The cannabis sector’s earnings season has wrapped up, and on top of individual company results, it’s left us with four critical takeaways to understand now.
Like most retailers, cannabis companies report late in the earnings season. So the sector just finished reporting the third quarter.
Here are the four key sector insights from earnings calls – three positive and one negative.
1. Rescheduling Remains Likely
Big picture, cannabis company executives still believe President Donald Trump’s administration will reschedule cannabis. That will be a huge sector catalyst. But like everyone else, they just don’t know when.
“I continue to believe the administration will ultimately deliver on its commitment to reschedule cannabis to Schedule III, on its own timetable,” said Curaleaf (CURLF) CEO Boris Jordan. “I am more positive on that than I have ever been. I think we are on the precipice of getting change.”
Jordan’s logic comes down to politics. “They need the youth vote. They got a major message in the election that they need something that attracts it.” The big question is when rescheduling will happen. “I think he is going to do it on his timetable not when we want. Sometimes these things take a lot more time than people think.” In the past, Jordan has speculated that rescheduling will happen closer to the 2026 midterms, for greater political impact.
The bottom line, though, is that “the direction remains clear and positive for the industry,” says Jordan.
Trulieve (TCNNF) CEO Kim Rivers is in the same camp. “I remain optimistic Trump will reschedule. It will be the first major domino in federal reform,” she says, citing changes like banking reform that would follow. To support her view, she cites polls showing that 90% of Americans favor some form of legalization. “The momentum for reform is gaining traction.”
2. Price Compression Continues
Price compression persists as a challenge for cannabis companies.
“Price compression headwinds did not abate in the third quarter as all markets we operate in showed a low double-digit decline on average as compared to the third quarter last year,” said Jordan, at Curaleaf. The company’s flower price per gram was down 10% over the year before.
Discounting was higher than expected in the quarter in Illinois and New Jersey, said Verano (VRNOF) CFO Richard Tarapchak.
Relatedly, consumers continue to be frugal. “The basket is filled with a lot of value products,” said Verano founder and CEO George Archos. At Curaleaf, consumers traded up to larger value-size formats. “Consumers continue to favor value,” said Rivers at Trulieve.
3. Margins Are Expanding in Some Cases
At Curaleaf, adjusted gross margins improved to 50%, an increase of 115 basis points, both sequentially and versus the prior year. At Cronos (CRON), adjusted gross profit came in at $18.3 million for a 50% gross margin. That was a 19-percentage point improvement from 31% adjusted gross margins in the third quarter of 2024.
4. European Growth Continues
Europe continues to be a high-growth market with a long runway. Curaleaf’s international sales grew 12% sequentially and 56% year over year, because of strength in the U.K. and Germany. Cresco (CRLBF) announced it is in the process of making its first foray into Europe, a confirmation that growth will persist. Executives expect the continent’s medical market to continue to expand, as more countries get on board or expand their markets.
For more on what companies will benefit the most from the positive trends, consider subscribing to Cabot Cannabis Investor here.
