Second quarter 2026
Filed Sep 11, 2026Revenue Grew to $97.7M, up 20.8% YoY; Gross margin expansion of 609 basis points; Reaffirms FY26 Guidance for Revenue and Adjusted EBITDA
Revenue grew 20.8% year-over-year, gross margin expanded 609 basis points, net loss narrowed to $(12.9) million, and Adjusted EBITDA increased to $12.6 million. The company reaffirmed fiscal-year revenue growth and Adjusted EBITDA margin guidance, although cash declined and third-quarter Adjusted EBITDA Margin is guided negative.
Key metrics
shortened, hover for the filing’s print| Metric | Value | q/q | y/y |
|---|---|---|---|
| Total revenue, netGAAP | $97.7M | – | 20.8% |
| Subscription and Reserve rental revenueGAAP | $83.8M | – | – |
| Other revenueGAAP | $13.9M | – | – |
| Gross profitGAAP | $35.3M | – | 45.3% |
| Gross marginGAAP | 36.1% | – | 609 basis points |
| Fulfillment expenseGAAP | $23.5M | – | – |
| Technology expenseGAAP | $9.8M | – | – |
| Marketing expenseGAAP | $7.4M | – | – |
| General and administrative expenseGAAP | $23.8M | – | – |
| Rental product depreciation and revenue shareGAAP | $38.9M | – | – |
| Other depreciation and amortizationGAAP | $2.1M | – | – |
| Total costs and expensesGAAP | $105.5M | – | – |
| Operating lossGAAP | −$7.8M | – | – |
| Interest income / (expense), netGAAP | −$200K | – | – |
| Other income / (expense), netGAAP | $1.3M | – | – |
| Securities litigation expenseGAAP | −$6.1M | – | – |
| Net lossGAAP | −$12.9M | – | – |
| Net loss as a percentage of revenueGAAP | (13.2)% | – | – |
| Net loss per share attributable to common stockholders, basic and dilutedGAAP | $(0.38) | – | – |
| Adjusted EBITDAnon-GAAP | $12.6M | – | – |
| Adjusted EBITDA Marginnon-GAAP | 12.9% | – | – |
| Ending Active Subscribersother | 140,826 | – | (3.8)% |
| Average Active Subscribersother | 148,259 | – | 1.0% |
| Ending Total Subscribersother | 186,019 | – | 0.5% |
| Net cash (used in) provided by operating activities, six months ended July 31GAAP | −$5M | – | – |
| Net cash used in investing activities, six months ended July 31GAAP | −$16.6M | – | – |
| Free Cash Flow, six months ended July 31non-GAAP | −$21.6M | – | – |
| Free Cash Flow Margin, six months ended July 31non-GAAP | (11.5)% | – | – |
Segments
| Segment | Revenue | q/q | y/y |
|---|---|---|---|
| Subscription and Reserve rental revenueThe company concentrated resources on its rental and selling offerings, including Reserve, which it said carries its strongest satisfaction scores. | $83.8M | – | – |
| Other revenueAdd-on bookings increased 81% year-over-year and 33% of subscribers used an add-on during the quarter, up from 29% a year ago. | $13.9M | – | – |
Fiscal third quarter of 2026 and fiscal year 2026 outlook
- RevenueFor the fiscal third quarter of 2026, Revenue of between $87 million and $90 million. For fiscal year 2026, reaffirming Double-Digit Revenue Growth versus fiscal year 2025.
- NoteFor the fiscal third quarter of 2026, Adjusted EBITDA Margin of between negative 3% and negative 6%.
- NoteFor fiscal year 2026, reaffirming Adjusted EBITDA Margin of between 4% and 7%.
- NoteFor fiscal year 2026, updating Rental Product Acquired in the range of $53-55 million versus $74.9 million in fiscal year 2025.
What drove it
- Total revenue increased 20.8% year-over-year to $97.7 million.
- Gross margin expanded 609 basis points to 36.1%.
- Add-on bookings increased 81% year-over-year, and 33% of subscribers used an add-on during the quarter.
- AI-powered outfits generation was live to all customers by the end of June 2026. During the pilot, customers with the experience added items to their bag approximately 12% more often than those without it.
- The company paused the online marketplace pilot, on-site advertising and monetization, and new B2B dry cleaning opportunities to focus resources on core rental and selling offerings.
Concerns
- Ending Active Subscribers declined (3.8)% year-over-year to 140,826.
- Cash and cash equivalents were $29.0 million, compared to $43.6 million in the second quarter of fiscal year 2025.
- Long-term debt, net was $157.5 million at July 31, 2026.
- The third-quarter outlook calls for Adjusted EBITDA Margin of between negative 3% and negative 6%.
- The company said fuel surcharges, tariffs, and other macroeconomic developments are not incorporated into its expectations and can materially affect actual fiscal-year 2026 results.
- Securities litigation expense was $(6.1) million in the quarter.
What to watch
- Execution against third-quarter revenue guidance of between $87 million and $90 million.
- The progression from a 12.9% second-quarter Adjusted EBITDA Margin to guidance of between negative 3% and negative 6% for the fiscal third quarter.
- Fiscal-year execution toward Double-Digit Revenue Growth and Adjusted EBITDA Margin of between 4% and 7%.
- Rental Product Acquired, which is now expected in the range of $53-55 million versus $74.9 million in fiscal year 2025.
