The Estée Lauder Companies (EL) Q2 2026 earnings summary

Executive summary

• Achieved strong Q2 and first half results with 4% organic sales growth, 6% net sales growth to $4.23 billion, and 43% EPS growth, driven by operational transformation, Beauty Reimagined strategy, and strong performance in Mainland China and EUKEM regions.

• Operating income rebounded to $401 million for the quarter, reflecting higher sales, improved gross margin, and lower non-consumer-facing expenses.

• Net earnings reached $162 million for the quarter, with diluted EPS of $0.44, a significant turnaround from prior-year losses.

• Expanded consumer coverage across online and brick-and-mortar, overhauled innovation processes, and increased consumer-facing investments, supported by PRGP savings.

• Raised full-year fiscal 2026 outlook, expecting restored organic sales growth and margin expansion for the first time in four years.

Financial highlights

• Q2 net sales rose 6% year-over-year to $4.2 billion; organic net sales up 4%.

• Gross margin expanded 40 bps to 76.5%; adjusted operating margin up 290 bps to 14.4%.

• Adjusted diluted EPS increased 43% to $0.89; reported diluted EPS at $0.44, up from a loss.

• Net cash from operations for the first half was $785 million, up from $387 million; free cash flow reached $581 million.

• Capital expenditures decreased to $204 million, reflecting a focus on consumer-facing investments.

Outlook and guidance

• Fiscal 2026 organic net sales growth expected between 1% and 3%, led by mid-single-digit growth in Mainland China.

• Adjusted operating margin forecasted at 9.8%–10.2%; adjusted EPS expected to grow 35%–49% year-over-year.

• Net cash from operations projected at $1.1–$1.2 billion, with capex at ~4% of sales.

• Tariff-related headwinds expected to impact profitability by ~$100 million, mostly in the second half.

• Committed to delivering at the top end of guidance for both top and bottom line.