On 8 month 5 day, the American beauty group e.l.f. Beauty released its first quarter financial report for fiscal year 2027.
The financial report revealed an unusual change: this beauty group, established over 20 years ago, saw its main growth driver in the past year come from an acquisition completed less than a year ago.
In 2025 year 8 month, e.l.f. Beauty acquired Rhode, founded by Hailey Bieber, for up to 10 hundred million US dollars. At the time, the market widely questioned whether the deal was "too expensive."
A year later, Rhode has contributed one-third of the group's revenue, while the group's original business is shrinking. Excluding Rhode, the group's sales are actually declining.
Rhode brings not just incremental revenue, but a deeper question: when an acquired new brand becomes the main growth driver, is e.l.f. Beauty still a "beauty brand company"?
In the first quarter of fiscal year 2027, e.l.f. Beauty's net sales reached 4.79 hundred million US dollars (approximately 32.3 hundred million yuan), a year-on-year increase of 36%. Rhode contributed 1.6 hundred million US dollars (approximately 10.8 hundred million yuan), accounting for one-third of the group's revenue. In other words, for every 100 US dollars the group sells, 33 US dollars come from this brand acquired less than a year ago.
Looking at a longer time frame, this figure is more intuitive. After the acquisition was completed in 2025 year 8 month, Rhode contributed 2.94 hundred million US dollars (approximately 19.8 hundred million yuan) in about 8 months, and in the new fiscal year, the single quarter further surged to 1.6 hundred million US dollars (approximately 10.8 hundred million yuan). As of the end of 6 month this year, cumulative sales have reached 4.54 hundred million US dollars (approximately 30.6 hundred million yuan).
Before the acquisition, Rhode's sales over the past 12 months were only 2.12 hundred million US dollars (approximately 14.3 hundred million yuan). In less than a year, it more than doubled. A brand established only 4 years ago is rapidly becoming a core variable affecting the group's revenue.
But the other side of this growth is that the original business is losing blood. Management revealed on the earnings call that excluding Rhode, the group's organic sales declined by a high single-digit percentage this quarter. In other words, e.l.f.'s original business is not only not growing, but actually shrinking.
Over the past few years, e.l.f. Beauty's growth has been entirely supported by its namesake affordable makeup brand e.l.f. Cosmetics: cheap, fast new product launches, adept at social media, and wide offline distribution. With this combination, it surged from mass makeup into the mainstream of American beauty. But now, the baton is being passed to a brand established only 4 years ago.
The two forces, one up and one down, piece together the true underlying picture of this financial report. For e.l.f. Beauty, Rhode brings not just an incremental revenue stream; it is redefining the company's growth source: from relying on organic growth of one brand to driving growth through acquiring new brands.
In 2022 year 6 month, Hailey Bieber founded Rhode.
At that time, celebrity beauty was nothing new. From Fenty Beauty to Kylie Cosmetics, the celebrity beauty brand market was almost saturated with top players, but very few could break through fan economy and create long-term commercial value.
The core reason Rhode has come this far is not just Hailey Bieber's celebrity influence, but that it has woven personal IP, product strategy, and young people's beauty consumption habits into a single rope.
Hailey provides not just a face, but an entire aesthetic system.
Clean girl beauty, glazed skin—the core logic of these trends is simple: skin looks translucent, natural, and healthy, rather than heavily concealed and overdone. Rhode's product strategy follows this path completely. Peptide Lip Treatment, Glazing Milk, Pocket Blush... It doesn't flood the market with a large number of SKUs, but builds memory points around a few highly recognizable products, using hit products to break through awareness, then gradually expanding the product matrix.
▍Rhode product matrix
But what really made Rhode take off is that it hit upon a new path.
Traditional brands start by relying on department stores and supermarkets, but Rhode took the DTC route. Direct sales on its official website, social media buzz, and spontaneous consumer sharing. Fast feedback, fast adjustments, and low early costs. But the downside is also obvious: after an online explosion, how do you scale up?
This is exactly where e.l.f. can help. The first move after the acquisition was to fill the channel gap.
Before the acquisition, Rhode was primarily DTC, with almost zero offline presence. Less than a year after entering the e.l.f. system, it quickly expanded into all Sephora stores in North America and began penetrating the European market. On the earnings call, management revealed that Rhode has only entered less than 20% of Sephora's global stores, meaning there is still a large amount of blank market waiting to be filled.
