Cricut's 2026 Earnings Calls Reveal Shifting Stories on Product Revenue and Margin Pressures

Date of Call: May 5, 2026

Financials Results

• Revenue: $159.5M, down 2% YOY
• EPS: $0.10 per diluted share, down from $0.11 per diluted share in Q1 2025
• Gross Margin: 58.1%, down 2.4% YOY
• Operating Margin: 14.4% of revenue, down from 18% of revenue in Q1 last year

Guidance:

• Q2 total company revenue not expected to grow YOY due to difficult comparison against Q2 2025 which benefited from tariff-related revenue pull-forward.
• Platform revenue expected to grow each quarter in 2026.
• Expect to see seasonal pressure on subscription rates in Q2 and Q3, with flat to declining quarter-on-quarter subscriber growth rates possible.
• Expect to be profitable each quarter and generate cash flow from operations for full year 2026.
• Expect continued activity with the $50M stock repurchase program ($29.1M remaining).
• Board approved a recurring semiannual dividend of $0.10 per share.

Business Commentary:

Platform Revenue and Profitability:

• Cricut reported platform revenue of $84.8 million, up nearly 6% year-over-year.
• The company maintained a profitability margin of 12.7% of total sales in Q1.
• The growth in platform revenue and profitability was driven by an increase in paid subscribers and foreign exchange benefits.

Product Revenue and Pricing Strategy:

• Product revenue was $74.7 million, down 9.6% year-over-year.
• Average selling prices declined due to the introduction of new machines with lower price points and promotional activities.
• The decline in product revenue was attributed to the shift in strategy towards more affordable bundles and the clearance of end-of-life inventory.

International Growth:

• International sales grew over 16% year-on-year to $40.9 million, representing 26% of total revenue.
• This growth was primarily due to targeted pricing and marketing investments in Europe and Australia, along with strong momentum in emerging markets in Asia and Latin America.

User Engagement and Subscription Growth:

• Paid subscribers increased by 104,000 or over 3% year-over-year to almost 3.08 million.
• Despite a drop in subscribers sequentially from Q4, the company saw a rise in platform ARPU by 4.8%.
• The increase in subscribers was supported by new product introductions and improved onboarding processes, although seasonal pressure is expected in Q2 and Q3.

Gross Margin and Cost Pressures:

• Total gross margin in Q1 was 58.1%, down 2.4% year-on-year.
• The decrease was primarily due to inventory write-downs, lower monetization of previously reserved inventory, and tariff pressures.
• Product gross margin fell to 23.1% due to the factors mentioned above, while supply chain efficiencies and cost reductions helped offset lower average selling prices.

Sentiment Analysis:

Overall Tone: Neutral

• Management acknowledged headwinds with 'solid Q1 profitability despite early headwinds' and 'did not grow products revenue in Q1'. They are 'moving with urgency' to address challenges but expressed optimism about 'strong momentum' from new products and marketing, and confidence for growth in the second half.

Q&A:

• Question from Dylan Liu (Morgan Stanley): 90 days ago, you did mention a difficult comp... How did that compare with your expectations?... why you’re confident that the second half will be better.
  Response: The first half decline is due to lower average selling prices from new, less expensive machines and promotional activity. Confidence in the second half stems from an improved product roadmap, increased international marketing investment, and the positive impact of higher-priced bundles.

• Question from Dylan Liu (Morgan Stanley): On gross margins. Product gross margins recovered over almost 5 points sequentially to 23%. What is your product gross margin outlook for the year?
  Response: Gross margins are in line with expectations, pressured by end-of-life inventory impairments, tariff costs (including IEEPA and new 10% tariffs), and lower monetization of reserved inventory, not by lower selling prices which have been offset by cost efficiencies.

• Question from Angus Kelleher (Barclays): I wanted to ask about retailers and your retail partners... are you seeing any change in retailer ordering behavior or demand signals?
  Response: Retailers are generally enthusiastic about Cricut's innovation and bundle strategy. No significant shift in buying behavior due to economic caution has been observed, with strong support globally and award recognition for new product launches.

• Question from Angus Kelleher (Barclays): First, on the App Store dynamics, how meaningful has the shift toward Cricut direct payments been for subscriber economics so far? Second, on the IEEPA-related tariff refunds...
  Response: Most consumers on the iOS App Store choose Cricut's payment option for the legacy price, with no significant impact on sign-up rates. Management is testing new subscription plans and pricing tiers. IEEPA tariff refunds are material but not monetized; they will credit COGS when received.

