One algorithm tweak wiped out $2 billion. Is the beauty-tech darling a bargain now?

When a stock loses more than half its value in a few months, investors usually assume something is badly broken. That is exactly what happened to ODDITY Tech — the AI-powered company behind makeup brand IL MAKIAGE and wellness label SpoiledChild — in 2026.

But the story behind the crash is stranger than the usual growth-stock blowup. ODDITY's products kept selling. Its brands kept their fans. What broke was something almost nobody outside of advertising talks about: the price of buying a new customer online.

Founded in 2013 and run out of New York and Tel Aviv, ODDITY isn't your typical makeup brand. More than 40% of its staff work in tech roles. It sells beauty products, but it runs like a software company — using AI, computer vision and a mountain of customer data to match shoppers to the right foundation shade or skincare routine online, without a store or a mirror.

That formula worked spectacularly. Revenue more than tripled in four years, topping $810 million in 2025. IL MAKIAGE's viral "try before you buy" model and its AI shade-matching quiz turned first-time browsers into repeat buyers, and the stock became a Wall Street favorite, peaking near $77 in June 2025.

In early 2026, ODDITY told investors that a big advertising platform had changed its algorithm — and overnight, the cost to acquire a new customer spiked roughly 83% from a year earlier. The company hadn't raised prices or lost demand. The pipe that fed it new shoppers simply got a lot more expensive, all at once, across the U.S., Canada, the U.K. and beyond.

The damage showed up fast. First-quarter 2026 revenue fell 26% from a year earlier, new orders dropped about 50%, and the company swung to a loss after years of steady profits. Analysts hit the sell button: Goldman Sachs eventually cut the stock all the way to a Sell rating, and price targets tumbled across the board.

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Here's where it gets interesting. If demand really had collapsed, you'd expect the crowds to vanish from ODDITY's websites too. They didn't — at least not the way the stock did. Website visits to its brands actually surged into early 2026, cresting around 22.6 million monthly visits before easing back to about 12.6 million as the company deliberately pulled back on expensive paid ads.

The pattern tells the real story: the growth wave that carried ODDITY was powered by cheap, efficient paid traffic. When that traffic got expensive, the company chose to spend less rather than torch its margins — and the visit count came down with it. That's a business making a cost decision, not a brand losing its audience. One caveat worth naming: even Google Trends has become a shaky tool for tracking brands in 2026, as AI chatbots eat into traditional search — so we lean on the harder traffic data here.

There are early green shoots, too. Management says the cost to acquire an IL MAKIAGE customer improved about 28% in May versus April — the first step in the right direction — and its ad partner estimates ODDITY can claw back 40% to 60% of the cost spike over time. Its newest brand, METHODIQ, is the one corner of the portfolio whose traffic is still climbing.

The stock has already staged a partial comeback — up more than 68% from its June low near $9.81 to about $16.50 today, though still down roughly 58% for the year. Wall Street is split down the middle: the analyst crowd is at "hold," with price targets ranging from $8 to $80. That spread is the whole debate in one number — is the ad shock a passing storm, or a permanent crack in the model?

The next couple of quarters — starting with earnings due in early August — will likely settle it. If customer costs keep normalizing and METHODIQ catches on, today's price may look like a gift. If the ad troubles linger, there could be more pain ahead. For now, ODDITY is one of the market's most fascinating "is-it-broken-or-is-it-a-bargain" stories.

Not financial advice. 10bps is for informational and educational purposes only. Do your own research before making any investment decision. Figures are as of July 13, 2026 and may have changed.