- Active Subscriber trends following the (3.8)% year-over-year decline in ending Active Subscribers.
- Liquidity and free cash flow after $(21.6) million of Free Cash Flow for the six months ended July 31, 2026.
- The CEO transition effective September 14, 2026, when Paige Thomas succeeds Teri Bariquit.
Balance sheet and cash flow
- Cash and cash equivalents were $29.0 million at July 31, 2026, compared with $50.4 million at January 31, 2026.
- Restricted cash, current was $4.0 million at July 31, 2026, compared with $4.5 million at January 31, 2026.
- Restricted cash was $4.2 million at July 31, 2026, compared with $4.2 million at January 31, 2026.
- Long-term debt, net was $157.5 million at July 31, 2026, compared with $156.6 million at January 31, 2026.
- Total assets were $192.4 million at July 31, 2026, compared with $221.0 million at January 31, 2026.
- Total liabilities were $257.9 million at July 31, 2026, compared with $257.1 million at January 31, 2026.
- Total stockholders’ equity (deficit) was $(65.5) million at July 31, 2026, compared with $(36.1) million at January 31, 2026.
- Purchases of rental product were $(27.7) million for the six months ended July 31, 2026, compared with $(42.0) million for the six months ended July 31, 2025.
- Net cash used in financing activities was $(0.3) million for the six months ended July 31, 2026, compared with $(1.4) million for the six months ended July 31, 2025.
Analysis
Rent the Runway reported a strong second quarter, with total revenue of $97.7 million, up 20.8% year-over-year from $80.9 million. Subscription and Reserve rental revenue was $83.8 million and other revenue was $13.9 million. Revenue growth occurred despite ending Active Subscribers declining (3.8)% year-over-year to 140,826. Average Active Subscribers increased 1.0% to 148,259 and ending Total Subscribers increased 0.5% to 186,019. Add-on activity was a notable engagement indicator: add-on bookings increased 81% year-over-year and 33% of subscribers used an add-on, compared with 29% a year earlier.
Profitability improved materially. Gross profit increased 45.3% to $35.3 million and gross margin reached 36.1%, compared with 30.0% a year earlier. Operating loss narrowed to $(7.8) million from $(20.1) million, while net loss narrowed to $(12.9) million from $(26.4) million. Adjusted EBITDA rose to $12.6 million from $3.6 million, and Adjusted EBITDA Margin increased to 12.9% from 4.4%. The quarter included $(6.1) million of securities litigation expense and $1.8 million of executive transition costs in the Adjusted EBITDA reconciliation.
Management attributed the margin outcome to gross-margin expansion and disciplined operating-expense control. Fulfillment expense was $23.5 million, technology expense was $9.8 million, marketing expense was $7.4 million, and general and administrative expense was $23.8 million. The company also narrowed its operational scope by pausing the online marketplace pilot, on-site advertising and monetization, and new B2B dry cleaning opportunities. It said the redirected resources will support the core rental and selling businesses, including Reserve.
Liquidity remains a point of attention. Cash and cash equivalents were $29.0 million at July 31, 2026, compared with $50.4 million at January 31, 2026, while long-term debt, net was $157.5 million. For the six months ended July 31, 2026, net cash used in operating activities was $(5.0) million and net cash used in investing activities was $(16.6) million. Free Cash Flow improved to $(21.6) million from $(32.9) million in the prior-year period, supported by lower purchases of rental product of $(27.7) million compared with $(42.0) million.
The company reaffirmed fiscal-year 2026 expectations for Double-Digit Revenue Growth and Adjusted EBITDA Margin of between 4% and 7%, while updating Rental Product Acquired to a range of $53-55 million versus $74.9 million in fiscal year 2025. Third-quarter revenue is expected between $87 million and $90 million, with Adjusted EBITDA Margin between negative 3% and negative 6%. The outlook excludes potential effects from fuel surcharges, tariffs, and other macroeconomic developments. Leadership will also change on September 14, 2026, when Paige Thomas becomes Chief Executive Officer and President and Teri Bariquit becomes non-executive Chair.
Management, verbatim
Rent the Runway is operating from a focused foundation, with a core rental business that continues to grow and a customer who is telling us what she values most.
Teri Bariquit, Interim CEO and President of Rent the Runway
Second quarter results were strong with revenues that reflect an all-time high for the company and profit margin expansion that is driven by our operating discipline and highlights how we intend to run the business.”
Dave Loretta, Interim Chief Financial Officer and Treasurer of Rent the Runway
I'm focused on listening to our customer and making every decision through her lens, doubling down on fashion and what makes this fashion service platform unique, while executing with operational excellence.
Paige Thomas, CEO of Rent the Runway
Not in the filing
stated, not guessed- Previous-release outlook was not provided, so no comparison of reported results with prior guidance is available.
- Non-GAAP earnings per share was not reported.
- Quarter-over-quarter comparisons were not reported for revenue, profitability, subscriber metrics, cash flow, or balance-sheet metrics.
- Quarterly free cash flow and quarterly free cash flow margin were not reported.
- Third-quarter and fiscal-year gross margin guidance, operating-expense guidance, and tax-rate guidance were not reported.
- Capital returns, including share repurchases and dividends, were not reported.
- A segmented revenue presentation beyond Subscription and Reserve rental revenue and Other revenue was not reported.
AlphAI analysis generated from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure was cross-checked against the filing text; consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.