Contradiction Point 1

Product Revenue Performance and Outlook

Expectations for product revenue performance and the underlying drivers shift between quarters.

Dylan Liu (Morgan Stanley) - Dylan Liu (Morgan Stanley)

2026Q1: The Q1 product revenue decline was driven by **lower average selling prices (ASPs)** due to new, lower-priced machines... Q2 and first half of 2026 are expected to see **continued softness**. - [Kimball Shill](CFO) and [Ashish Arora](CEO)

How did the 10% year-over-year product revenue decline in Q1 compare with your expectations, has the first half tracked better or worse than anticipated, and why are you confident the second half will improve? - Erik Woodring (Morgan Stanley)

20260304-2025 Q4: Products face **challenges in the first half** due to difficult comparisons... but the company expects to **hit its stride in the back half**. Overall, they are **confident for the full year**. - [Kimball Shill](CFO) and [Ashish Arora](CEO)

Contradiction Point 2

Gross Margin Outlook

The characterization of gross margin pressures and the full-year outlook changes between the quarters.

Dylan Liu (Morgan Stanley) - Dylan Liu (Morgan Stanley)

2026Q1: Gross margin pressures are **consistent with expectations**... The company expects **gross margins to be lower than 2025** and is factoring this into its planning. - [Kimball Shill](CFO)

Given the sequential improvement in product gross margins to 23% and the FX tailwind in Q1 international results, what is the outlook for product gross margins this year and in 2026? - Erik Woodring (Morgan Stanley)

20260304-2025 Q4: The company is optimistic about 2026... expecting **platform growth for the full year** despite seasonal softness in Q2 and Q3. - [Kimball Shill](CFO) and [Ashish Arora](CEO)

Contradiction Point 3

Product Gross Margin Outlook for 2026

Contradiction on whether gross margins are expected to improve or face pressure.

Dylan Liu (Morgan Stanley) - Dylan Liu (Morgan Stanley)

2026Q1: The company expects **gross margins to be lower than 2025** and is factoring this into its planning. - [Kimball Shill](CFO)

What is the product gross margin outlook for the year, considering Q1's FX tailwind in international and how should we think about 2026 gross margins? - Angus Kelleher-Ferguson (Barclays)

20251105-2025 Q3: Several factors helped Q3 margins vs. last year... The company will manage this by balancing price and promotional strategies... **Some margin absorption due to tariffs is anticipated for 2026.** - [Ashish Arora](CEO)

Contradiction Point 4

Tariff Impact on Gross Margins

Contradiction on the primary driver of gross margin pressure in Q3 2025 being inventory and mix, versus in Q1 2026 being tariffs and write-downs.

Dylan Liu (Morgan Stanley) - Dylan Liu (Morgan Stanley)

2026Q1: Gross margin pressures are consistent with expectations and are **not primarily due to lower ASPs**, but rather from: 1. Inventory write-downs from end-of-life (EOL) programs. 2. Less monetization of previously reserved inventory this year vs. last. 3. **Tariff costs** (IEEPA and subsequent 10% tariffs). - [Kimball Shill](CFO)

Considering the Q1 FX tailwind in international, what is the product gross margin outlook for 2026? - Erik Woodring (Morgan Stanley)

20251105-2025 Q3: Several factors helped Q3 margins vs. last year (**absence of excess inventory reserves, monetization of excess inventory, mix shift to newer products**). Looking to Q4 and 2026, **tariff impacts will occur.** - [Kimball Shill](CFO)

Contradiction Point 5

Tariff Impact and Financial Outlook

Statements on tariff impact timeline and financial implications conflict between quarters.

Dylan Liu (Morgan Stanley) - Dylan Liu (Morgan Stanley)

2026Q1: Tariffs remain a headwind... The **10% FX benefit** in Q1 is lapping in soon... The company expects **gross margins to be lower than 2025**. - [Kimball Shill](CFO)

What is the product gross margin outlook for the year and 2026, considering Q1's significant FX tailwind in international? - Maya C. Neuman (Morgan Stanley)

2025Q2: Tariffs will create margin pressure in **H2 2025, with a more meaningful impact in 2026.** - [Kimball Shill](CFO)