Grove (GROV) Q2 2026 earnings review
Profitability Stabilizes, But the Customer Bleed Continues
Grove achieved its primary goal for the quarter: proving that Q1 was the revenue trough. Q2 net revenue ticked up 1.0% sequentially to $36.6M, breaking a long string of quarter-over-quarter declines. Cost discipline is working, delivering a third consecutive quarter of positive Adjusted EBITDA ($0.5M) and positive Operating Cash Flow ($1.3M). However, the underlying growth quality is deeply troubling. The core Direct-to-Consumer (DTC) business actually shrank sequentially, with the top-line "beat" entirely driven by wholesale channels like Amazon and QVC. Active customers plummeted by another 44,000 in just three months, down 23.3% year-over-year. Management reaffirmed full-year guidance and declared the disastrous 2025 technology migration fully behind them, but the company must prove it can acquire customers profitably before this turnaround can be called a success.
🐂 Bull Case
Operating expenses plummeted 27% YoY, transforming what used to be a cash-burning machine into a business capable of generating positive Adjusted EBITDA (3 straight quarters) and positive Operating Cash Flow on a significantly lower revenue base.
The launch of the new subscription experience marks the completion of the 2025 platform migration fixes. With the core friction removed, retention and conversion metrics have a clear runway to improve in H2 2026.
🐻 Bear Case
Despite total revenue growing 1.0% sequentially, the core DTC segment revenue actually declined. Growth was artificially propped up by wholesale orders from Amazon and QVC, which carry different margin and customer LTV profiles.
Active customers dropped a staggering 23.3% YoY to 509,000. Years of slashed advertising budgets and platform glitches have severely damaged the top of the funnel, and rebuilding it will be expensive.
⚖️ Verdict: 🔴
Bearish. While management deserves credit for stopping the cash burn and stabilizing the top line, a consumer brand losing nearly a quarter of its active customer base in 12 months is fundamentally unhealthy. Relying on Amazon/QVC to mask DTC deterioration suggests the brand's direct appeal is waning.
Key Themes
Non-DTC Channels Masking Core Weakness
Management touted Q2 as proof that the revenue trough was hit in Q1, citing a 1.0% sequential revenue increase. However, the press release explicitly states this was "driven by growth from non-DTC channels, primarily QVC and Amazon, partially offset by a slight decline in DTC revenue." This is a massive red flag. The core subscription engine (DTC) is still contracting, and replacing recurring direct relationships with transactional wholesale revenue damages long-term value.
Relentless Operating Discipline
Grove has successfully re-engineered its cost base. Operating expenses fell 27% YoY to $20.4M. This was achieved through lower headcount, reduced advertising, and taking advantage of favorable macro conditions in shipping (lower outbound freight rates). This structural shift allowed the company to print $0.5M in Adjusted EBITDA despite a 16.9% YoY revenue collapse.
New Subscription Technology Launched
The company launched its highly anticipated new subscription experience this quarter. Management noted this was the "last major element" of the disastrous 2025 technology migration. This specific tech innovation is designed to allow customers to easily skip, reschedule, and customize ordering cadences, removing the friction that caused mass cancellations last year.
Gross Margin Setback
After quarters of steady margin expansion driven by the VIP program, Gross Margin decelerated, falling 190 basis points YoY to 53.6%. Management blamed "one-time disposals" and the lap of a prior-year inventory reserve sell-through. While deemed one-time, any margin compression limits the cash available to reinvest in desperately needed customer acquisition.
Basket Sizes Continue to Expand
Despite losing customers, the customers that remain are highly valuable. DTC Net Revenue per Order increased 6.1% YoY to $69.19. This acceleration is driven by category expansion into higher-priced wellness/supplement items and better promotional efficiency driven by the Green Rewards loyalty program.
Other KPIs
Stable. Positive for the quarter, improving from $1.0M a year ago and reversing the -$0.7M outflow in Q1 2026. This was driven by a $1.0M reduction in inventory. With cash balances rising to $11.4M, immediate liquidity risk has been significantly mitigated.
Decelerating violently. Down 23.3% YoY and representing a sequential loss of 44,000 customers from Q1. This is the compounding effect of slashing advertising budgets over the past year combined with legacy churn from the 2025 website crash.
Guidance
Stable. The company reaffirmed its full-year outlook. At the midpoint ($147.5M), this implies a YoY deceleration of ~15% compared to FY25 ($173.7M). However, management explicitly reaffirmed expectations for sequential revenue acceleration in each of the remaining quarters of 2026.
Stable. Reaffirmed guidance. This implies a significant acceleration in profitability compared to the $2.2M loss in FY25, heavily relying on the structural SG&A cuts and marketing efficiency holding through the back half of the year.
Key Questions
DTC vs Wholesale Margin Discrepancy
Q2 sequential revenue growth was driven by Amazon and QVC while DTC declined. How do the Gross Margin and Adjusted EBITDA contributions of these wholesale channels compare to a direct subscriber, and does this represent a permanent channel mix shift?
Customer Acquisition Cost (CAC)
With the final piece of the technology migration (the subscription experience) now complete, have you seen a material decrease in CAC that would justify meaningfully re-accelerating advertising spend in Q3?
Active Customer Floor
Active customers declined by another 44,000 sequentially. Based on your current cohort retention data and planned ad spend, in which quarter do you model the active customer count finally bottoming out?
Inventory Disposals
Gross margin was impacted by 'one-time disposals' this quarter. Can you quantify the exact dollar impact of these disposals, and which product categories were written off?