Cricut's new machine is a subscription funnel, not a product launch

A smarter cutting machine is the wrong way to read the news. Cricut's latest headline — a new, more capable machine — is really an announcement about subscriptions. In the three months that ended in June, for the first time, the pieces of Cricut's business that recur each month brought in more money than its machines did. Machines had always been the visible product. The quarter quietly said they were no longer the business.

Cricut is easy to misread because it looks like a hardware maker. Open the box and there's the machine, $100 to $400, bought once. That's the costume. Underneath it's a razor-and-blade business with a twist: the blades are a recurring subscription, and the machine is the cost of acquiring a subscriber.

Here's what people actually do with it. Crafter buys a machine that cuts shapes out of vinyl, paper, and iron-on for shirts and decals. The cutting happens through Cricut's software, and the software gates a library of images, fonts, and prebuilt projects behind Cricut Access — $9.99 a month, or $14.99 for a premium tier with extra perks. So the company doesn't just make money when you buy the machine. It makes money every month you keep using it, plus every time you buy the materials it cuts. That monthly stream is what investors are really paying for.

The proof is in the June quarter. In the period ended June 30, 2026, "platform" revenue — subscriptions and the materials and accessories subscribers buy — was $85.0 million, or 54.4% of total sales, up about 5% from a year earlier. Machine revenue was $71.3 million, down 22%. It was the first quarter platform revenue overtook the machines.

Now the part that doesn't line up. Cricut shipped more machines, not fewer — units sold actually rose double digits year over year. Yet machine revenue fell. Two things explain the gap. First, the company launched cheaper machines: this generation's entry-level Joy 2 sells for around $99 to $129, against last year's $399 price point for the then-flagship Maker. Second, Cricut now sells new machines only as bundles stuffed with tools and materials, on purpose. It wants the first sale to seed the ecosystem, not to make a fat margin on a one-time purchase. A machine sold at $129 that locks a customer into a $10 or $15 monthly subscription is worth more over time than a $399 machine sold to someone who never subscribes.

The consequence is a business growing its money by extraction, not by new customers. Paid subscribers rose 3% to about 3.1 million. The active user pool was basically flat at just under 6 million, and the number of people who actually engaged in the last 90 days steadied around 3.5 million — the first time that metric has stopped shrinking in a June quarter since 2022. The extra revenue came because average revenue per user climbed 5%, led by new subscribers taking the pricier premium tier. In plain terms: the pond isn't getting bigger, so the company is getting better at charging the fish already in it.

Before you celebrate the quarter's profit, read the fine print. Cricut reported a gross margin of 74.5% and a net margin of 25% — numbers that would make any hardware neighbor jealous. They were swollen by one-time items: a $17.9 million tariff refund and a $6.4 million royalty-dispute settlement. Strip those out and the gross margin drops to roughly 59%, and operating margin to about 15%. That's still a healthy business. It just isn't the almost-software-like engine the headline margin implies, and it's the number to watch when the one-time money stops.

This explains the stock's quiet climb. At about $5.85, Cricut has risen roughly 18% this year and more than 40% over the last four months. It trades around 14 times trailing earnings, under 7 times EBITDA, yields about 3.4% in a semiannual dividend, and sits on $286 million of cash with no debt. The market is repricing Cricut from a pandemic fad — a stock that peaked in the $70s in 2021 during the stay-at-home crafting boom, then collapsed toward single digits when demand normalized — into a steady cash generator that pays you to wait. That repricing mostly happened already; the recent gains are the market catching up to the cash-flow math, not a new growth story.

Which brings the question to the new machine launch. A durable product is the problem here. A Cricut machine lasts years, so repeat sales depend on convincing owners the next machine is worth the upgrade, and on pulling in someone new with each generation. The machine is a cost — R&D, marketing, inventory — whose payoff is counted in subscribers, not units sold. So the whole valuation hinges on one number: whether the engaged base starts growing again.

Right now it isn't. Subscribers are up 3%, revenue per user is up 5%, and the pool they're drawn from is flat. That combination describes a mature, well-run cash cow that can pay dividends for a long time — and also a company whose "growth" is a subscription price that will eventually meet resistance from hobbyists who bought a $100 machine.

This is a testable model, and the test is simple. The report says the machine shipped record volume while the subscriber count crept up — that's the model doing its job, the funnel working. The day machines and subscribers stall together, the new hardware is just a headline. Until then, Cricut asks a fair question of you: is a flat pond being fished more cleverly worth 14 times earnings, or are you paying for a machine that wants to be a subscription company it isn't yet quite sure it is?