eCommerce
Inside Oddity's 72.7% Gross Margin: What's in the Cost
Oddity Tech, the parent of IL Makiage, posted a 72.7% gross margin on $809.8M of FY2025 revenue. Cost of revenue is purely physical: manufacturing, freight, duties, fulfillment, warehousing, packaging, and depreciation. The data and software spend sits below gross profit, inside SG&A, which is why the model looks so clean at the top.
Key Takeaways
- Oddity's FY2025 gross margin was 72.7% on $809.8M of net revenue ($588.7M gross profit), up from 67.2% in FY2022. That 550 basis point climb over three years came from supply-chain efficiency and scale, not price hikes.
- Cost of revenue is entirely physical. Per the 20-F, it covers contract-manufacturer invoices, inbound and outbound freight, duties, third-party fulfillment, warehousing, packaging, and depreciation. Software, data science, and machine-learning spend are not in there.
- The data model's cost lives below gross profit, inside SG&A. Marketing was 30.3% of revenue in FY2025; the remaining 27.7% of 'other SG&A' is where tech headcount, data infrastructure, and G&A sit. The exact tech split is not disclosed.
- 72.7% is top-tier for beauty. It sits just under Estee Lauder (74.0%) and above e.l.f. (70.7%), Olaplex (69.4%), and Coty (64.8%). Pure-DTC pricing plus European manufacturing is what gets a brand there.
- Marketing intensity is the risk. Marketing jumped from 24.6% of revenue in FY2023 to 30.3% in FY2025. When acquisition cost climbs faster than the data layer can offset it, the gross-to-profit spread compresses fast.
Oddity Tech, the company behind the direct-to-consumer beauty brand IL Makiage, ran a 72.7% gross margin in its 2025 fiscal year. That number is higher than most legacy prestige beauty houses and near the top of the entire public beauty cohort. The obvious question, especially for a brand that markets itself as a data and AI company, is how much of that margin is physical product cost and how much is the technology stack that powers the shade-match quiz and the personalization engine. The 20-F answers it cleanly, and the answer is not what most operators assume.
What is actually in Oddity's cost of revenue
Start with the definition, because it settles the whole framing. Oddity's FY2025 20-F states that cost of revenue "consists principally of the costs of procuring the Company's products, including the amounts invoiced by third-party contract manufacturers and suppliers for inventory, as well as inbound and outbound shipping costs, duties and other related costs and inventory write-offs." It goes on: "Cost of revenue also includes third-party fulfillment costs, warehousing, depreciation and amortization and packaging costs."
Read that list again and notice what is missing. There is no software, no data-science headcount, no machine-learning infrastructure, no R&D. Cost of revenue is purely physical. It is the stuff you can touch: the bottle, the freight to get it into the warehouse, the duty at the border, the pick-and-pack to get it out the door. In FY2025 that came to $221.1M against $809.8M of net revenue, which is where the 72.7% gross margin comes from. Gross profit was $588.7M.
This matters because it tells you the 72.7% is a genuine product-economics number, not a number inflated by hiding costs somewhere clever. The data model that Oddity is famous for costs real money, but that money is spent below the gross profit line. When we talk to founders running a data-heavy DTC brand, the mistake we see most often is assuming their "tech" belongs in COGS and then panicking when their gross margin looks thin. Oddity's own accounting says the opposite: keep the product line clean, and let the software show up as operating expense where it belongs.
| Layer | % of revenue | $ millions (FY2025) |
|---|---|---|
| Net revenue | 100.0% | 809.8 |
| Cost of revenue | 27.3% | 221.1 |
| Gross profit | 72.7% | 588.7 |
| Marketing (in SG&A) | 30.3% | 245.5 |
| Other SG&A (tech, data, G&A) | 27.7% | 224.4 |
| Operating income | 14.7% | 118.8 |
From 67% to 73% in three years
The gross margin did not arrive at 72.7% by accident, and it did not get there through price increases. In FY2022 Oddity ran a 67.2% gross margin. It climbed to 70.4% in FY2023, 72.4% in FY2024, and 72.7% in FY2025. That is a 550 basis point improvement over three years, and the company attributes it to a specific cause. The MD&A in both the FY2024 and FY2025 filings uses nearly identical language: the gross margin increase was "largely driven by supply chain efficiencies and cost improvement efforts."
