ODDITY Tech's revenue falls 25% in the second quarter as the IL MAKIAGE advertising dislocation drags on, but guidance points to a much shallower third-quarter decline
ODDITY Tech reported second-quarter 2026 results before the open on Wednesday that quantify the damage from the advertising-algorithm failure the company first disclosed in February, and — in the guidance — the first concrete claim that the damage is receding. Net revenue for the quarter was $181 million, down 25 percent from $241 million a year earlier, according to the company's Sept. 9 release. For the first six months of 2026, net revenue was $378.5 million against $509.2 million, a decline of roughly 25.7 percent.
Margins moved with the volume. Gross margin was 68.7 percent in the quarter, against 72.3 percent in the second quarter of 2025, a decline of roughly 360 basis points.
The GAAP and non-GAAP pictures diverge in an unusual direction. On a GAAP basis, ODDITY reported net income of $12.9 million and diluted earnings per share of $0.24, down from $49.3 million and $0.79 respectively a year earlier. On a non-GAAP basis, adjusted EBITDA was $12.9 million against $69.5 million, and adjusted diluted earnings per share were $0.20 against $0.92. Adjusted earnings per share came in below the GAAP figure — the reverse of the usual pattern, in which adjustments flatter the result. The reconciliation explains why: ODDITY's GAAP result includes a $12.4 million gain on the repurchase of its exchangeable notes, and that gain is backed out of adjusted net income. Share-based compensation of $9.8 million is added back the other way, but the note gain is the larger item, so the adjusted line lands below the reported one.
The guidance is where the release makes its case. For the third quarter, the company said it expects "net revenue to decline by approximately 5% year-over-year" and "adjusted EBITDA between $18 million and $20 million." For the full year, it expects "net revenue to decline by approximately 19% year-over-year" and "adjusted EBITDA between $30 million and $32 million." A move from a 25 percent decline to an approximately 5 percent decline in a single quarter is a steep change in trajectory, and it implies that the second half carries most of the recovery the full-year number assumes.
Chief Financial Officer Lindsay Drucker Mann tied that to observed trading rather than forecast. "So far in the third quarter, we are seeing an improved year-over-year net revenue trend, driven by growth at SpoiledChild and METHODIQ and a moderating impact from the IL MAKIAGE account dislocation," she said in the release. "As a result, we now expect third quarter net revenue to decline approximately 5% year-over-year, a meaningful sequential improvement from the first half."
Chief Executive Oran Holtzman was more guarded on the core brand. "We made progress during the quarter, including strong results for both SpoiledChild and METHODIQ," he said in the release. "We remain hopeful that IL MAKIAGE is on track to achieve normalization and we continue to work in close partnership with our largest advertising partner to solve the technical issue." The word "hopeful" is doing real work in that sentence: nearly seven months after the problem surfaced, the company is still describing the fix as in progress and still describing the counterparty as a partner it depends on.
Beneath the headline decline, the portfolio is splitting. The release cites "double-digit revenue growth for SpoiledChild during the second quarter," and says the brand is "on track to grow at least 35% compared to 2025 and approach $350 million of net revenue in 2026." METHODIQ, the newer launch, is expected to deliver first-year net revenue ahead of SpoiledChild's first year. IL MAKIAGE, historically the group's largest brand, is the one carrying the customer-acquisition-cost dislocation.
The origin of that dislocation is worth restating for anyone coming to the name now. Calcalist's CTech reported on Feb. 25, 2026 that ODDITY shares fell approximately 50 percent that Wednesday to an all-time low, leaving a market capitalisation of about $850 million at that time, after the company warned that an algorithmic mismatch with a major advertising partner had produced a substantial misallocation of advertising budgets to low-quality bids, pushing customer acquisition costs to levels inconsistent with its business model. That report said the company guided first-quarter 2026 revenue to roughly $188 million, against analyst expectations nearer $323 million. ODDITY did not name the platform involved. Those February figures describe that date, not the company's position today.
The balance sheet has absorbed the shock without visible strain. The company reported $561 million in cash, cash equivalents and investments as of June 30, 2026. It has also been buying back stock aggressively: the release cites approximately $162.8 million of repurchases covering roughly 11.7 million Class A shares year to date, reducing shares outstanding by about 20 percent. Separately, in June it repurchased and retired $50 million in principal of its exchangeable notes for approximately $35 million, leaving roughly $550 million outstanding — the transaction that produced the $12.4 million GAAP gain excluded from adjusted results. Repurchases at that scale mechanically support per-share metrics: diluted shares averaged 54.1 million in the quarter against 62.3 million a year earlier, which is worth holding in mind when reading the per-share lines against a revenue base that has fallen by a quarter.
The risks in the document are stated plainly enough. The company's recovery thesis rests on a technical remediation it does not control alone, involving a single large advertising counterparty it declines to name. Two of its three growth engines — SpoiledChild and METHODIQ — are being asked to offset a decline in the brand that built the business. And the full-year guidance of an approximately 19 percent revenue decline embeds a second-half improvement that has, so far, been characterised only as a trend observed in the opening weeks of the third quarter.
What the next print will test is whether the approximately 5 percent third-quarter decline lands, and whether IL MAKIAGE's customer acquisition costs return to a level the company will describe as normalised rather than improving. Until then, the group's reported profitability continues to rest on a shrinking revenue base and a shrinking share count at the same time.
