Oddity Tech’s Q1 Surge: Can 27% Growth Sustain in a Tightening Market?

Oddity Tech Ltd’s Q1 2025 earnings report was a masterclass in execution, delivering a 27% revenue surge to $268 million while raising full-year guidance. The company’s blend of product innovation, disciplined capital allocation, and a fortress balance sheet positions it as a rare growth story in a slowing economy. But with macro headwinds looming, the question remains: Can this outperformance last?

The numbers are undeniable. Adjusted EBITDA hit $52 million (19.5% margin), free cash flow soared to $87 million, and gross margins expanded to a staggering 74.9%, up 116 basis points year-over-year. These results pushed Oddity to revise its 2025 outlook upward: Revenue is now expected to grow 22–23% ($790M–$798M), while adjusted EBITDA is raised to $157M–$161M. Even as tariffs and trade policies threaten margins, Oddity’s management insists its “20/20 algorithm”—20% revenue growth with 20% EBITDA margins—is still within reach.

The Drivers: Repeat Customers, International Ambitions, and Science-Backed Innovation

Oddity’s success hinges on three pillars. First, repeat revenue now accounts for over 60% of 2024 sales, a figure rising in 2025 thanks to high customer satisfaction and subscription models. This retention engine is critical in a cost-conscious environment, as 60% of revenue from loyal customers acts as a shield against economic volatility.

Second, international expansion is the next frontier. While only 20% of revenue comes from abroad today, management is targeting double-digit growth in Europe and Australia, with plans to test new markets. Competitors like Glossier (70% international revenue) face higher geopolitical risks, but Oddity’s U.S.-centric base gives it flexibility to scale overseas cautiously.

Third, Brand 3 (telehealth) and Oddity Labs (biotech R&D) are the future. Though not yet revenue contributors, Brand 3’s AI tools—like acne lesion classification at 93% accuracy—suggest a play for the $150B medical aesthetics market. Oddity Labs’ proprietary molecules could also cement its position as a leader in science-driven beauty.

Risks and Resilience: Tariffs, Trade, and the “20/20” Test

The company’s gross margin expansion to 74.9% is a feat, but challenges loom. U.S. tariffs and trade policies could shave 50–100 basis points off margins in 2025. Management argues this is manageable due to its European supply chain (limited China exposure) and cost efficiencies. The shows a clear upward trend, suggesting resilience even under pressure.

Regulatory risks, meanwhile, appear muted. The FTC’s “click-to-cancel” rule for subscriptions won’t hurt Oddity, as its model already emphasizes opt-in consent.

The Bottom Line: A Growth Story Built to Last?

Oddity’s Q1 performance isn’t just a blip—it’s a testament to its D2C model’s scalability and tech-driven differentiation. With $257 million in cash, no debt, and a $200M credit line, it has the liquidity to weather macro storms while funding acquisitions in biotech or AI.

The critical question is whether the “20/20 algorithm” is achievable. At current margins, Oddity is already exceeding the EBITDA target (19.5% in Q1 vs. 20% long-term goal). The real test will be sustaining 20% revenue growth amid slowing consumer spending.

Conclusion: A Buy, But Keep an Eye on International Rollout
Oddity Tech’s Q1 results are a compelling case for growth investors. The company is executing on its strategic pillars, converting customer loyalty into cash flow, and investing in high-margin adjacencies like telehealth. While macro risks persist, its financial flexibility and margin resilience suggest it can navigate them.

The underscores its outlier status. If it can replicate its U.S. success internationally and monetize Brand 3 by late 2025, the “20/20” algorithm could become a reality. For now, Oddity is a rare name in beauty tech—profitable, cash-rich, and betting big on science. Investors would be wise to take notice.