Oddity Tech (NASDAQ:ODD) shares tumbled on Wednesday after the company disclosed a sudden issue involving its largest advertising partner, which has sharply increased customer acquisition costs (CAC) and is expected to weigh heavily on near-term revenue.
The stock dropped more than 36% in premarket trading by 07:33 ET following the announcement.
According to the company, algorithm changes by a key advertising partner redirected marketing campaigns into “lower quality auctions at abnormally high costs,” significantly raising expenses tied to acquiring new customers. Management emphasized that the issue is unrelated to broader market trends or the company’s historical performance.
“We believe we recently identified the root cause of the problem and have already implemented significant actions that we hope will drive meaningful progress in Q2 and return our acquisition costs to normal levels in Q3 or Q4,” said co-founder and CEO Oran Holtzman.
The disruption is expected to have a substantial short-term impact. Oddity warned that first-quarter 2026 revenue could decline by roughly 30% year over year due to elevated acquisition costs, although the company anticipates meaningful recovery in the second half of the year.
The update accompanied the company’s fourth-quarter results. Net revenue for the quarter increased 24% year over year to $153 million, while adjusted diluted earnings per share reached $0.20, surpassing consensus estimates of $0.14 and revenue expectations of $150.81 million.
Adjusted EBITDA totaled $13 million, down from $15 million in the same period a year earlier. Gross margin declined to 70.5% from 72.7%, and adjusted EBITDA margin fell to 8.2% from 12.3%, reflecting higher operating costs during the quarter.
For the full year, Oddity reported revenue of $810 million, representing 25% annual growth, alongside adjusted EBITDA of $163 million and adjusted diluted EPS of $2.21.
Despite the near-term challenges, management said underlying demand trends remain healthy and reiterated that there is “no change to strategy or long-term growth focus.” The company plans to issue full-year 2026 guidance once visibility improves in the coming months.