Forget U.S. Rescheduling: Tilray's 71% Growth in Europe Is the Story Investors Are Missing

The main story for marijuana companies has been the ongoing trend toward legalization. The big dream has always been the U.S. government legalizing pot. The recent rescheduling of marijuana, making it easier for companies to do research, is a step in that direction, but not anywhere near what marijuana investors are hoping is the end game. But the real story for Tilray Brands (NASDAQ: TLRY) isn't rescheduling anymore; it's management's efforts to diversify the business away from pot. Here's what you need to know.

Tilray is a changed company

Tilray started life as a pure-play marijuana stock. It held its initial public offering (IPO) at a time when pot stocks were all the rage on Wall Street. But when financial results for marijuana stocks fell well short of investor expectations, the entire sector plunged, including Tilray. There were a number of reasons for this, including slower-than-hoped-for legalization and intense competition from both legal and illicit marijuana competitors.

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Tilray has shifted gears dramatically, as it has sought to broaden its portfolio beyond pot. Along the way, the company's geographic reach has expanded as well, further reducing the importance of the U.S. marijuana market. Some numbers from the company's fiscal first-quarter 2027 earnings release will help explain what's going on.

On the product category side, first-quarter results showed that beverages (largely beer) generated $101.5 million in revenue, up 82% year over year, driven by a major acquisition. Marijuana sales accounted for only $56.1 million in revenue. Tilray is no longer just a pot stock. In fact, it now looks like a beverage stock, with a side of marijuana. Meanwhile, also helped along by the acquisition, Tilray's sales in Europe, the Middle East, and Africa (EMEA) grew by a huge 71%.

You may need to rethink Tilray Brands

When you step back and look at the big picture, Tilray Brands is not the same company it was just a short while ago. It is executing on its goal of becoming "a global lifestyle and consumer packaged goods company leading at the nexus of the beverage, cannabis, and wellness industries." The company lost money in the first fiscal quarter, so there's still more work to be done. But the growth of its beverage business and its international expansion are key features of the important changes taking shape at Tilray Brands. Changes that could even, eventually, turn it into a sustainably profitable business.

Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool recommends Tilray Brands. The Motley Fool has a disclosure policy.