Tilray Inc

Key Reasons for Buy

Revenue Growth and Portfolio Diversification: Tilray Brands, Inc. reported a steady increase in consolidated net revenue for the first quarter of fiscal year 2026, underscoring the company’s resilience and diversified business model. Total net revenue rose by approximately 5% year-over-year to USD 209.5 million, compared to USD 200.0 million in the corresponding quarter of the prior fiscal year. This growth was driven by strength in the cannabis and distribution segments, supported by expanding product reach across key markets. The revenue mix continues to demonstrate Tilray’s strategic emphasis on diversification across cannabis, beverages, wellness, and distribution, providing a balanced foundation for sustainable growth.

Segmental Performance and Market Expansion: The cannabis segment delivered 5% growth, achieving net revenue of USD 64.5 million, fueled by higher adult-use sales in Canada and continued traction in international medical cannabis channels. The distribution business recorded 9% growth, generating USD 74.0 million, supported by increased order volumes and improved European logistics. The wellness segment also contributed positively, with revenue rising 3% to USD 15.2 million, driven by consumer preference for natural and health-focused products. In contrast, beverage segment revenue remained largely stable at USD 55.7 million, reflecting ongoing product rationalization and timing impacts from the company’s restructuring initiatives under Project 420.

Profitability and Cost Rationalization: While top-line growth remained positive, Tilray experienced moderate margin contraction due to product mix changes. Gross profit decreased slightly to USD 57.5 million from USD 59.7 million in the prior-year period, with the gross margin declining to 27% from 30%. This reduction was largely attributed to lower-margin product categories within the cannabis and distribution portfolios. Nevertheless, the company achieved significant cost efficiencies through disciplined expense management, as total operating expenses declined by approximately 42% to USD 55.4 million, compared to USD 96.3 million a year earlier. The decline was primarily driven by lower amortization, restructuring, and transaction-related costs.

Operational Turnaround and Earnings Recovery: Tilray achieved a meaningful turnaround in profitability during the quarter. The company reported net income of USD 1.5 million, a substantial improvement from the net loss of USD 34.7 million reported in the prior-year quarter. The improvement of over USD 36 million was primarily the result of reduced operating expenses, favorable fair value adjustments, and lower non-recurring charges. Additionally, adjusted EBITDA rose 9% year-over-year, reflecting continued operational improvements and enhanced cost discipline across the organization.

Strengthened Financial Position and Liquidity: Tilray maintained a robust balance sheet and liquidity position, with cash and cash equivalents of USD 264.8 million as of August 31, 2025, compared to USD 205.2 million in the same quarter of the previous fiscal year. The company’s working capital position improved, and total liabilities declined to USD 562.0 million, reflecting reduced contingent obligations and disciplined debt management. Positive operating cash flow during the quarter, following prior-year outflows, signified improved financial efficiency and stronger cash conversion capabilities, providing flexibility for future strategic investments and debt servicing.

Strategic Initiatives and Market Outlook: Tilray continues to advance its long-term strategy centered on portfolio optimization, operational efficiency, and international market expansion. The company is investing in innovation to strengthen its cannabis and beverage offerings, while expanding its footprint in Europe through partnerships and regulatory alignment. Ongoing integration of acquired assets such as Craft Acquisition II is expected to deliver meaningful synergies in subsequent quarters, enhancing cost structures and margin recovery. Management remains focused on achieving profitability and reinforcing Tilray’s position as a global leader in the cannabis and consumer packaged goods sectors.

In summary, Tilray Brands demonstrated tangible progress in operational execution and financial recovery in the first quarter of fiscal 2026. Despite modest margin pressure, the company’s ability to deliver revenue growth, achieve profitability, and improve liquidity reflects sound strategic management and effective cost containment. With a diversified portfolio, strengthened capital structure, and expanding global presence, Tilray is positioned to capitalize on emerging opportunities in both cannabis and wellness markets, while maintaining a prudent and disciplined approach to growth.

Considering recent key business, financial updates, current trading levels, and key business risks, a ‘Buy’ recommendation has been given on Tilray Brands, Inc. (NASDAQ: TLRY) at the current market price of USD 1.22, as on Nov 06,2025 at 10:05 am PST.