Two structural factors sit underneath that. The first is manufacturing location. Oddity produces primarily in Europe through contract manufacturers, and management has publicly cited that footprint as the reason it expects to weather tariff volatility better than peers who source from Asia. European contract manufacturing at scale gives you shorter freight lanes, fewer duty surprises, and more predictable landed cost. The second factor is pure volume. Revenue nearly tripled from $324.5M in FY2022 to $809.8M in FY2025, and manufacturing overhead spread across more units pulls the per-unit cost down.
Here is the full income-statement progression, because the trajectory is the story.
| Metric | FY2022 | FY2023 | FY2024 | FY2025 |
|---|---|---|---|---|
| Net revenue ($M) | 324.5 | 508.7 | 647.0 | 809.8 |
| Cost of revenue ($M) | 106.5 | 150.5 | 178.7 | 221.1 |
| Gross profit ($M) | 218.1 | 358.2 | 468.3 | 588.7 |
| Gross margin % | 67.2% | 70.4% | 72.4% | 72.7% |
| Total SG&A ($M) | 190.4 | 283.9 | 352.7 | 469.9 |
| SG&A % of revenue | 58.7% | 55.8% | 54.5% | 58.0% |
| Operating income ($M) | 27.7 | 74.3 | 115.6 | 118.8 |
| Operating margin % | 8.5% | 14.6% | 17.9% | 14.7% |
Notice the operating margin. It peaked at 17.9% in FY2024 and then slipped to 14.7% in FY2025 even though gross margin ticked up. That divergence is the tell, and it points straight at the next section.
Returns are quietly eating your margin. See by how much.
Get our Real Cost of Returns calculator: plug in your numbers, see the true hit per return.
Check your inbox. We'll send the Real Cost of Returns calculator shortly.
Where the data model's cost actually lives
If the technology is not in cost of revenue, where is it? The answer is SG&A, and the 20-F gives us enough to split that bucket in two. Note 14, the segment and expense disaggregation, breaks SG&A into marketing and everything else.
Marketing was $245.5M in FY2025, or 30.3% of revenue. That is up sharply from $163.6M (25.3%) in FY2024 and $125.1M (24.6%) in FY2023. The remaining "other SG&A" line, which is where all the software R&D, the data-science team, the machine-learning infrastructure, and ordinary G&A live, was $224.4M in FY2025, or 27.7% of revenue.
That is the number to sit with. The company's entire non-marketing operating cost base, including the famous data flywheel, is roughly $224M a year, and the filings do not break out how much of that is technology versus legal, finance, and HR. What we can say for certain is that the data layer is not free and it is not in COGS. It is structurally embedded in the 27.7% "other SG&A" bucket, which is exactly why the 72.7% gross margin compresses to a 14.7% operating margin. The gross-to-operating spread, about 58 points of revenue, is where the entire cost of running a data-driven beauty company sits.
When I talk to founders who describe themselves as a tech company that happens to sell a physical product, this is the framing I push them toward. Your gross margin measures your product. Your operating margin measures your product plus your machine. If the two are far apart, the machine is expensive, and the only question that matters is whether the machine earns its keep by lifting retention and lifetime value enough to justify the load. For Oddity, over half of a recent quarter's revenue came from repeat customers, which is the argument that the machine pays for itself.
How Oddity benchmarks against the beauty peer set
A 72.7% gross margin only means something in context. Here is where it sits against the public beauty cohort.
| Company | Gross margin | Revenue ($B) | Business type |
|---|---|---|---|
| Estee Lauder | 74.0% | 14.3 | Prestige multi-brand legacy |
| Oddity Tech (ODD) | 72.7% | 0.81 | DTC-native tech beauty |
| e.l.f. Beauty | 70.7% | 1.64 | Mass DTC and retail hybrid |
| Olaplex | 69.4% | 0.42 | Prestige DTC haircare |
| Coty | 64.8% | 5.89 | Legacy mass and prestige multi-brand |
| Ulta Beauty | 39.1% | 12.39 | Beauty specialty retailer |
The read is straightforward. Oddity sits second, a point and a half behind Estee Lauder and clearly above e.l.f., Olaplex, and Coty. That is a genuinely rare position for a company doing a fraction of Estee Lauder's revenue. The legacy conglomerates like Coty run lower consolidated margins because they carry lower-margin mass brands and sell heavily through wholesale, which shaves the spread. Ulta sits at 39.1% because it is a retailer, not a brand: its "cost of goods" includes buying finished product from the brands above it, so it is a reminder of how much margin the retail layer absorbs and how much a direct brand keeps by cutting that layer out.
