e.l.f. Beauty surges 24% after FY25 earnings, $1bn acquisition of rhode

e.l.f. Beauty Inc. (NYSE: ELF) reported a 28% year-over-year jump in revenue for Fiscal 2025, reaching $1.31 billion in net sales. In doing so, the Oakland-based cosmetics company marked its 25th consecutive quarter of net sales growth—a remarkable feat in a beauty landscape increasingly shaped by inflation, channel fragmentation, and consumer fatigue across traditional segments.

For the fourth quarter ended March 31, 2025, e.l.f. Beauty posted $332.6 million in sales, up 4% from Q4 FY24. The company continues to outperform peers with a high-growth, digitally native strategy that leans heavily on inclusive branding, fast innovation cycles, and a lean supply chain anchored in Asia.

The announcement came with a blockbuster surprise: a definitive agreement to acquire Hailey Bieber‘s skincare brand, rhode, in a deal valued at up to $1 billion. The acquisition—one of the largest in the indie beauty space this year—is set to reshape e.l.f.’s portfolio and deepen its presence in the prestige skin-focused category.

What’s Behind the $1 Billion Deal with rhode?

e.l.f. Beauty will pay $800 million upfront—$600 million in cash and $200 million in stock—to acquire rhode, a fast-growing lifestyle beauty brand founded by celebrity influencer Hailey Bieber. The agreement also includes an earnout of up to $200 million based on performance metrics across the next three fiscal years. The deal is expected to close in Q2 FY26, pending regulatory clearance.

Founded with a Gen Z-first positioning, rhode has gained viral traction for its clean formulations, minimalist branding, and strong influencer-led marketing playbook. Its success aligns closely with e.l.f. Beauty’s overarching strategy: curating a house of fast-growing, mission-driven, digitally fluent brands. With rhode, e.l.f. now adds a prestige, skincare-led engine to a portfolio that already includes Naturium, Well People, Keys Soulcare, and the core e.l.f. SKIN and Cosmetics franchises.

CEO Tarang Amin framed the acquisition as a strategic move to diversify and future-proof the portfolio by expanding into complementary high-growth verticals and capturing share in a fragmented market.

How Profitable Was e.l.f. Beauty in FY25?

Gross margin for the full year improved to 71%, up 50 basis points year-over-year. This was driven by a combination of favorable FX on imports from China, transportation cost relief, and scale efficiencies. Adjusted EBITDA reached $296.8 million for the year, representing 23% of sales—up 26% YoY. Q4 alone delivered adjusted EBITDA of $81.4 million, nearly doubling year-over-year.

Adjusted net income climbed to $197.6 million, while adjusted diluted EPS stood at $3.39, up from $3.18 in FY24. On a GAAP basis, however, net income fell to $112.1 million, compared to $127.7 million in the previous fiscal, due to higher marketing spend, equity-based compensation, and amortization of acquired intangibles.

Operating income for FY25 reached $158 million, supported by strong demand across retail and online channels and rising international contributions.

How Are Investors Reacting to e.l.f. Beauty’s Strategy?

Investor sentiment turned sharply positive after the May 28 earnings and acquisition news. On May 29, 2025, e.l.f. Beauty shares surged by 24% to close at $111.84—marking the largest one-day rally in the company’s trading history. The stock reaction was catalyzed by a combination of strong earnings metrics, the high-visibility rhode acquisition, and a favorable macro event: a U.S. federal court decision that blocked most of President Trump’s proposed China tariffs, which had been a looming headwind for supply chain-heavy retailers.

Despite the May 29 rally, e.l.f. stock remains nearly 40% below its all-time high, reflecting sector-wide corrections that followed the post-COVID boom in beauty valuations. Nevertheless, analysts believe the dip offers a tactical opportunity, especially given the company’s growth consistency, balance sheet strength, and M&A execution track record.

What Do Institutional Flows and Buy-Side Analysts Say?

Institutional ownership remains robust. Leading asset managers including BlackRock Inc., Vanguard Group Inc., and Baillie Gifford & Co. hold significant stakes in the company, reinforcing confidence in its long-term potential. Over the past quarter, data from Fintel.io suggests modest net buying activity among mutual funds and ETFs, especially those focused on consumer discretionary and ESG-aligned growth strategies.

The buy-side remains split on valuation. Bulls highlight e.l.f.’s EBITDA expansion, omnichannel strength, and first-mover advantage in clean, affordable beauty. Bears are cautious about execution risks related to integrating rhode and potential dilution from the $200 million stock issuance component.

Retail sentiment, especially from social and forum-based investors, leans positive post-earnings, with many traders citing the deal’s brand power and upside in skin-focused prestige retail as near-term catalysts.

Why Did e.l.f. Skip FY26 Guidance?

While many expected e.l.f. Beauty to raise full-year guidance given its momentum, the company chose not to issue a Fiscal 2026 outlook. This was attributed to ongoing uncertainty around tariffs, particularly those related to imports from China—where a significant portion of the company’s products are manufactured.

With the Biden-Trump tariff landscape in flux, the company’s conservative stance signals prudence amid geopolitical uncertainty. Analysts note that e.l.f. has a history of outperformance even without issuing formal forward-looking guidance, and see the absence as a temporary risk-mitigation measure rather than a red flag.

How Does e.l.f. Stack Up Against Its Beauty Industry Peers?

Compared to traditional giants like Estée Lauder and L’Oréal, e.l.f. Beauty continues to punch above its weight, leveraging its agile cost structure and fast innovation cycles to disrupt the market. Where legacy firms are battling channel fatigue and product lifecycle elongation, e.l.f. is thriving with short-form content-driven launches and TikTok-native campaigns.

Its value-driven positioning, cruelty-free claims, and vertically integrated model distinguish it from premium rivals and drugstore incumbents alike. The addition of rhode is expected to further stretch its consumer spectrum—from mass market to influencer-led prestige.

What Is the Investment Outlook for e.l.f. Beauty?

From a fundamentals perspective, e.l.f. Beauty enters FY26 on a strong footing. Its cash and cash equivalents rose to $148.7 million, and net debt remains manageable despite recent repurchase activity and upcoming acquisition-related outflows. Operating cash flow for the year hit $133.8 million, up nearly 90% from FY24.

That said, with high expectations baked in, the stock may see some near-term volatility as the market assesses integration progress and broader macro themes. Still, e.l.f. remains one of the few beauty companies showing consistent double-digit top-line growth, sustained margin expansion, and institutional investor loyalty.

Buy-side analysts are currently leaning toward a “Hold” recommendation in the short term, pending further visibility into post-acquisition margin impact and tariff clarity. However, many see e.l.f. as a potential long-term compounder, particularly if rhode hits its internal benchmarks and global scaling plays out as modeled.

What to Expect Next from e.l.f. Beauty?

In the months ahead, investors will watch three things: the regulatory approval and integration timeline for rhode, developments in U.S.-China trade policy, and Q1 FY26 sales momentum—especially in light of recent channel diversification efforts. New product innovation cycles and influencer collaboration rollouts are also expected to play a key role in maintaining e.l.f.’s cultural relevance.

With a strong balance sheet, rising brand equity, and a proven M&A engine, e.l.f. Beauty appears well-positioned to maintain its status as one of the most compelling growth stories in beauty retail.