▍Rhode's offline display in Sephora Canada stores
But channels are only the surface. Deeper changes are happening in two places:
First, improvement in supply chain efficiency. e.l.f.'s supply chain system, honed over years in mass beauty, allows Rhode to complete production and replenishment at lower cost and faster speed. For a brand operating on a hit-product logic, this means the risk of stockouts is greatly reduced, and profit margins are reopened.
Second, completion of DTC capabilities. It sounds contradictory—Rhode started as a DTC brand, so what can e.l.f. teach it? In reality, early growth of DTC brands is often driven by content and community, but at the scaling stage, the real test becomes user operations, data analysis, and repurchase management. e.l.f. has already run through these systems in the past few years. After Rhode plugged into this system, operational efficiency improved while maintaining brand tone.
This is the real value e.l.f. brings to Rhode: plugging in a proven system, turning the brand from a hit-product machine into a business that can sustain scalable growth.
Actually, e.l.f. is no stranger to doing this.
▍Naturium product image
In 2023, it acquired the skincare brand Naturium for approximately 3.55 hundred million US dollars (approximately 24 hundred million yuan). Since then, Naturium has continued to expand its offline channels and overseas markets, becoming an important fulcrum for e.l.f.'s skincare layout. Naturium was the first validation: e.l.f. has the ability to take over a brand that has already gained momentum and amplify it for another round. Rhode is a larger-scale test, with both the acquisition amount and brand magnitude stepping up a level.
Both acquisitions have worked out, but whether this model is sustainable still remains uncertain.
Over the past two quarters, e.l.f. Beauty's growth story has been almost entirely written by mergers and acquisitions. Rhode contributed one-third of the group's revenue, Naturium completed the role transition from small-step validation to stable contribution, while e.l.f. Cosmetics is shrinking.
This is already a strategic direction taking shape: e.l.f. is transforming from a "brand company" into an "M&A company."
The difference between these two models is that building a brand relies on product, marketing, and channel capabilities, doing one thing to the extreme, and then growing slowly from 1 to 10; doing M&A relies on capital allocation, target screening, and post-investment integration capabilities, using money to buy time and starting directly from 10.
Both are needed, but the core capabilities required are completely different. The moat of the former is the brand, and the moat of the latter is the system.
If e.l.f. wants to fully walk the second path, it needs to answer three questions.
First, are there still enough good targets?
The beauty industry does not lack new brands, but brands worth spending 10 hundred million US dollars to buy are extremely rare. For a brand to grow to the magnitude of Rhode, it requires product strength and an aesthetic system, the founder's personal influence, and also catching a certain trend. Targets that satisfy all three conditions are inherently scarce resources.
More importantly, Rhode's success will drive up the valuations of subsequent targets. Sellers will think: "Rhode can sell for 10 hundred million, my brand is not bad either, why sell cheap?" This means that every time e.l.f. makes a move in the future, the cost is rising, and rising costs directly erode the return on M&A.
Second, how large can the management scope be?
e.l.f. Cosmetics focuses on affordable makeup, Naturium focuses on functional skincare, and Rhode focuses on celebrity lifestyle brands. Three brands, three positionings, three consumer profiles, three sets of tactics. Management complexity rises exponentially.
In the past, e.l.f. only needed to manage one thing well: making e.l.f. Cosmetics bigger. Now it needs to manage three things simultaneously, while ensuring that each brand does not lose its tone, does not conflict with each other, and does not dilute overall resources.
Third, how many times can this model be replicated?
If e.l.f. just wants to rely on Rhode to sustain growth for a few more quarters, it has already achieved that. But if it wants to prove that it is a true beauty M&A platform, the market needs to see that the third and fourth acquisitions can also produce similar results. Naturium was the first validation, Rhode was the second, so where is the third?
Currently, e.l.f.'s management is clearly laying out in this direction. On the earnings call, CEO Tarang Amin repeatedly emphasized that the company's "M&A pipeline" remains active and clearly stated that e.l.f. will continue to look for emerging brands that match the group's capabilities. This statement precisely shows that e.l.f. does not intend to rely solely on Rhode to prop up its image.
But statements are just statements; the market ultimately looks at results. Every acquisition is a heavy bet, and every integration is a test. If e.l.f. can successfully complete more than three large-scale acquisitions in a row, then its valuation logic will no longer be that of a company selling affordable makeup, but that of an M&A integration platform that can continuously create value. By then, whether it is 30 times PE or 50 times PE will no longer be a question.
For e.l.f., Rhode has already proven that it can be bought. What needs to be proven next is that it can be taken over and made to perform.
If it can do that, e.l.f.'s future is far beyond the ceiling of a single affordable makeup brand.