Hims & Hers Trades Growth for Margin as Legal Risk Builds

Hims & Hers grew second-quarter revenue 38% to about $753 million, but the mix behind that growth produced lower margins and negative cash flow. The stock's 52% one-year decline therefore reflects more than a change in valuation.

The company added two important growth engines in 2026. It broadened its branded weight-loss offering and completed the acquisition of Eucalyptus in June. Eucalyptus contributed about $40 million of quarterly revenue, while international sales rose more than seventeenfold to $131 million. Domestic revenue remained larger at $622 million but grew a more modest 16%.

The new mix is less profitable so far. Adjusted gross margin fell about six percentage points from the preceding quarter to 64%, which management linked to branded weight-loss products and international expansion. The company also reported an $86 million net loss and negative free cash flow of $68.2 million.

Working capital is part of the cash drag because fast-growing branded products require inventory and other upfront spending. That can reverse as sales scale, but investors need evidence rather than an assumption.

Regulatory risk adds another claim on cash. The Federal Trade Commission filed a complaint on July 29 after a lengthy investigation and settlement discussions. Hims said the action ignores evidence and state telehealth rules and that it will defend the case. The outcome, timing and cost remain unresolved, and related shareholder litigation adds complexity.

Liquidity provides room to respond. Hims ended the quarter with more than $840 million of cash and short-term investments. Management also raised full-year revenue guidance to $2.8 billion to $3.0 billion.

The next quarter should show whether growth quality is improving. Revenue alone is not enough. Investors should track gross margin, operating cash flow, international retention and any legal reserve changes. A return to positive cash generation would show that the expanded platform can fund itself; continued losses would make the cheaper sales multiple less compelling.