Hims & Hers posted a surprise third-quarter net loss of $33.0 million, or 14 cents a share, and lowered its full-year adjusted EBITDA forecast, the company said on Monday. The result marks a sharp reversal from the same quarter a year earlier, when the telehealth operator reported net income of $15.8 million, or 6 cents a share. Analysts had projected earnings of 6 cents per share, according to The Wall Street Journal.

The loss landed days after Eli Lilly announced an agreement to offer its weight loss drugs Zepbound and Foundayo through the Hims & Hers platform — a deal that sent the company's stock up 6.3% in premarket trading last Friday.

What went wrong in the quarter?

Gross margin fell to 57%, down from 74% a year earlier — a 17-percentage-point collapse at the core of the earnings miss. Cost of revenue more than doubled, rising to $381.2 million from $156.9 million. Total operating expenses climbed to $575.3 million from $430.3 million, according to the company's results.

Adjusted EBITDA rose to $82.4 million from $78.4 million year over year, but the underlying margin narrowed to 9% from 13%. In plain terms, the company generated slightly more cash profit than a year ago while carrying a far larger cost base to do it.

Marketing expense, the company's largest discretionary line, rose to $247.3 million from $232.2 million a year earlier. CFO Yemi Okupe said in a statement that the company held back marketing spending ahead of several planned platform expansions in the fourth quarter.

Did revenue keep growing?

Yes, but not enough to satisfy the market's expectations. Revenue rose 49% to $890.4 million — a growth rate most consumer companies would envy. Analysts polled by FactSet had expected $893.1 million, according to The Wall Street Journal, leaving the company roughly $2.7 million short.

The growth split sharply by geography. U.S. revenue increased 21%, while revenue outside the U.S. surged 321% — international sales are expanding more than fifteen times faster than the domestic business, though from a much smaller base.

Subscribers grew 13% to nearly 2.8 million, meaning the company added roughly 320,000 members over the year while its revenue base expanded at nearly four times that pace. The gap signals higher spending per subscriber, but also the heavier costs of serving them.

What does the new guidance say?

For the full year, Hims & Hers now expects:

• Revenue of $3.13 billion to $3.15 billion
• Adjusted EBITDA of $257 million to $277 million
• The revenue range replaces an earlier forecast of $3.1 billion to $3.3 billion, cutting roughly $100 million from the top end

For the fourth quarter, management guided to revenue of $875 million to $895 million and adjusted EBITDA of $70 million to $90 million. Analysts forecast fourth-quarter revenue of $953.8 million, according to The Wall Street Journal — meaning the midpoint of the company's guidance sits roughly $69 million, or about 7%, below Wall Street's number.

Why the Eli Lilly deal matters now

The quarterly numbers arrive amid a rapid reshaping of the company's drug distribution strategy. Eli Lilly said last Friday it would offer Zepbound and Foundayo through the Hims & Hers telehealth platform, and shares climbed 6.3% before the market opened that day. Hims & Hers had unveiled a comparable arrangement with Novo Nordisk earlier in the year.

The two deals tie the platform to the dominant makers of weight loss drugs. They also help explain the quarter's cost pressure: building the infrastructure and supply relationships to sell branded GLP-1 medications carries a far higher cost of revenue than the compounded alternatives that once drove the company's margins.

Okupe's comment about holding back marketing ahead of fourth-quarter platform expansions signals that the company expects those deals to begin contributing before the year ends. The fourth-quarter EBITDA guidance of $70 million to $90 million implies margins between 8% and 10%, consistent with the 9% posted in the third quarter rather than a rebound toward last year's 13%.

The strategic bet is now visible: accept compressed margins today, roughly 57% gross versus 74% a year ago, to secure direct partnerships with Eli Lilly and Novo Nordisk in the highest-demand category in healthcare.

A 13% subscriber base approaching 2.8 million, a 321% international growth rate, and two major drugmaker agreements in a single year constitute the growth case. A $33 million quarterly loss and a lowered outlook constitute the cost.