Oddity Tech Ltd (NASDAQ: ODD) shares rose 25.34% to $16.32 on Wednesday after the beauty and wellness technology company reported second-quarter results that exceeded analyst expectations and issued upbeat guidance for the remainder of the year.

The rally was likely magnified by a short squeeze, with 32% of the public float sold short prior to the report. Investors reacted positively to adjusted earnings per share of 20 cents, which beat the consensus estimate of 16 cents. This operational beat came despite significant headwinds in customer acquisition costs.

Q2 Financial Performance

Revenue fell 25% year over year to $180.52 million, slightly topping the $177.60 million estimate. The decline was primarily driven by lower IL MAKIAGE sales following an advertising account disruption involving the company’s largest partner. However, profitability metrics outperformed both guidance and market expectations.

Gross margin narrowed 360 basis points to 68.7% from 72.3% a year earlier, partly due to lower average order value. First-order net revenue fell about 40% year over year, while repeat-order net revenue declined about 20%. Average order value fell about 8%, mainly due to lower IL MAKIAGE average order value and a shift in product mix away from the brand.

Adjusted EBITDA of $13 million topped the company’s $8 million to $10 million guidance. Profitability was pressured by higher IL MAKIAGE customer acquisition costs, fixed-cost deleverage, and increased spending to accelerate SpoiledChild’s growth.

Balance Sheet and Capital Allocation

Oddity Tech ended the quarter with $561 million in cash, cash equivalents, and investments. Its $350 million credit facilities remained undrawn, providing substantial liquidity flexibility.

The company repurchased 5.6 million shares for $80 million during the quarter. Year-to-date repurchases reached 11.7 million shares for $163 million, reducing ordinary shares outstanding by about 20%. Oddity Tech had about $87 million remaining under its $200 million repurchase authorization.

Business Updates and New Brands

SpoiledChild remains on track to grow at least 35% in 2026 and approach $350 million in net revenue. The brand is expected to reach that milestone more than a year faster than IL MAKIAGE. Its 12-month net revenue repeat rates remain well above 100%.

Metodic, launched several months ago, is showing early momentum. Oddity Tech expects its first-year revenue to exceed SpoiledChild’s first-year revenue. Management noted that Metodic’s hyperpigmentation products are showing stronger customer satisfaction and retention signals, with higher acquisition costs expected to be offset by average order value, retention, and resulting paybacks.

Oddity Tech has more than 70 million users on its direct-to-consumer platform, providing extensive first-party data to identify consumer demand and product opportunities. Additionally, Oddity Labs is developing molecules targeting hyperpigmentation and aging, with early in-vitro results showing potential to increase collagen synthesis and reduce aging markers.

Guidance Points To Sequential Improvement

For the third quarter, Oddity Tech expects sales of $140.51 million, above the $122.64 million estimate. Revenue is expected to decline about 5% year over year, marking a significant sequential improvement from the first half. Management stated it believes the worst of the acquisition-driven revenue pressure has passed.

For fiscal 2026, Oddity Tech expects sales of $655.97 million, above the $628.06 million analyst estimate. Revenue is projected to decline about 19% year over year, primarily reflecting the first-half weakness.

What the Numbers Show

The divergence between top-line contraction and bottom-line resilience highlights the effectiveness of Oddity Tech’s capital allocation strategy. Despite a 25% revenue decline and a 360-basis-point compression in gross margins, the company delivered an adjusted EBITDA of $13 million, exceeding the upper end of its $10 million guidance range. This suggests that cost discipline and the rapid scaling of higher-margin or more efficient brands like SpoiledChild are offsetting the drag from IL MAKIAGE’s acquisition cost pressures. Furthermore, the aggressive share buyback program, which reduced outstanding shares by 20% year-to-date, likely contributed to the per-share earnings beat, enhancing returns for remaining shareholders despite the broader revenue headwinds.

Needham analyst Ryan MacDonald has reiterated a Hold rating on ODDITY Tech (NASDAQ: ODD). The firm maintains its neutral stance on the stock without issuing a new price target or altering its previous outlook.

The rating update reflects the analyst's current assessment of the company's valuation and near-term prospects. No specific financial metrics or operational changes were cited as drivers for this decision in the brief filing.

Analyst Action

• Analyst: Ryan MacDonald
• Firm: Needham
• Rating: Hold
• Ticker: ODD (NASDAQ)

The market will likely await further commentary or earnings data before expecting a shift in sentiment from the brokerage.