Hims & Hers Stock Drops After Earnings: Buying Opportunity or Warning Sign?

Hims & Hers Health (NYSE: HIMS) delivered another quarter of strong revenue growth.

But that came with shrinking margins, rising costs, and a surprise net loss.

The telehealth company reported first-quarter 2026 revenue of $608.1 million, up 4% year over year, while subscribers continued growing across its weight-loss, sexual health, dermatology, and primary care businesses.

The problem, however, is profitability.

A bitter pill to swallow

Hims reported a net loss of $92.1 million for the quarter compared to net income of $49.5 million a year earlier. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) fell to $44.3 million from $91.1 million last year, while gross margin shrank from 73% to 65%.

Most of the pressure came from the company's shift away from compounded GLP-1 weight-loss drugs toward branded products like Novo Nordisk's (NYSE: NVO) Wegovy.

That transition fundamentally changed the economics of the business.

Compounded GLP-1 drugs carried significantly higher margins for Hims. But after regulatory pressure and legal disputes involving Novo Nordisk, the company pivoted to selling more branded therapies. That lowers regulatory risk, but it also compresses margins and increases operating costs.

The trade-off was a bitter pill to swallow.

Shares fell more than 12% following the earnings release, despite management raising full-year revenue guidance to $2.8 billion to $3.0 billion.

That was coupled, however, with reduced adjusted EBITDA guidance from $300 million to $375 million to $275 million to $350 million as the company spends more aggressively on international expansion, acquisitions, AI tools, diagnostics, and branded weight-loss infrastructure.

It's not all bad

During 2024 and 2025, investors rewarded Hims for rapidly scaling revenue while significantly expanding adjusted EBITDA and maintaining strong free cash flow generation. This quarter suggested that dynamic may be weakening.

At the same time, there are still several reasons not to write this stock off.

The company continues generating positive free cash flow. Operating cash flow reached $89.4 million during the quarter, while free cash flow came in at $53 million.

Subscriber growth also remains strong.

Hims now serves more than 2.6 million subscribers globally, and the company's entire model bypasses traditional healthcare channels by allowing patients to access consultations, prescriptions, diagnostics, and medication delivery directly through a digital platform, without in-person doctor visits or insurance-based systems.

Image source: Getty Images.

Some analysts believe that the shift toward direct-to-consumer healthcare is still in its early stages, particularly among younger patients who increasingly prefer subscription-based healthcare services, telemedicine, home delivery, and app-based treatment management.

Hims is effectively betting that healthcare will eventually behave more like other consumer internet businesses, where patients prioritize convenience, pricing transparency, recurring subscriptions, and digital access over traditional clinic-based care.

The company is expanding well beyond weight loss and traditional telehealth categories, too.

Hims has indicated that future growth initiatives include peptide-based therapies, hormone-optimization programs such as testosterone replacement therapy and menopause care, preventative diagnostic testing, and broader longevity-focused healthcare services aimed at aging-related health concerns.

At the same time, the company is continuing to expand internationally following its acquisition of ZAVA. This European digital health platform operates across the United Kingdom, Germany, France, and Ireland.

That deal gave Hims immediate access to millions of potential patients outside the United States, along with an established telemedicine infrastructure, physician network, and prescription fulfillment system already operating under European regulatory frameworks.

At the time of the acquisition announcement, ZAVA generated approximately $100 million in annualized revenue across European markets.

The question now just boils down to valuation.

Still at a premium

Even after the recent sell-off, Hims still trades at a premium valuation compared to many traditional healthcare companies because investors continue betting on long-term growth across telehealth, weight loss, diagnostics, and international healthcare expansion.

That means execution risk remains high.

If revenue growth slows further while margins continue to compress, the stock could remain volatile. But if Hims successfully transitions into a broader digital healthcare platform while stabilizing profitability, the company could still justify a higher valuation over time. This transition, however, will not happen overnight, so if you're looking to buy shares of Hims stock at these levels, you will have to be patient for any kind of meaningful gains.

To be sure, the latest earnings report didn't break the Hims growth story. But it did clarify that scaling telehealth profitably, especially in highly regulated markets like weight loss and compounded medicine, is becoming much more complicated.

Jeff Siegel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Hims & Hers Health. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.