Shares of Tilray (TLRY) have seen positive action in pre-market trading after the leading global cannabis and consumer packaged goods company announced its third-quarter financial results for fiscal year 2025, showing improved profit margins despite a slight dip in revenue. Despite short-term challenges, Tilray’s focus on margin improvement and strategic market expansion helped the company post earnings that beat expectations, despite missing revenue targets. Investors who have watched the shares decline over 50% so far this year are hoping the results catalyze meaningful upward movement in the stock.
Well Positioned in THC Markets
Tilray is a global cannabis-lifestyle and consumer packaged goods company with an operational footprint spanning Canada, the United States, Europe, Australia, and Latin America. Its business encompasses the entire cannabis value chain, from research and cultivation to production and distribution, with a diverse product portfolio that includes medical cannabis, adult-use cannabis, and cannabinoid-based products, in addition to hemp-based foods and alcoholic beverages.
In a significant expansion move, Tilray has broadened the distribution of its hemp-derived THC beverages across 10 U.S. states, now reaching over 1,000 retail locations. This initiative has tapped into growing consumer trends, particularly the shift away from alcohol among younger generations and the rising “sober curious” movement. “The hemp-derived THC beverage market is projected to grow from $239 million in 2023 to $4.1 billion by 2028, and we’re well-positioned to capture this opportunity,” a company representative noted.
Notably, Tilray has conducted an analysis in response to the new tariffs on international trade and determined that these tariffs will not affect its sales. This conclusion is based on their operational strategy, which localizes production and distribution within specific regions. In the U.S., Tilray’s beverage brands are produced and sold domestically, while in Canada, their cannabis brands cater exclusively to the Canadian market. Their European operations involve creating and distributing medical cannabis across Europe and Australia. Furthermore, their wellness brand, Manitoba Harvest, is not subject to the new tariffs, ensuring continued operation without additional costs from trade obstacles.
Revenue Miss but Earnings Beat
For Q3 of FY2025, the company reported a net revenue of $185.8 million, down slightly from $188.3 million in the same period last year, missing analyst expectations by $23.9 million. However, more encouragingly, gross profit increased by 5% to $52 million, with gross margins improving by 200 basis points to 28%.
Tilray posted a substantial net loss of $793.5 million for the quarter, primarily due to a $700 million non-cash impairment charge rather than operational issues. On a positive note, the company reduced its total debt by $71 million, including a $58 million reduction in convertible notes.
Notably, the company reported an 800-basis point improvement in cannabis segment margins. This impressive gain was primarily driven by strategic moves, including cutting less profitable products from their lineup, particularly in categories like infused pre-rolls and vapes that have faced significant price pressure. The company has deliberately maintained higher pricing in profitable segments, even at the cost of some market share, while improving operational efficiency and redirecting inventory to international markets with better margins. As a result, non-GAAP earnings per share (EPS) of $0.00 beat expectations by $0.03.
Looking ahead, Tilray has revised its revenue guidance for fiscal year 2025 to between $850 million and $900 million.
Analyst Forecast
Analysts following the company have yet to weigh in on the announced results. However, before this morning’s news, the consensus opinion was cautious.
Tilray is currently rated a Hold overall, based on the most recent recommendations of eight analysts. The average price target for TLRY stock is $1.57, which represents a potential upside of 171.02% from current levels.
