Oddity Tech’s 2025 Q4 Earnings Call: Guidance Volatility, Algorithm Uncertainty, and Acquisition Strategy Shifts Clash

Date of Call: Feb 25, 2026

Financials Results

• Revenue: Q4: $153M, up 24% YOY; Full Year: $810M, up 25% YOY
• EPS: Q4 adjusted EPS: $0.20; Full Year adjusted EPS: $2.21
• Gross Margin: Q4: 70.5%, compressed 220 bps YOY; Full Year: 72.7%, expanded 30 bps YOY
• Operating Margin: Q4 adjusted EBITDA margin: 8.2%, compressed 410 bps YOY; Full Year: 20.2%

Business Commentary:

Record Financial Performance:

• ODDITY reported record revenue of $810 million for 2025, an increase of 25%.
• Adjusted EBITDA reached $163 million, representing an adjusted EBITDA margin of 20.2%.
• The growth was driven by strong repeat sales, with approximately 70% of revenue coming from repeat sales, and successful launches like the METHODIQ brand.

Challenges in User Acquisition Costs:

• The company experienced a significant increase in new user acquisition costs, with some costs being more than 2x higher than last year.
• This was attributed to changes in algorithms of their largest advertising partner, which diverted traffic to less desirable auctions.

Strong Brand Performance:

• IL MAKIAGE grew revenue in the low double digits to approximately $560 million, with IL MAKIAGE Skin comprising about 40% of brand revenue.
• SpoiledChild increased revenue double digits to approximately $250 million.
• International revenue grew by 42%, with IL MAKIAGE being the primary driver.

Investment in Future Growth:

• Despite the challenges in user acquisition, ODDITY continued to invest in future growth initiatives, including ODDITY LABS, new products, and infrastructure.
• The company plans to introduce 8 products in 2026 developed with ODDITY LABS molecules, focusing on areas like acne and aging.

Liquidity Position:

• The company ended the year with a strong liquidity position, including $776 million in cash and cash equivalents.
• This was driven by a successful exchangeable note offering and free cash generation of $84 million for the year.

Sentiment Analysis:

Overall Tone: Neutral

• "2025 was a strong year for ODDITY. We delivered record financial results..." "Despite experiencing challenging user acquisition costs in H2 that drove an increase in advertising spend..." "We believe we understand the problem... it is a technical issue. And from here, we believe it is a matter of time and execution..."

Q&A:

• Question from Youssef Squali (Truist Securities): Maybe dig a little deeper into the algo change. I'm assuming this is related to Google's Andromeda. When did the issue actually start -- when did you start seeing it? Has it -- is it continuing to -- is the trend continuing to worsen? Or has it kind of stabilized? And lastly, Oran, when you talk about the issue being related to Try-Before-You-Buy, does that mean that you guys are going to deemphasize that? Or is there work around it such that you can continue to differentiate yourself through that offering and still maybe rank higher?
  Response: Issue first observed in H2 2025, worsened in 2026; working on a range of fixes to solve the Try-Before-You-Buy issue while preserving the model, but can pivot to a standard buy model if needed.

• Question from Anna Lizzul (Bank of America): I just wanted to ask on the change or the lack of guide here, I guess, and what you can recover for the remainder of the year, it does seem like an uphill battle. Is it possible to shift this user acquisition really from Q1 or H1 into Q2 or H2? Or will there be more of a delay? And does this change your thinking at all on distribution, just given you are vastly sold on direct-to-consumer, would this make you think at all about going into retail?
  Response: No change in strategy or distribution plans; CPA is more than 2x higher, leading to reduced acquisition spending; Q1 and Q2 are typically largest acquisition periods, so reduced activity will lower repeat sales later.

• Question from Brian Tanquilut (Jefferies): Maybe, Lindsay, just as I think about the model, right, I mean one of the things that we've always loved about your business is how you can flex the advertising spend. And obviously, as you said, CPA is up more than 2x in some cases. So when we think about how you would strategize around this, I mean, once things normalize, I mean, should we expect kind of like a steep pullback on advertising expense? Or just curious how you're thinking about strategizing around this once we get that normalization point? And then can you just give us any color on retention rates or reorder rates that you're seeing in the market?
  Response: Need to keep spending to feed the algorithm while balancing overspending; normalization would mean CPA in line with industry. Repeat rates remain very strong, with 2025 repeat sales at 70% of revenue and 12-month net revenue repeat rates over 100%.

• Question from Andrew Boone (Citizens Bank): Can you guys help us understand just what exactly is changing within your guys' funnel? Is this higher CPMs? Is this lower click-through rates? Is this worse on-site conversion, meaning it's a lower quality user that you're targeting? Help us understand that dynamic. And then one of the things that we've also always appreciated about the business is just your ability to be able to pull different levers to be able to sustain that 20% growth. And so can you just help us understand the size of this channel and your inability to be able to allocate spend elsewhere and help us understand just why this is an overly large impact versus what we would have thought was a more diversified ad platform?
  Response: The change is global across brands and makes it hard to grow without overspending; for the largest ad partner, pure platform orders represent just under 25% of revenue, but impact is larger due to repeat sales.

• Question from Georgia Anderson (Evercore ISI): You mentioned that you've made kind of significant actions to fix this. Can you maybe clarify if these are more structural, I guess, technical fixes to your internal, I guess, data feedback loops, maybe retraining your AI to find intent users, kind of things like that? Or is the rebound expected to come from like a strategic shift in budget allocation? Maybe just talk us through the fixes that you're making.
  Response: Fixes include infrastructure, offering adjustments, and signal adjustments; the company can run multiple variants in-house and is more prepared than most to address the issue.

