AI Takeaway
Estée Lauder Companies (EL) delivered a strong Q2 FY2026 turnaround, with revenue rising 5.6% YoY to $4.23B and operating income swinging to $401M from a prior-year loss of $580M, driven by gross margin expansion and disciplined SG&A control.
Revenue
$4.23B
++5.62% YoY
EPS (Basic)
$0.45
++127.44% YoY
Gross Margin
76.5%
++0.40% YoY
Operating Income
$401M
++169.14% YoY
Filed · Analysis updated · Source: SEC EDGAR 10-Q filing
Net sales grew 5.6% YoY to $4.23B in Q2 FY2026 (vs. $4.00B in Q2 FY2025), signaling a meaningful recovery in consumer demand for prestige beauty products after a challenging prior-year period.
Source: Source: 10-Q Income Statement
Operating income surged to $401M from a loss of $580M in the prior year, a YoY improvement of approximately $981M (+169.1%), reflecting both revenue growth and significant reduction in restructuring or impairment charges that weighed on the prior period.
Source: Source: 10-Q Income Statement
Gross margin improved modestly to 76.5% from 76.1% YoY, demonstrating that the company maintained pricing power and cost-of-goods discipline even as revenue scaled, with Cost of Revenue growing only 3.9% vs. revenue growth of 5.6%.
Source: Source: 10-Q Income Statement / Key Ratios
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Upgrade to unlockSG&A expenses remain very high at $2.63B, representing approximately 62% of revenue, leaving limited room for error if revenue growth slows. Any demand softness could quickly erode the operating margin that was only recently restored to positive territory.
Source: Source: 10-Q Income Statement
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Upgrade to unlockReported EPS of $0.89 versus the $0.86 analyst consensus — a +3.4% beat for Q2 FY2026.
| Metric | Current | Previous | YoY Change |
|---|---|---|---|
Revenue | $4.23B | $4B | +5.62% |
Cost of Revenue | $994M | $957M | +3.87% |
Gross Profit | $3.23B | $3.05B | +6.17% |
Operating Income | $401M | $-580M | +169.14% |
Net Income | $162M | $-590M | +127.46% |
EPS (Basic) | $0.45 | $-1.64 | +127.44% |
EPS (Diluted) | $0.44 | $-1.64 | +126.83% |
SG&A Expense | $2.63B | $2.58B | +1.62% |
| Metric | Current | Previous | YoY Change |
|---|---|---|---|
Total Assets | $19.63B | $19.76B | -0.64% |
Current Assets | $7.16B | $6.9B | +3.80% |
Current Liabilities | $5.27B | $5.03B | +4.77% |
Stockholders' Equity | $4.03B | $4.17B | -3.31% |
| Metric | Current | Previous | YoY Change |
|---|---|---|---|
Operating Cash FlowYTD | $785M | $387M | +102.84% |
Investing Cash FlowYTD | $-208M | $-294M | +29.25% |
Financing Cash FlowYTD | $-419M | $-878M | +52.28% |
Share BuybacksYTD | $67M | $35M | +91.43% |
D&A | $197M | $207M | -4.83% |
| Metric | Current | Previous | YoY Change |
|---|---|---|---|
Gross Margin | 76.5% | 76.1% | +0.40% |
Operating Margin | 9.5% | -14.5% | +23.97% |
Net Margin | 3.8% | — | — |
ROE | 4.0% | — | — |
ROA | 0.8% | — | — |
Current Ratio | $1.358 | — | — |
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EL reported basic EPS of $0.45 in Q2 FY2026, a dramatic improvement from -$1.64 in Q2 FY2025. While consensus estimate comparisons are not available in the filing, the company's return to profitability and strong revenue growth of 5.6% to $4.23B suggest a materially better-than-feared result.
The headline story is EL's turnaround: operating income swung from -$580M to +$401M YoY, and net income recovered to $162M from -$590M. Revenue grew 5.6% to $4.23B while SG&A grew only 1.6%, demonstrating meaningful operating leverage and cost discipline.
EL's revenue grew 5.6% YoY to $4.23B in Q2 FY2026, up from $4.00B in Q2 FY2025. Gross profit grew even faster at 6.2% to $3.24B, as cost of revenue increased at a slower 3.9% pace, reflecting improved product mix or supply chain efficiency.
Key risks include EL's very high SG&A cost base (~62% of revenue), a thin net margin of only 3.8% despite strong gross margins of 76.5%, and a balance sheet with significant leverage implied by $19.6B in assets against only $4.0B in equity. The prior-year large impairment charges also raise questions about whether structural headwinds have been fully resolved.
EL's financial health is improving but still in recovery mode: the company returned to profitability with $162M net income and generated $785M in YTD operating cash flow, but ROE is only 4.0%, ROA is 0.83%, and the current ratio of 1.36 provides only modest liquidity headroom. The balance sheet carries substantial implied debt relative to its $4.03B equity base.