FIGS (FIGS) Q2 2026 earnings review
Growth Accelerates, But Headline Margins Mask Structural Costs
FIGS completely crushed Q2 expectations, delivering its third consecutive quarter of 25%+ revenue growth. Net revenues surged 28.8% YoY to $196.6 million, driven by massive international adoption and an expanding non-scrubwear assortment. A one-time 780-basis-point boost from IEEPA tariff refunds artificially inflated Gross Margin to 75.2%, but underlying operational leverage was still excellent, pushing Adjusted EBITDA margin to an impressive 18.6%. Management's confidence is palpable: they raised full-year top-line guidance to ~20% growth, bumped EBITDA margin expectations, and armed themselves with a fresh $100 million share repurchase authorization.
🐂 Bull Case
The 'Go Broad' geographic strategy is yielding spectacular results. International revenue is accelerating rapidly, up 67.0% YoY to $37.9 million, proving the brand's viral word-of-mouth model translates globally.
Even excluding the tariff refund optical boost, operating leverage is highly impressive. SG&A dropped to 57.3% of revenue from 60.5%, driving a massive jump in YTD Free Cash Flow to $38.6 million from negative $5.6 million last year.
🐻 Bear Case
FIGS is heading into a brutal comparison period. With 26FY guidance at ~20% and 1H growing at ~28.5%, management is implicitly signaling a significant deceleration in 2H as they lap Q4 2025's massive 33% surge.
Macro pressures persist. The reported 75.2% gross margin looks stellar, but without the one-time $7.9M tariff refund, gross margin expanded only 40 bps YoY. Structural tariff headwinds and higher supply chain costs remain a persistent drag.
⚖️ Verdict: 🟢
Bullish. A flawless quarter on the top line. Active customers are accelerating, AOV is expanding, and international growth is parabolic. The underlying business is humming, justifying the raised guidance and $100M buyback authorization.
Key Themes
International Adoption is Accelerating
International net revenues spiked 67.0% to $37.9 million, accelerating from 50% in Q1 and 55% in Q4. This validates the 'Go Broad' market expansion strategy to scale beyond North America. With international only representing 19% of total Q2 revenue, the runway here is massive.
Non-Scrubwear Layering System Paying Off
Non-scrubwear net revenues jumped 40.3% YoY to $35.4 million, accelerating from Q1's 31% growth. Product innovations in fabrics (like FIBREx) and the 'layering system' (underscrubs, outerwear, compression socks) are successfully driving higher basket sizes and pushing Average Order Value (AOV) up 8.5% to $127.
Gross Margin Optical Illusion
The reported Gross Margin of 75.2% is highly misleading. It includes a 780-basis-point benefit from a $7.9 million IEEPA tariff refund for goods sold in the prior fiscal year. Adjusted for this one-time macro event, gross margin would be approximately 67.4%, a mere 40 bps improvement from 67.0% a year ago. Structural global tariffs continue to consume pricing and efficiency gains.
Capital Return Authorization Signals Confidence
The Board authorized a massive $100 million increase to the share repurchase program, up from the dwindling $19.2 million remaining. Generating $43.6 million in operating cash flow in H1 alone easily funds this program, allowing management to offset dilution and act opportunistically on valuation dips.
Lapping the 'COVID Overhang' Rebound
Management's FY26 guidance implies a decelerating H2. Q2 revenue grew 28.8%, but the full-year target of ~20% mathematically dictates slower growth ahead. This is primarily a base-effect issue: FIGS will be comping against a massive Q4 2025 where sales surged 33%.
Other KPIs
Accelerating. Up 13.2% YoY, an acceleration from the 12% growth seen in Q1. The combination of double-digit new customer acquisition and higher retention rates proves the brand's top-of-funnel marketing investments are generating strong ROI.
Inventory is declining while sales are soaring. Down 6.5% from year-end 2025 ($127.9M). This incredible working capital management drastically reduces markdown risk and contributed directly to the $43.6 million in operating cash flow generated in H1.
A dramatic improvement from 60.5% in the same period last year. The 320 bps of operating leverage was driven by fixed cost leverage on 28.8% higher sales and lower stock-based compensation expense, proving the business model scales beautifully when volume accelerates.
Guidance
Accelerating vs prior guidance but decelerating vs current quarter trajectory. Management raised the full-year outlook from the 14-16% range given in Q1. However, with H1 growing at ~28.5%, this implies a slowdown in H2 as the company faces much tougher comps from late 2025.
Accelerating from prior guidance. Raised significantly from the 13.0%-13.2% range provided in Q1. This explicitly reflects confidence in maintaining SG&A leverage and absorbing ongoing tariff pressures, even excluding the Q2 one-time tariff refund.
Key Questions
Normalized Gross Margin Exit Rate
Excluding the 780 bps optical boost from the IEEPA tariff refund, gross margin was roughly 67.4%. What is the structural gross margin expectation for the back half of the year given current global tariff rates and shipping costs?
H2 Growth Implication
Raising full-year revenue guidance to ~20% while delivering ~28.5% in H1 implies a mathematical deceleration in H2. Is this entirely driven by tougher Q4 comps, or are you modeling a more measured promotional cadence or macroeconomic consumer pullback?
Pace of Buybacks
You added $100 million to the repurchase authorization after spending $32.8 million in H1. Do you view this authorization primarily as an anti-dilution tool for SBC, or an aggressive mechanism to reduce outstanding float at current valuations?