Mattel Q2 Sales Beat Estimates as Margin Pressure Squeezes Earnings

Mattel, Inc. MAT posted a clear split in second-quarter 2026 performance. Net sales rose 10% year over year and topped expectations, while adjusted earnings fell sharply as margin pressure and higher operating expenses weighed on profitability.

The quarter showed that revenue momentum is improving faster than earnings. That puts greater emphasis on whether second-half margin recovery can support the company’s reaffirmed full-year outlook.

Mattel's Q2 Sales Beat Masks an Earnings Miss

Mattel reported net sales of $1.13 billion, up 10% year over year and 4.2% above the Zacks Consensus Estimate of $1.08 billion. Growth was led by North America, Vehicles and the Action Figures, Building Sets, Games and Other category.

Adjusted earnings were 1 cent per share, down from 21 cents a year earlier. The result missed the Zacks Consensus Estimate of 3 cents by 66.7%, as higher advertising, selling and administrative expenses and weaker margins offset the benefit of higher sales.

MAT Growth Came From Vehicles and Challenger Categories

Worldwide Vehicles gross billings increased 11% in constant currency to $463 million, mainly on Hot Wheels growth. Action Figures, Building Sets, Games and Other gross billings rose 33% in constant currency to $358 million, helped by games, Mattel163 and action figures tied to theatrical releases.

The broader competitive landscape also shows why digital and intellectual-property monetization matter. Hasbro, Inc. HAS operates across physical and digital games, toys, licensed consumer products and entertainment, while Take-Two Interactive Software, Inc. TTWO develops and publishes interactive entertainment through Rockstar Games, 2K and Zynga. Mattel’s expansion into digital games and entertainment increases its exposure to some of the same consumer attention channels.

Mattel's Margin Squeeze Raises the Second-Half Bar

Adjusted gross margin declined 260 basis points year over year to 48.6%. Tariffs reduced margin by 170 basis points, inflation by 120 basis points, higher royalties by 110 basis points and foreign exchange by 60 basis points.

Mattel163 contributed 120 basis points of benefit, while tariff-mitigation actions and Optimizing for Profitable Growth savings added another 80 basis points. Management still expects adjusted gross margin of about 50% for 2026 and sequential improvement in the second half, making cost control and mix improvement central to the earnings recovery.

MAT Keeps Its 2026 Outlook Intact

Management reaffirmed its full-year 2026 guidance despite the second-quarter earnings shortfall. Mattel continues to expect constant-currency net sales growth of 3% to 6% and adjusted operating income of $580 million to $630 million.

Adjusted earnings are still projected at $1.27 to $1.39 per share, with adjusted gross margin expected at about 50%. The guidance provides a counterweight to the weak quarterly profit result, but it also leaves execution pressure elevated because stronger second-half profitability is needed to support the full-year targets.

MAT's Hold Signal Reflects Q2 Crosscurrents

Mattel’s second-quarter results support a balanced view. Sales growth accelerated and category diversification improved, but the earnings miss and margin contraction show that higher revenues are not yet converting into stronger profits. 

The stock currently carries a Zacks Rank #3 (Hold). Mattel also has a Value Score of A and VGM Score of B, while its Growth Score of C and Momentum Score of D are less favorable. The mix supports patience rather than a more aggressive stance until margin recovery and earnings performance become more convincing. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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