• Question from Scott Schoenhaus (KeyBanc Capital Markets): Lindsay, is there areas that you're currently seeing strength that you could possibly offset this weakness strategically? I want to focus here on international opportunities and then the Brand 3 rollout, which you mentioned was -- has seen nice success.
  Response: Brand 3 METHODIQ is growing well, exceeding launch expectations; international and other areas still require user acquisition, but the priority is fixing the acquisition issue before pursuing growth.

• Question from Ryan MacDonald (Needham & Company): As we think about balancing sort of the near-term priority of sort of fixing the problem here versus sort of balancing with longer-term investments to sort of continue the growth sort of growth trajectory once these problems are solved. Can you talk about sort of what that balance looks like internally right now? And then what are some of the priorities, whether it's continuing down the path of product development with ODDITY LABS growing METHODIQ brand? Also, is there a risk here that we see a delay or a push out in sort of the Brand 4 launch plans as well?
  Response: Current focus is fixing the problem, but investments in ODDITY LABS, Brand 4, and new products continue; no change in investment plans, and no delay expected for Brand 4.

• Question from Kate Grafstein (Barclays): I was just wondering how does this dislocation impact the launch of METHODIQ? I know you had planned to step up spending in the first half of the year with this launch, and that was expected to have an impact on your EBITDA margins in the first half.
  Response: METHODIQ is small enough to continue growing without the negative EBITDA impact seen with other brands, but the core user acquisition problem still affects it.

Contradiction Point 1

Financial Outlook and Guidance Certainty

Contradiction on providing specific guidance versus offering a vague, forward-looking statement.

Anna Lizzul (Bank of America) - Anna Lizzul (Bank of America)

20260225-2025 Q4: The company views this as a pothole to recover from, expecting CPA normalization and a return to a normal financial model in the second half of 2026. - Lindsay Mann(CFO)

Can you explain the change or lack of guidance and your strategy for recovery in the remainder of the year? - Anna Lizzul (BofA Securities)

2025Q3: No specific 2026 guidance yet, but the company is 'extremely bullish' on METHODIQ's long-term potential... The brand is in early stages post-launch. - Lindsay Mann(CFO)

Contradiction Point 2

Nature and Impact of Advertising Algorithm Issue

Contradiction on whether the issue is a temporary technical glitch or a fundamental, persistent challenge.

Youssef Squali (Truist Securities) - Youssef Squali (Truist Securities)

20260225-2025 Q4: The issue first observed in the second half of 2025, worsened entering 2026, and scale with business growth. Some improvement was seen, but the holiday quarter's noise made it hard to assess. The problem became clear in Q1 2026. - Lindsay Mann(CFO)

"When did the issue with the algorithm change related to Google's Andromeda begin, and has the trend been worsening or stabilizing?" - Anna Lizzul (BofA Securities)

2025Q3: Higher-than-planned media costs in Q3 were offset by strong repeat performance. Investment in growth initiatives... continues into Q4 and H1 2026. - Lindsay Mann(CFO)

Contradiction Point 3

Strategic Focus on User Acquisition and Cost Management

Contradiction on prioritizing cost control versus maintaining growth investments during a period of rising acquisition costs.

Anna Lizzul (Bank of America) - Anna Lizzul (Bank of America)

20260225-2025 Q4: CPA (cost per acquisition) is currently 2+ times higher than last year, leading to a significant dial-back in acquisition spending to manage costs. Since Q1 and Q2 are historically the largest acquisition periods, reduced activity now will lead to lower repeat sales later in the year even if CPAs normalize. - Lindsay Mann(CFO)

Can user acquisition be shifted from Q1/H1 to Q2/H2 to aid recovery for the remainder of the year, given the change or lack of guidance? - Bonnie Herzog (Goldman Sachs)

2025Q3: The 20% growth algorithm is durable, and the company manages it as a portfolio. Repeat rates remain 'very, very strong.' - Lindsay Mann(CFO)

Contradiction Point 4

User Acquisition Strategy and Cost

The company shifts from a proactive, growth-focused strategy to a reactive, cost-constrained approach due to a sudden algorithmic issue.

Anna Lizzul (Bank of America) - Anna Lizzul (Bank of America)

20260225-2025 Q4: CPA is currently 2+ times higher than last year, leading to a significant dial-back in acquisition spending to manage costs. - Lindsay Mann(CFO)

Can the shift in user acquisition from Q1/H1 to Q2/H2 be feasible without delaying recovery, and does this impact distribution strategies, including potential retail expansion? - Lauren Rae Lieberman (Barclays)

2025Q2: The company actively constrains growth to ensure it can compound at 20% revenue growth with 20% adjusted EBITDA margins for many years. - Lindsay Drucker Mann(CFO)

Contradiction Point 5

Distribution Strategy and Growth Model

Contradiction on commitment to direct-to-consumer vs. openness to retail.

Anna Lizzul (Bank of America) - Anna Lizzul (Bank of America)

20260225-2025 Q4: The company remains fully committed to online direct-to-consumer growth and sees this as a temporary technical issue to be corrected, not a reason to move into retail. - Oran Holtzman(CEO) and Lindsay Mann(CFO)

Can user acquisition be shifted from Q1/H1 to Q2/H2 or delayed, and would this impact distribution strategies, including a potential move to retail despite a focus on direct-to-consumer? - Dara Mohsenian (Morgan Stanley)

2025Q1: International expansion is a massive opportunity... The focus is on scaling existing markets (e.g., US, UK, Germany) and testing new ones (e.g., France, Italy, Spain, developing markets). For acquisitions, the priority is finding things they don’t have internally, such as strong brands, biotech, or AI capabilities. - Oran Holtzman(CEO) and Lindsay Drucker Mann(CFO)