoppers Drug Mart in Canada, Boots in the UK, and Sephora in Australia and New Zealand.
e.l.f. has 21 segments where it holds the number one or two position, creating competitive moats in key categories.
rhode recently launched a face mask and lip mask with strong consumer acceptance.
