The Honest Company (HNST) Q2 2026 earnings summary

Executive summary

• Q2 2026 reported revenue was $83.3 million, down 10.9% year-over-year, but organic revenue grew 6.7% due to strong performance in wipes and personal care, offsetting declines in diapers and exited categories.

• Net income for Q2 2026 rose to $10.7 million, up from $3.9 million year-over-year, driven by tariff refunds, cost reductions, and improved product mix.

• Underlying adjusted gross margin reached 43.8% (up 340 bps), and underlying adjusted EBITDA margin hit a record 9.8% (up 160 bps).

• Record profitability and strong cash position enabled accelerated reinvestment and a raised full-year outlook.

• Continued execution of Powering Honest Growth transformation, focusing on brand maximization, margin enhancement, and operating discipline.

Financial highlights

• Organic revenue increased 6.7% to $80.2 million, offsetting declines from strategic exits and diaper revenue.

• Gross margin reached 48.4% (+800 bps); adjusted gross margin was 50.1% (+970 bps), including tariff refunds and apparel liquidation; underlying adjusted gross margin was 43.8% (+340 bps).

• Adjusted EBITDA for Q2 2026 was $14.5 million (17.3% margin); underlying adjusted EBITDA was $7.8 million (9.8% margin).

• Free cash flow for the first half of 2026 was $35.3 million, a significant improvement from negative $3.8 million a year ago.

• Cash and cash equivalents as of June 30, 2026, were $105.9 million, up from $89.6 million at year-end 2025.

Outlook and guidance

• Full-year 2026 revenue outlook raised to $319–$325 million (from $306–$312 million), with organic revenue growth expected at 5–7% (previously 4–6%).

• Adjusted gross margin forecasted in the mid-40% range (previously low-40%), and adjusted EBITDA guidance increased to $23–$25 million.

• Powering Honest Growth restructuring expected to be substantially completed by year-end 2026, with total costs of $28–31 million and annualized benefits of $14–17 million.

• New apparel licensing agreement expected to be immaterial for 2026 results.