Callaway Golf Company (CALY) Q3 2026 earnings review
Callaway lifts profit and full-year plan while club sales fall
Callaway Golf Company earned more profit this quarter even though revenue shrank as it delayed a major golf club launch. Sales fell 6% to $437 million, beating the top of the company's plan with help from new Mini Spinner fairway woods. Gross margin excluding one-offs rose 5.2 percentage points because the golf equipment and apparel maker raised prices and dropped lower-margin products. Chief executive Chip Brewer raised the full-year outlook for a third straight quarter.
| Net sales | $436.9M -5.6% from a year ago |
|---|---|
| Gross margin, excluding one-offs | 45.0% +5.2 percentage points from a year ago |
| Adjusted EBITDA | $35.9M +17.3% from a year ago (plan: $10–20M) |
| Full-year Adjusted EBITDA outlook | Raised $23M middle of the range: $276M (+24%) |
⚖️ Verdict: 🟢 Bullish
The story got better because margin gains held up during a quarter with falling sales, and $34 million in US tariff refunds arrived ahead of schedule. That lifted net cash to $358 million by our math and funded $51 million in third-quarter share buybacks. The bad news: golf ball sales slipped 4%, sales in Europe and Asia fell by double digits, and Callaway's remaining 40% stake in Topgolf produced an $18 million loss.
The question now is whether delaying iron launches into 2027 builds a more profitable schedule or hands customers to rivals that release clubs every year. Callaway's fourth-quarter plan still calls for a $49 million Adjusted EBITDA loss at the middle of the range as sales drop 9% by our math. First-quarter 2027 club orders and the 2027 outlook in February will settle it.
🐂 Bull Case
Cost Cuts and Pricing Lifted Gross Margin
Callaway has spent the year dropping low-profit items to make more money on each sale. That effort is working even while total sales fall. Gross margin excluding one-offs rose 5.2 percentage points from a year ago to 45.0%, as the cost of making its products dropped from 60.2% of sales to 55.0% by our math.
- Golf Equipment operating margin: 9.7% of segment sales, up 2.1 percentage points
- Apparel, Gear and Other operating margin: 12.5% of segment sales, up 3.8 percentage points
- Operating expenses excluding one-offs: up 0.8%, holding nearly flat against inflation
The company credited the gain to "select price increases, cost reductions and rationalizing lower margin business". Those actions overcame lower factory volume and rising raw material costs. Because Callaway kept overhead tight after leaving Topgolf, Adjusted EBITDA (operating profit before depreciation, stock pay and one-offs) climbed 17.3% to $35.9 million, more than double the $15 million middle of its own plan.
What to watch: fourth-quarter gross margin excluding one-offs when full-year results arrive in February. Expanding the margin during the smallest sales quarter of the year would show that pricing and product mix outweigh lost factory volume.
Tariff Refunds and Debt Paydown Build Cash
US import tariffs were Callaway's biggest cost worry entering 2026, but refunds of past duties are now bringing in cash. The golf maker recorded $33.5 million in tariff refunds and related interest this quarter under the International Emergency Economic Powers Act (IEEPA), a US trade law.
That brought nine-month tariff refunds to $44.3 million, covering almost the entire ~$42.6 million in cost-of-sales refunds booked so far and meeting the company's second-half recovery target a quarter early. Callaway excludes these refunds from its non-GAAP profit, but the cash is real. Combined with paying off over $1.4 billion of debt earlier this year, the company ended September with $434 million in unrestricted cash against $76 million in debt.
What to watch: any additional Phase 3 tariff refund receipts in the fourth-quarter report, alongside updates on 2027 tariff rates. Further refunds would add directly to Callaway's $358 million net cash cushion by our math.
Buybacks Pass $135 Million as Debt Disappears
Paying off its term loans and convertible notes earlier this year freed Callaway to buy back its own stock and eliminated its interest bill. By our math, the Carlsbad group spent $51 million on share repurchases in the third quarter, up from $42 million in each of the first two quarters.
Through September, Callaway has retired about 9 million shares for $135 million and has $70 million left on its current authorization. Meanwhile, net interest swung from a $14.8 million expense a year ago to $0.5 million of net interest income. Chief executive Chip Brewer also noted the company is investing in long-term projects "including our new 3D printing capabilities".
What to watch: fourth-quarter share repurchases and diluted share count in the full-year filing. Retiring the remaining $70 million authorization would reduce the share count further before the 2027 club launch season begins.
🐻 Bear Case
Delayed Iron Launch Cuts Second-Half Sales
Callaway decided this year to lengthen the time between new golf club models and pushed a major iron launch into 2027. That decision is now pulling revenue down against a busy launch period in late 2025. Total sales fell 5.6% to $436.9 million, though the drop was smaller than the company planned "due to the successful launch of the Company’s Mini Spinner fairway woods, as well as the TRTL putters in Asia".
- Golf club sales: $213.3 million, down 8.9% from a year ago
- Golf ball sales: $68.2 million, down 4.5% after growing 14.8% in the second quarter
- Apparel sales: $99.5 million, up 2.8% on growth at TravisMathew
The slowdown deepens in the fourth quarter. Management's outlook calls for fourth-quarter sales to fall about 9% at the middle of the range and Adjusted EBITDA to drop to a loss of $45 million to $53 million, nearly double last year's $25.1 million loss. Lower volume, investments in club fitting and lost dividend income after spending cash to pay off debt all weigh on the final quarter.
