Bubs Australia delivers strong half year with upgraded earnings guidance
Bubs Australia (ASX: BUB) has reported Bubs Australia Half Year Results for the six months ended 31 December 2025, delivering group revenue of $55.5M (up 14% from $48.5M in H1 FY25) and upgrading its full year earnings guidance. The infant formula manufacturer’s underlying EBITDA increased to $4.4M from $0.5M in the prior corresponding period, representing a near-ninefold improvement as the company converts revenue growth into profitability.
The result positions the company to exceed its FY26 commitments, with management upgrading group revenue guidance to $120-$125M and EBITDA guidance to $4.0-$6.0M. Gross margin remained steady at 48%, down marginally from 49% in H1 FY25.
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What the upgraded FY26 guidance means for investors
Management’s decision to raise full year guidance reflects confidence in the current trading environment and operational momentum heading into the second half. The upgraded targets suggest operating conditions are exceeding earlier expectations, particularly in the company’s key US market.
The revised guidance provides investors with a clearer path to profitability, with the company positioning itself to achieve sustained positive EBITDA performance. Gross profit margin guidance has been set at 40-45%, indicating management expects to maintain pricing discipline whilst absorbing some input cost pressures.
| Metric | H1 FY26 Actual | FY26 Guidance | H1 as % of FY26 Target | YoY Change |
|---|---|---|---|---|
| Group Revenue | $55.5M | $120-$125M | 44-46% | +14% |
| Underlying EBITDA | $4.4M | $4.0-$6.0M | 73-110% | +780% |
| Gross Margin | 48% | 40-45% | – | -1pp |
With H1 revenue at $55.5M, the company needs to generate $64.5-$69.5M in H2 to achieve guidance. This target appears achievable given accelerating US momentum and normalising China inventory levels.
US market drives growth as Bubs expands retail footprint
The United States has emerged as the primary growth engine for the business, with revenue reaching $34.2M (up 48% on pcp). The US market now represents approximately 62% of group revenue, providing higher margins and reducing reliance on more volatile China sales.
Growth has been driven by category expansion in goat infant formula, supported by ranging expansion across major retailers. Increasing store counts and broader instore distribution are sustaining sales momentum into the second half, with the company capitalising on growing consumer acceptance of goat milk-based formulations.
Joe Coote, Chief Executive Officer
“Our revenue and gross profit growth highlight the strength of our brands and the diversity of our business model, with the US our main growth engine as major retailers expand store counts and instore ranging.”
From a product category perspective, total infant formula sales grew 16% to $48.6M compared to H1 FY25 ($41.8M), underpinned by effective sales execution and continued delivery against strategic priorities.
China momentum building despite temporary headwinds
China revenue of $7.5M reflected temporary in-market inventory effects and short-term supply shortages during the half. However, underlying demand signals remain positive across key digital channels, with ageing stock now fully cleared and in-market inventory levels healthy for normalised sales in H2.
Channel performance indicators suggest strong consumer demand:
- CBEC (Cross-Border E-Commerce): Up 30% on pcp
- O2O (Online-to-Offline): Up 50% on pcp
- Physical store expansion: Products listed in 1,752 stores across 97 cities, up 77% on pcp
The company continues to strengthen offline penetration through ongoing O2O expansion and the introduction of its China-label goat adult milk powder. Whilst H1 revenue was impacted by supply constraints, the cleared inventory position and expanding distribution network support a recovery trajectory in the second half.
Understanding infant formula market dynamics
The infant formula industry operates under strict regulatory frameworks, with products requiring approval from authorities such as the US Food and Drug Administration (FDA) or Australia’s Therapeutic Goods Administration (TGA) before they can be sold. These approvals verify that formulations meet nutritional standards and manufacturing processes comply with food safety requirements.
Goat milk formula represents a differentiated product category within the broader infant formula market. Some parents select goat milk-based products due to perceived digestibility characteristics or as an alternative protein source to cow milk formulations. However, both cow and goat milk formulas must meet the same nutritional adequacy standards.
The US market opening to Australian infant formula manufacturers in recent years has created significant export opportunities. Regulatory barriers to entry, combined with manufacturing capability requirements and the need to establish brand recognition, create competitive advantages for companies that successfully secure shelf space in major retail chains.
Balance sheet and cash position
The company’s balance sheet provides adequate liquidity to fund growth initiatives, with available resources including:
- Cash and equivalents: $9.9M as at 31 December 2025
- Undrawn debt facilities: $20.0M
- Total available liquidity: Approximately $30M
Operating cash flow of -$5.7M during the half reflected deliberate inventory investment rather than operational weakness. Inventory levels of $28.5M represent a rebuild to support revenue growth, particularly in the US market where demand is accelerating.
Management has invested in rightsizing inventory levels to respond quickly to market opportunities, particularly in the US and China where momentum continues to build. The negative operating cash flow relates to strategic positioning rather than cash consumption from trading losses.
Regional performance snapshot
Performance in the company’s smaller markets reflected a combination of supply constraints and competitive pressures:
- Australia: Revenue of $9.5M, impacted by stock constraints in a competitive retail landscape, reduced brand visibility, and supply-driven market share pressure
- Rest of World: Revenue of $4.2M, led by Japan and Vietnam, with performance affected by complex regulatory requirements and rationing due to low product availability
Management noted that Australia and Rest of World markets are stabilising following supply chain challenges during the half. Whilst these segments underperformed relative to the US and China, they represent a smaller portion of the overall growth story, with the US market driving the earnings upgrade.
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What to watch in H2 FY26
Key catalysts for the second half that investors should monitor include:
- US retail expansion continuation: Store count growth and ranging expansion across major retailers will determine if the 48% H1 growth rate can be sustained
- China sales normalisation: With inventory now cleared, Q3 and Q4 revenue performance will indicate if the 30-50% channel growth rates translate to reported sales
- Margin trajectory: Whether the company can maintain gross margins within the 40-45% guidance range whilst scaling US operations
- Infant formula category sales: Total IMF sales grew 16% in H1, and maintaining this momentum is critical to achieving the upgraded revenue guidance
The earnings upgrade provides a clear target of $120-$125M revenue and $4.0-$6.0M EBITDA for FY26. With $55.5M already delivered in H1, investors should monitor US sell-through data and China channel growth as leading indicators of whether management can deliver on the upgraded commitments.
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