Canopy Growth (CGC 20.00%), a major player in the global cannabis industry known for its medical, adult-use, and vaporizer products, announced its financial results for Q1 FY2026 (prepared in accordance with U.S. GAAP) on August 8, 2025. The most noteworthy headline was a significant outperformance on revenue, reaching $72.1 million compared to analyst expectations of $49.8 million. However, the quarter also saw gross margin compression and wider adjusted EBITDA losses. The period showed early signs of progress in core Canadian cannabis segments, but profitability and margin recovery remain ongoing challenges.
| Metric | Q1 FY2026 (quarter ended June 30, 2025) | Q1 FY2026 Estimate | Q1 FY2025 (quarter ended June 30, 2024) | Y/Y Change |
|---|---|---|---|---|
| EPS (GAAP) | $(0.22) | $(0.15) | $(1.60) | 86.3 % |
| Revenue (GAAP) | $72.13 million | $49.79 million | $66.21 million | 8.9 % |
| Gross Margin % | 25 % | 35 % | (10.0 pp) | |
| Adjusted EBITDA (Non-GAAP) | $(7.92) million | $(5.28) million | (50.0 %) | |
| Free Cash Flow (Non-GAAP) | $(11.64) million | $(55.70) million | 79.1 % decrease |
Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q4 2025 earnings report.
Understanding Canopy Growth's Business
The company operates across cannabis cultivation, production, and distribution, serving both medical and adult-use (recreational) markets. It also owns the Storz & Bickel brand, producing premium vaporization devices for both medical and recreational consumers. Core operations span Canada, Europe, and Australia, with strategic exposure to the U.S. market via investments in Canopy USA.
Recently, its main areas of focus have included cementing its leadership in medical cannabis in Canada and abroad, regaining momentum in the Canadian adult-use segment, developing new vaporizer technology, and tightening financial management. Success in these areas hinges on its ability to manage regulatory changes, control costs, innovate within its product portfolio, and maintain consistent supply—especially for high-value medical products and sought-after new product types like infused pre-roll joints.
Quarter in Review: Key Developments and Financial Results
Consolidated revenue (GAAP) increased 9% year over year. Driving this, the Canadian adult-use cannabis business surged 43% year over year, aided by broader distribution and strong demand for new manufactured products such as Claybourne infused pre-roll joints. The Canadian medical business also performed well, climbing 13% year over year, mainly from more insured patients and bigger average order sizes through the company’s Spectrum Therapeutics online channel. International medical cannabis net revenue in markets like Europe increased 5% year over year, though this growth was partly held back by supply interruptions and prescription rule changes, especially in Poland.
Performance in the vaporization technology segment was notably weak. Storz & Bickel, known for its high-end vaporizer devices, saw revenues fall 25% year over year. Management attributed this to tough economic conditions, softer consumer demand, and strong sales comparisons from the prior year. The segment’s gross margin (GAAP) shrank by 10 percentage points year over year, with higher manufacturing costs and headcount reductions now underway to support future margin recovery. New product launches are planned for the second half of calendar year 2025 to help turn around this segment.
Total gross margin for the company (GAAP) came in at 25%, down 10 percentage points year over year. The main reasons were a heavier mix of lower-margin manufactured cannabis products in Canada (driven by consumer preferences for newer products like infused pre-rolls), reduced higher-margin sales in Poland, and weak vaporizer volumes. Segment-level margins reflected these pressures, with cannabis margins at 24% (down from 33%) and vaporizer margins at 29% (down from 39%).
Adjusted EBITDA, a non-GAAP measure, declined to a loss of $(7.92) million, compared to a $(5.28) million loss a year earlier. This wider loss came despite a sharp 21% reduction in selling, general, and administrative expenses, reflecting the company's focus on cost discipline. Free cash flow outflow (non-GAAP) improved, dropping to $(11.64) million, or roughly a fifth of the outflow seen a year earlier. Cash and short-term investment balances increased to $144 million.
The company realized $17 million in annualized cost savings toward its $20 million target since March 1, 2025, mostly in corporate overhead. While further cost reduction opportunities were flagged, management stated the majority of the planned $20 million annualized savings target had been achieved, leaving future margin improvement to come from operational gains and top-line growth.
The company does not currently pay a dividend.
The U.S. expansion strategy continues through Canopy USA, an unconsolidated entity that holds leading cannabis assets like Wana (edibles) and Jetty (vaporizer brands). Canopy USA's annualized sales run rate is approximately $210 million USD for the fiscal year ended December 31, 2024, which is below initial targets. Its portfolio saw underperformance, tied mainly to ongoing difficulties at Acreage (another U.S. cannabis operator), particularly due to lower-than-expected results in Ohio and continued liquidity constraints during FY2024. While these investments offer long-term strategic value if the regulatory environment shifts, they contributed little to the current quarter’s results and remain below expectations.
From a product perspective, the Canadian portfolio was streamlined to focus on segments with higher demand and better margins, such as high-potency flower, infused pre-roll joints, and vapes. This rationalization involved cutting underperforming stock keeping units (SKUs) and launching new innovations. Claybourne infused pre-roll joints performed especially well, rising 58% sequentially and holding the number two spot for market share in their category in Alberta, and number three nationally.
Looking Ahead: Guidance and Investor Considerations
Management reaffirmed its focus on reaching positive adjusted EBITDA and improving gross margin as the main financial priorities but did not specify a concrete timeline for achieving these goals. The company is banking on operational improvements, supply chain optimizations, and automation investments to benefit margins in the second half of the fiscal year. New product launches, especially for vaporizer devices, are expected in the second half of 2025 and are positioned as potential growth drivers.
No formal forward guidance was provided with respect to revenue or earnings for the next quarter or full year. Management noted high uncertainty within the vaporizer segment and international markets as reasons for withholding concrete projections. Investors should continue monitoring gross margin trends, the progress of cost efficiency programs, and performance in the U.S. investments, as well as the successful rollout of new Canadian products and medical market supply stabilization.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