What to watch: first-quarter 2027 revenue outlook and the shipping schedule for the delayed irons on the next earnings call. A weak launch would mean longer product cycles cost Callaway market share rather than just shifting timing.
Remaining Topgolf Stake Weighs on Reported Profit
Brewer said the quarter's results "demonstrate the benefits of our return to a focused, pure-play golf company" after selling 60% of the Topgolf driving-range chain in January. Yet Callaway still owns roughly 40% of Topgolf, and that remaining stake continues to drag down reported earnings.
Callaway recorded a $17.9 million loss from equity method investments (its share of profits or losses from companies it partly owns) this quarter, up from $1.0 million in the second quarter. That brought its nine-month "proportionate share of Topgolf’s net losses" to $46.6 million, cutting the carrying value of the stake on Callaway's balance sheet to $195.2 million from $213.9 million in June. Management strips these losses out of non-GAAP profit and Adjusted EBITDA, but they reduce the value of an asset Callaway still holds.
What to watch: fourth-quarter equity method losses and the carrying value of the Topgolf investment in the annual report. Continued heavy losses at Topgolf would reduce what Callaway can eventually recover when it exits the remaining stake.
Foreign Sales Drop in Asia and Europe
Sales outside North America fell much faster than in the United States, where revenue slipped 3.0% to $292.8 million. In Asia, Callaway's largest overseas market, revenue fell 11.5% to $80.0 million as a weaker currency added to soft demand. Even at constant currency rates, Asian sales dropped 6.9%, worsening from a 6.3% constant-currency gain in the second quarter.
Europe was weaker still, with sales down 17.1% to $37.4 million, or 16.4% at constant exchange rates, after staying roughly flat in the second quarter. Only the Rest of World region grew, rising 6.0% to $26.7 million. The overseas drop shows that fewer product launches and cautious consumers are hitting international distributors harder than US retailers.
What to watch: constant-currency sales in Asia and Europe in the fourth quarter and early 2027. If overseas revenue fails to rebound when the new irons ship, international weakness is about demand rather than launch timing.
💲 Other KPIs
Inventory rose $5.4 million, or 1.0% by our math, from a year ago, while down from $625.3 million at the end of 2025. Keeping stock levels nearly flat while third-quarter sales fell 5.6% suggests Callaway is not building excess warehouse stock ahead of its 2027 club launches.
Cash from continuing operations rose 72.6% by our math from $157.8 million in the first nine months of 2025. Excluding $44 million of tariff refunds, operating cash flow grew 45% to $228 million. By our math, the golf equipment group generated $191.9 million of operating cash in the third quarter alone as customers paid seasonal bills.
Corporate general and administrative costs fell 3.8% from $31.7 million a year ago. Over the first nine months of 2026, corporate expenses dropped 11.1% to $84.3 million as the US company trimmed headquarters costs following the sales of Topgolf and Jack Wolfskin.
🔮 Guidance
Raised. The middle of the range moved up $14 million, putting full-year sales up 0.6% from 2025 by our math instead of slightly down. It is the third straight raise this year, though each increase has been smaller than the last: +$27.5 million, +$15.0 million, and +$14.0 million.
Raised. The middle of the range rose $23 million to $276 million, up 24.1% from $222.4 million in 2025 by our math. That roughly matches the $20.9 million third-quarter beat against the middle of the prior plan. It is the third raise in three quarters: +$39.5 million, +$31.0 million, and +$23.0 million.
New. The fourth-quarter plan points to an 9.0% sales drop at the middle of the range against $367.5 million a year ago by our math, a steeper decline than the third quarter's 5.6% fall. Management attributed the drop to the delayed iron launch and exiting low-margin product lines. The range sits inside the $320–345 million implied by last quarter's full-year plan.
New. Callaway plans for an Adjusted EBITDA loss of $49 million at the middle of the range, nearly double the $25.1 million loss in the fourth quarter of 2025. Lower sales volume, investments in club fitting, and less dividend income after spending cash to pay off debt drive the wider seasonal loss. The range aligns with the $44–58 million loss implied by last quarter's outlook.
❓ Key Questions
Why did golf ball sales fall after Q2's jump?
Golf ball revenue dropped 4.5% to $68.2 million after growing 14.8% in the second quarter. Management did not say in the release how much of the drop came from dropping low-margin ball lines versus retailers working down second-quarter shipments, or where US market share stood.
What drove the $17.9 million Topgolf loss in Q3?
Callaway's share of Topgolf's net loss jumped from $1.0 million in the second quarter to $17.9 million in the third, a seasonally busy summer period for golf venues. The release gave no operating figures for Topgolf to explain the wider loss.
When in 2027 will the delayed irons ship?
Golf club sales fell 8.9% this quarter and the fourth-quarter outlook calls for another 9% overall sales drop. Investors need to know whether the deferred iron line ships in the first or second quarter of 2027 to judge when revenue growth returns.
How large are raw material cost pressures for 2027?
Management previously flagged rising costs for tungsten, energy and golf ball materials. The release did not size the fourth-quarter or 2027 cost impact or say whether further price increases are planned to cover it.