The 70% line is the one that matters for operators. When we talk to beauty founders, the benchmark we point them at is 70% gross margin including outbound shipping in cost of goods. Oddity clears it comfortably. Most emerging brands do not, and the reason is almost always one of three things: wholesale distribution, sub-scale manufacturing, or a fulfillment cost that quietly eats 3 to 5 points of margin.
What a founder can copy, and what they cannot
Some of Oddity's margin is replicable and some of it is not, and being honest about which is which saves a lot of wasted effort.
The replicable parts are the boring ones. Selling direct rather than through wholesale keeps the full retail spread. Manufacturing at scale in a region with clean freight and predictable duties, in Oddity's case Europe, holds landed cost down. Tight, well-negotiated third-party fulfillment keeps the pick-pack line from bloating. A founder with discipline on those three levers can get to the high 60s in DTC color cosmetics. That is e.l.f. territory, and it is a good place to be. If you want to see how those levers translate into a full contribution-margin stack, our fractional CFO services walk through exactly which costs belong above the gross profit line and which belong below it.
| Factor | Lower bound (~65%) | Upper bound (~73%) | Oddity's position |
|---|---|---|---|
| Channel | Wholesale or multi-retailer | Pure DTC or owned channel | Predominantly online DTC |
| Manufacturing | Landed-freight premium sourcing | Regional contract mfg at scale | Primarily European contract mfg |
| Category | Skincare or personal care | Color cosmetics | IL Makiage color cosmetics led |
| Pricing power | Mass market, price-competitive | Brand equity plus data premium | Premium hero-product positioning |
| Repeat rate | Low, single-category | High, over 50% repeat | Over 50% of revenue from repeats |
| Data layer | None | AI personalization lifting LTV | Proprietary shade-match and profiles |
The part you cannot copy quickly is the top of that table's right-hand column: the data flywheel. Oddity's shade-match quiz and its large base of user profiles let it convert acquisition spend into repeat revenue at a rate a new brand simply cannot match on day one, because that engine is built on years of accumulated purchase data. That retention is what pushes the ceiling from the high 60s up to 72.7%, and it is what lets the company carry a 30% marketing line without the model breaking. The pattern we see again and again is that founders can replicate the cost side of a brand like this in 18 months, but the retention side takes years because it compounds on data you do not have yet.
Oddity's 72.7% gross margin is a clean product number, and the data model that everyone talks about costs nothing in cost of revenue. It costs plenty below the line, buried in the 27.7% of revenue that is non-marketing SG&A. The margin is real. What defends it is the retention engine, and that is the one thing on the income statement a competitor cannot buy off the shelf.
What the numbers do not tell you
Three honest gaps are worth flagging before you treat any of this as a blueprint.
First, there is no brand-level split. IL Makiage was over $500M of FY2024 revenue by management's own account, with SpoiledChild making up the rest, but the 20-F never breaks brand-level economics out. Every margin figure here is consolidated.
Second, there are no disclosed customer metrics. Oddity references a large user base and a majority-repeat revenue mix in commentary, but the filings carry no formal customer acquisition cost, no lifetime value, and no repeat-purchase rate you can audit. Treat those as directional, not precise.
Third, and most important, marketing intensity is climbing. Marketing went from 24.6% of revenue in FY2023 to 30.3% in FY2025, and the FY2025 filing warns explicitly about "a significant increase in customer acquisition costs." That is the pressure point. The whole thesis of a data-driven beauty company is that the machine keeps acquisition efficient. When acquisition cost rises faster than the data layer can offset it, the gross-to-operating spread compresses, and you watch it happen in real time: FY2025 operating margin fell to 14.7% from 17.9% a year earlier, even though the gross margin held. The product economics are excellent. The forward risk is entirely below the gross profit line, which is exactly where the interesting money in this business is spent.
