E.l.f. Beauty, Inc. (NYSE: ELF) experienced a notable shift in its stock price following the release of its third-quarter financial results and an updated fiscal-year guidance. Initially, the shares traded higher but reversed course and declined after the company posted results surpassing market expectations and raised its forecasts for fiscal 2026, in a post-market announcement on Wednesday.
During the third quarter, E.l.f. reported adjusted earnings per share (EPS) of $1.24, considerably outperforming the consensus estimate, which stood at $0.72. In tandem, the company's revenue reached $489.50 million, eclipsing the estimated figure of $459.10 million. This revenue growth was driven by an impressive 38% increase in net sales compared with the same period of the previous year.
The sales expansion originated from broad-based growth both through retailer partnerships and e-commerce platforms within the United States and international markets. While achieving this sales momentum, E.l.f. encountered a contraction in gross margin to 71%. The decrease was primarily attributed to elevated tariff expenses. However, these higher costs were partly offset by beneficial pricing strategies and favorable product mix adjustments.
The company’s profitability metrics also showed strong year-over-year improvement. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) surged by 79%, reaching $123.0 million, which represented 25% of net sales for the quarter. Meanwhile, GAAP net income was recorded at $39.4 million, with an adjusted net income measure totaling $74.5 million.
Reflecting confidence in its operational performance and market positioning, E.l.f. updated its fiscal year 2026 guidance, raising the expected adjusted EPS range from $2.80–$2.85 previously to $3.05–$3.10. This revised outlook surpassed the analyst consensus forecast of $2.87 per share. Correspondingly, the company increased its revenue guidance for the year from a prior span of $1.55 billion to $1.57 billion up to a revised range of $1.60 billion to $1.61 billion. This represents an upward adjustment relative to the consensus estimate of $1.56 billion.
Despite these robust financial results and an optimistic forward view, the market reacted with a decline in E.l.f.'s stock price. At the time of reporting, ELF shares were trading down approximately 4.14%, at around $81.13, based on data from Benzinga Pro.
Overall, E.l.f. Beauty’s third-quarter performance demonstrates effective revenue growth both domestically and internationally, driven by diverse distribution channels. Even though margin pressures were evident due to increased tariffs, the company leveraged pricing and assortment strategies to partially cushion this impact. The material upward revision to annual guidance signals management’s positive outlook on continued growth and profitability in fiscal year 2026.
Nevertheless, the market’s subdued reaction as indicated by the share price movement suggests investor caution or profit-taking despite the fundamental strength apparent in the earnings report and guidance enhancement.
Key Points
- E.l.f. Beauty delivered an adjusted EPS of $1.24 in Q3, significantly exceeding the analyst consensus of $0.72.
- Revenue for the quarter increased 38% year-over-year to $489.50 million, ahead of the expected $459.10 million.
- The company raised its fiscal-year 2026 adjusted EPS guidance to a range of $3.05 to $3.10, above the market forecast of $2.87.
- Adjusted EBITDA grew 79% year-over-year, representing 25% of net sales, underlining improved operational profitability.
Risks and Uncertainties
- Gross margin contraction to 71% due to rising tariff costs may persist, exerting pressure on profitability.
- Despite positive financial metrics, the stock price reaction suggests potential market volatility or investor concerns.
- Future revenue and earnings depend heavily on consumer demand across both domestic and international channels, which could fluctuate.