Canopy Growth Corp. (NASDAQ: CGC) reported third-quarter fiscal 2026 financial results on Friday, characterized by a significant narrowing of net losses and a notable beat on revenue expectations. While the company recorded a wider-than-expected per-share loss, its aggressive cost-containment strategy and double-digit growth in Canadian medical cannabis helped stabilize its balance sheet. Shares showed modest volatility in early trading, eventually settling near C$1.10 as investors digested the mixed bottom-line performance against improved operational efficiency.
Aggressive Cost Reductions Narrow Losses
The primary development in the third quarter was the company’s success in reducing its financial deficit. Canopy Growth reported a net loss of C$62.6 million for the period ended December 31, 2025, a 49% improvement compared to the C$121.9 million loss in the same quarter of the previous year. This improvement was largely attributed to a reduction in selling, general, and administrative (SG&A) expenses, which fell 12% year-over-year when excluding one-time acquisition and litigation costs.
The company also achieved its slimmest Adjusted EBITDA loss to date at C$2.9 million, a 17% improvement over the prior year. Management noted that the company has captured C$29 million in annualized savings since March 1, 2025, exceeding internal targets and positioning the firm for its goal of positive Adjusted EBITDA in fiscal 2027.
Financial Highlights for Q3 Fiscal 2026
Canopy’s top-line performance remained resilient despite international supply chain constraints and broader consumer economic uncertainty:
Net Revenue: C$74.5 million, remaining essentially flat year-over-year but significantly exceeding the C$70.5 million projected by analysts.
Canada Medical Cannabis: C$23 million, representing a 15% year-over-year increase and marking six consecutive quarters of growth.
Canada Adult-Use Cannabis: C$23 million, an 8% increase supported by new product launches in vapes and infused pre-rolls.
Storz & Bickel: C$22.8 million, a 9% year-over-year decline but a 45% sequential increase from Q2, aided by seasonal demand and the new VEAZY vaporizer.
International Markets: C$6.2 million, a 31% year-over-year decrease primarily due to European supply chain hurdles, though the segment saw a 22% sequential recovery.
Consolidated Gross Margin: Contracted to 29% from 32% a year ago, impacted by lower international sales and shifting product mixes.
Strategic Outlook and Growth Drivers
Canopy Growth is pivoting toward a more integrated operating model with a focus on high-margin product categories and disciplined execution. A key pillar of this strategy is the pending acquisition of MTL Cannabis, which is expected to close within the current fiscal year. Management believes MTL will provide a significant boost to the company’s high-quality flower supply and Quebec market share.
“The decisive cost reduction actions that we have taken to date in fiscal 2026 have strengthened our current year financial performance and will ensure we are well positioned as we close out the fiscal year,” said Luc Mongeau, Chief Executive Officer. Mongeau emphasized that the focus on “fundamentals” is working, pointing to the company’s improved liquidity and the fastest product ramp in the history of Storz & Bickel for the new VEAZY device.
Chief Financial Officer, Tom Stewart, echoed this sentiment, highlighting a strategic recapitalization completed in January 2026. The move improved liquidity and extended all debt maturities to 2031, leaving the company with C$371 million in cash and cash equivalents. “This gives us more flexibility around near-term financing and more room to make the right long-term decisions,” Stewart remarked.
Sector Context and Macro Environment
The Canadian cannabis sector continues to face saturation and price compression in the adult-use market, prompting leaders like Canopy to prioritize medical channels and premium product segments. While Canopy’s international revenue was hindered by logistics in Europe, the 22% sequential recovery suggests that retooling elements of the supply chain is beginning to yield results.
Furthermore, the company maintains its strategic interest in the U.S. market through Canopy USA. While the timing of federal regulatory reform remains a point of uncertainty for the broader market, Canopy’s structure is designed to capitalize on potential rescheduling or banking reform without direct consolidation until legal clarity is reached.
As the company moves into the final quarter of the fiscal year, investor focus remains on whether the current momentum in the Canadian medical market and the integration of MTL Cannabis can provide the necessary bridge to sustainable profitability.
Reasons to Pass on CGC
- Still operating at a loss: Canopy reported a C$62.6 million net loss, with adjusted EBITDA remaining negative.
- Profitability pushed out: Management targets positive adjusted EBITDA only in fiscal 2027.
- Flat revenue trend: Net revenue was essentially unchanged year over year, limiting operating leverage.
- Margin pressure persists: Gross margin declined to 29% from 32% due to mix and weaker international sales.
- International revenue contraction: International sales fell 31% year over year amid European supply chain disruptions.
- Improvements driven by cost cuts: Narrower losses were primarily the result of SG&A reductions rather than demand growth.
- Adult-use market headwinds: Ongoing saturation and price compression continue to weigh on the Canadian market.
- Acquisition execution risk: The pending MTL Cannabis deal adds integration risk.
- Regulatory uncertainty remains: U.S. market optionality depends on unclear federal reform timing.
- Equity volatility: Share price reaction reflected investor caution despite operational progress.