Related reading. For where a 72.7% gross margin sits against the field, see average DTC gross margin across public companies and the gross-to-operating margin gap in public DTC.
Sources and methodology
Oddity Tech FY2025 20-F (year ended December 31, 2025). Primary source for FY2025 net revenue ($809.8M), cost of revenue ($221.1M), gross profit ($588.7M), the verbatim cost-of-revenue definition, total SG&A ($469.9M), operating income ($118.8M), and the Note 14 marketing versus other-SG&A split. Filed March 2026, accession 0001104659-26-029490. Filing index available via SEC EDGAR.
Oddity Tech FY2024 20-F (year ended December 31, 2024). Used for FY2022 and FY2023 comparative figures, the accounting policy placing R&D inside SG&A, and the "significant increase in customer acquisition costs" risk language. Accession 0001410578-25-000198. Available via SEC EDGAR company search.
Peer gross-margin benchmarks. Estee Lauder, e.l.f. Beauty, Olaplex, Coty, and Ulta Beauty gross margins are drawn from each company's most recent annual 10-K, cross-checked against consolidated financial summaries at Stockanalysis.com. All figures reflect the latest fiscal year available per company.
Management commentary. The European-manufacturing and tariff-resilience context, and the IL Makiage revenue characterization, are drawn from a dated trade interview: Glossy, "IL Makiage owner Oddity believes it can withstand tariff uncertainty". These are management statements, not audited disclosures, and are labeled as such above.
Limitations. No brand-level (IL Makiage versus SpoiledChild) financials are disclosed in any filing. No audited customer-acquisition-cost, lifetime-value, or repeat-rate figures exist; repeat-revenue references come from management commentary. FY2025 figures were rounded to one decimal for readability; underlying 20-F line items are stated in thousands.
Frequently asked questions
what is il makiage's gross margin and how does it compare to sephora brands?
Oddity Tech, which owns IL Makiage, ran a 72.7% gross margin in FY2025 on $809.8M of revenue. That is higher than most brands sold through Sephora once you strip out the retailer's cut, because IL Makiage sells direct and keeps the full retail spread instead of splitting it with a wholesaler.
what actually goes into cost of revenue for a dtc beauty brand like il makiage?
Per Oddity's 20-F, cost of revenue is the physical product: what contract manufacturers invoice for inventory, inbound and outbound shipping, duties, fulfillment, warehousing, packaging, and depreciation. It does not include the software, data science, or marketing that most people assume is baked into a tech-beauty brand's cost.
how much of oddity's margin comes from technology vs the physical product?
The 72.7% gross margin is a clean physical-product number. Technology cost does not touch it. The data and software spend sits below gross profit inside SG&A, so it shows up in the gap between the 72.7% gross margin and the roughly 20% adjusted EBITDA margin, not in cost of revenue.
why do dtc beauty brands have such high gross margins compared to apparel?
Beauty carries a huge spread between what the product costs to make and what it sells for, and selling direct keeps that whole spread. Apparel usually goes through wholesale, which cuts the margin roughly in half. When we talk to founders across both categories, beauty operators can target 70% to 80% gross while apparel operators are often capped near 50%.
what does oddity spend on marketing as a percentage of revenue?
Marketing was 30.3% of revenue in FY2025 ($245.5M), up from 24.6% in FY2023. That is the single biggest line below gross profit, and its climb is the main reason FY2025 operating margin slipped even though gross margin held.
where is il makiage manufactured and does that affect margins?
Oddity manufactures primarily in Europe through contract manufacturers, which management credits for supply-chain efficiency and tariff resilience. European sourcing at scale is one of the structural reasons the gross margin sits in the low 70s rather than the mid 60s.
how do i know if my beauty brand's gross margin is good?
For DTC beauty, 70% gross margin including outbound shipping is the benchmark to target. Below that and either your product cost or your fulfillment is heavy. Above it and you have real pricing power or manufacturing scale. Oddity clears the bar; most emerging brands sit in the mid 60s until volume kicks in.
does il makiage break out spoiledchild revenue separately?
No. The 20-F only splits revenue by geography and by online-versus-other channel. IL Makiage was over $500M of FY2024 revenue per management commentary, but there is no audited brand-level line for IL Makiage versus SpoiledChild anywhere in the filings.