Tilray Reports Strong Quarterly Performance Amid Mixed Market Signals

Tilray US88688T1007

Cannabis producer Tilray Brands announced financial results for the second quarter of its 2026 fiscal year that surpassed market expectations, though the subsequent investor reaction revealed underlying concerns.

The company posted net revenue of $217.5 million, exceeding consensus estimates of $210.4 million. This rounded quarterly sales figure of $218 million represents a 3% increase compared to the same period last year. The $7.1 million revenue beat constituted a positive surprise of approximately 3.4%.

On the bottom line, Tilray reported an adjusted loss per share of $0.02, a significant improvement over the anticipated loss of $0.06 per share.

Divisional Performance Highlights

Growth was driven primarily by international operations and the pharmaceutical division, showcasing a diversified revenue base:

• International Cannabis: Revenue surged 36% year-over-year and 51% sequentially to $20 million.
• Pharmaceutical Distribution (Tilray Pharma): Achieved a record quarter with $85.3 million in sales, up 26% from the prior year.
• Canadian Recreational Cannabis: Posted a 6% quarterly gain.
• Beverage: Generated $50.1 million, though performance was impacted by continued softness in the craft beer segment.
• Wellness: Revenue remained largely stable year-over-year at $14.6 million.

Assessing Profitability and Financial Health

The company maintained profitability on an adjusted EBITDA basis, reporting $8.4 million, though this was slightly below the $9.0 million recorded in the year-ago quarter.

A marked improvement was seen in the net loss, which nearly halved. The Q2 2026 net loss was $43.5 million, a 49% improvement from the $85.3 million loss reported in the second quarter of the previous fiscal year.

Gross profit reached $57.5 million, yielding a gross margin of 26%. Within the cannabis business specifically, the gross margin expanded from 35% to 39%, attributed largely to higher-margin international sales.

Strengthened Balance Sheet

Tilray's financial position improved notably, moving from a net debt to a net cash status.
* Net Cash: $27.4 million, compared to net debt of $3.8 million in the prior quarter.
* Liquidity: Cash and marketable securities totaled $291.6 million.
* Operating Cash Flow: Showed a $32.2 million improvement to -$8.5 million (from -$40.7 million previously).

Market Reaction and Analyst Downgrade

Following the after-hours release of the results, Tilray's shares initially climbed between 7% and 10%. The stock had closed at $8.99 on the publication date. However, these early gains partially eroded in subsequent trading sessions.

The tempered enthusiasm coincided with a notable analyst action. Alliance Global analyst Aaron Grey significantly reduced his price target on Tilray shares from $20 to $10, while maintaining a Neutral rating. Grey cited limited visibility into the company's long-term revenue and cash flow trajectory as the rationale, despite acknowledging that the overall quarterly performance met expectations and that strengths in some units offset weaknesses in others.

Management Outlook and Strategic Priorities

CEO Irwin Simon characterized the period as a "strong second quarter" with record results that beat analyst forecasts despite facing headwinds.

Management reaffirmed its full-year 2026 guidance, targeting an adjusted EBITDA between $62 million and $72 million. The company stated it is currently operating at an annualized EBITDA run-rate of approximately $150 million, powered mainly by its international business.

A key strategic focus remains the potential federal reclassification of cannabis in the United States. Simon emphasized Tilray's years of investment in infrastructure and expertise for operating in strictly regulated medical markets globally. The December 2025 launch of Tilray Medical USA was noted as a move to position the company for a potential expansion of medical cannabis operations in the U.S.

Addressing Beverage Segment Challenges

The beverage division continues to present challenges, pressured by persistent softness in the craft beer market and portfolio rationalization efforts under "Project 420."

The company expects adjustments to its retail assortment in the spring to partially offset negative industry trends. Tilray also reported it remains on track to achieve $33 million in annualized cost savings from Project 420 by the fourth quarter of 2026.

Path Forward and Key Milestones

The company's next quarterly report is scheduled for April 7, 2026. Investor attention will likely center on three critical areas in the interim:
1. Developments regarding the potential U.S. federal cannabis rescheduling.
2. Continued growth in international cannabis markets, including Germany, Poland, Italy, and the UK.
3. An operational turnaround in the beverage segment.

Tilray maintains its position as the revenue leader in the Canadian cannabis market and holds an approximate 45% market share in THC beverages in Canada. The coming quarters will demonstrate the pace at which its improved cost structure and international growth initiatives translate to the bottom line.