Oddity Tech Ltd. (NASDAQ:ODD) reported second-quarter revenue of approximately $181 million on September 9, down 25% from $241 million a year earlier. Company-defined non-GAAP adjusted EBITDA fell to $13 million from $70 million. This measure excludes net financial income, income taxes, depreciation and amortization, share-based compensation, and certain unusual or nonrecurring items from net income.
Management attributed the disruption primarily to an advertising-algorithm problem affecting IL MAKIAGE. Oddity Tech Ltd. expects third-quarter revenue to decline approximately 5% year over year, with adjusted EBITDA of $18 million to $20 million. The sequential improvement describes a narrowing year-over-year revenue decline.
Bull Case
Management’s diagnosis centers on distorted advertising signals that impair IL MAKIAGE’s ability to reach suitable customers at acceptable acquisition costs. Oddity Tech Ltd. is testing changes with its largest advertising partner to retrain the algorithm. If those changes restore profitable customer acquisition, the existing brand could recover without a fundamental overhaul of its products.
Other brands provide operating evidence beyond that hypothesis. SpoiledChild delivered double-digit quarterly revenue growth, and management expects at least 35% growth for 2026, approaching $350 million in revenue. Management expects METHODIQ’s first-year revenue to exceed SpoiledChild’s first-year result.
These results support the argument that Oddity Tech Ltd. can build additional brands using its technology platform. A broader sales base could gradually reduce dependence on IL MAKIAGE, while successful customer retention would help recover upfront advertising spending over multiple purchases.
Second-quarter adjusted EBITDA also exceeded management’s $8 million to $10 million guidance. That shows some ability to manage through the disruption, although profitability remains well below its previous level.
Bear Case
The advertising fix remains incomplete. Management also believes SpoiledChild is affected by the algorithm problem, though less severely. Multiple brands therefore do not fully diversify exposure to the same acquisition channel.
The damage extends beyond attracting new buyers. Oddity Tech Ltd. reported second-quarter first-order revenue down approximately 40% year over year and repeat-order revenue down 20%. Management linked the repeat decline partly to advertising-sensitive purchases and the loss of follow-on orders from customers who were never acquired earlier in the year.
That could slow the recovery. Even if new-customer acquisition improves, rebuilding the pool of customers available for repeat purchases takes time. Competition or weaker demand could also prevent a technical repair from restoring previous customer economics.
Gross margin fell to 68.7% from 72.3%, while adjusted EBITDA margin, calculated as adjusted EBITDA divided by revenue, dropped to 7.1% from 28.8%. Revenue recovery must therefore improve both acquisition efficiency and the profit retained from each sale.
Oddity Tech Ltd. now forecasts a full-year revenue decline of approximately 19% and adjusted EBITDA of $30 million to $32 million. Growth at newer brands could improve consolidated results before IL MAKIAGE itself recovers.
Hedge Fund Sentiment
The filings available so far reflect positions held before Oddity Tech Ltd. reported its second-quarter results. Insider Monkey’s database showed 15 hedge funds holding Oddity Tech Ltd. at the end of 2Q2026, down from 19 funds three months earlier.
Conclusion
Oddity Tech Ltd. has encouraging brand growth and a smaller revenue decline in its forecast. The evidence supports progress, but does not yet establish that IL MAKIAGE’s advertising problem is resolved. Lower customer-acquisition costs, stronger repeat purchasing, IL MAKIAGE revenue, and third-quarter delivery will determine whether the improvement becomes a durable recovery.
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This article is originally published at Insider Monkey.
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