Executive Summary / Key Takeaways

• Aurora Cannabis has successfully pivoted to a "medical cannabis first" strategy, focusing on high-margin international markets, which is now driving consistent profitable growth and strong financial performance.
• The company reported robust Q1 2026 results, with net revenue increasing 17% to $98 million, adjusted gross margin reaching 52%, and adjusted EBITDA more than doubling to $11 million, demonstrating operational effectiveness.
• Aurora's competitive advantage is underpinned by its extensive network of EU GMP and TGA GMP certified facilities, advanced genetics research at Aurora Coast, and deep regulatory expertise, creating significant barriers to entry in global medical markets.
• Management projects continued strong positive adjusted EBITDA and positive annual free cash flow for fiscal year 2026, with global medical cannabis revenue expected to grow 8% to 12% year-over-year in Q2 2026.
• While regulatory shifts in key markets like Germany and competitive pressures present ongoing risks, Aurora's established infrastructure and strategic focus position it for sustained leadership in the expanding global medical cannabis market.

The Global Medical Cannabis Imperative: Aurora's Strategic Foundation

Aurora Cannabis Inc., founded in 2013, has strategically transformed itself into a leading global medical cannabis company, recognizing the significant opportunities in internationally regulated markets. The company's deliberate pivot to a "medical cannabis first" growth strategy, emphasizing high-margin opportunities outside of North America, has been a defining factor in its recent success. This strategic shift was predicated on the belief that regulatory environments in Europe and Australia would be more receptive to medical cannabis in the near term, a foresight that has proven accurate.

The global medical cannabis market is undergoing rapid expansion, with estimates suggesting it could exceed $5 billion in the next few years and potentially reach $9.5 billion by 2027. This burgeoning market, characterized by increasing patient access worldwide, forms a strong secular trend that Aurora is uniquely positioned to capitalize on. Unlike the more fragmented and price-sensitive recreational markets, medical cannabis benefits from higher barriers to entry, including stringent certifications and the necessity for on-the-ground infrastructure, which naturally leads to less price compression and more stable pricing.

Aurora's competitive differentiation is deeply rooted in its technological and operational excellence. The company boasts multiple EU GMP (European Union Good Manufacturing Practice) and TGA GMP (Therapeutic Goods Administration Good Manufacturing Practice, Australia) certified facilities, representing 90% of its annual manufacturing capacity. This adherence to pharmaceutical-grade standards is a critical competitive moat, enabling Aurora to be the largest Canadian exporter of high-quality medical cannabis. At the heart of its innovation lies Aurora Coast, a world-class research and genetics facility dedicated to developing proprietary cultivars. These efforts have led to tangible benefits such as improved yields, enhanced potency, and a lower cost per gram to produce, significantly increasing output capacity. Recent product innovations include the launch of high-potency cultivars like MedReleaf Noculus, boasting THC levels between 25-31%, and the introduction of new formats such as CBD lozenges through a partnership with Vectura Fertin Pharma, and cultivar-specific inhalable cannabis extracts in the UK. This continuous innovation and commitment to quality are crucial for maintaining top-tier margins and securing market leadership in a demanding medical landscape.

Financial Resilience and Growth Trajectory

Aurora's strategic focus on global medical cannabis has translated into a period of sustained financial improvement. Fiscal year 2025 marked a record-setting year for the company, with net revenue rising 27% to $343 million. Global medical cannabis revenue surged 39% to $244.4 million, with international revenue comprising over half of the total global medical cannabis revenue, up from 41% in fiscal 2024. The company achieved a record adjusted gross margin of 55% and a record adjusted EBITDA of nearly $50 million, alongside positive free cash flow of approximately $10 million.

The momentum continued into the first quarter of fiscal 2026 (period ending June 30, 2025), showcasing the effectiveness of Aurora's strategy. Net revenue increased 17% year-over-year to $98 million, primarily driven by a 37% rise in global medical cannabis revenue and an impressive 85% increase in international revenue. Adjusted gross margin saw a significant improvement of 1,000 basis points, reaching 52%, a direct result of higher cannabis margins. Adjusted EBITDA more than doubled to $11 million, and the company generated positive free cash flow of $9.2 million, representing a 42% increase from the prior year period.

Segment Performance Insights

The Global Medical Cannabis segment remains the cornerstone of Aurora's business, contributing 66% of net revenue and approximately 91% of adjusted gross profit in Q1 2026. Its adjusted gross margin stood at a robust 69%, up from 67% in the year-ago period. This margin expansion is attributed to larger revenue contributions from higher-margin international markets, sustainable cost reductions, and improved efficiency in production operations, including sourcing for Europe from Canada.
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Within this segment, Canadian Medical Cannabis continues to be a stable contributor, with net revenue growing year-over-year in Q1 2026. Aurora maintains the #1 market share in Canada, focusing on innovation in its online marketplace, expanding product assortment, and enhancing the patient experience. The company also recently expanded the eligibility of its medical compassionate pricing program.

International Medical Cannabis is the primary growth engine. Australia stands as Aurora's second-largest single market for medical cannabis, where it holds the #2 share. The full quarter contribution from MedReleaf Australia, acquired in February 2024, significantly boosted revenue and EBITDA. In Germany, descheduling in April 2024 has led to increased patient registrations and prescription volumes, with Aurora growing and gaining market share. The company has also launched its first German-cultivated medical cannabis product under the IndiMed brand and is investing in operational upgrades at its Leuna facility. Poland, after experiencing temporary headwinds from regulatory changes, has seen strong demand resume, supported by the launch of new high-potency proprietary cultivars. The U.K. market is also expanding, with Aurora broadening distribution and introducing innovative inhalable cannabis extracts.

The Consumer Cannabis segment, while not Aurora's primary strategic focus, remains important for gaining consumer insights into product preferences and pricing. Net revenue in this segment decreased to $7.9 million in Q1 2026 from $11.5 million in the prior year, reflecting the company's strategic decision to prioritize its higher-margin medical cannabis business. Despite the revenue decline, the adjusted gross margin for consumer cannabis improved to 33% from 20%, driven by sales of higher-margin products and cost efficiencies.

Aurora's Plant Propagation (Bevo) business recorded a new record net revenue of $23.9 million in Q1 2026, up 4% year-over-year. This segment, which is seasonal with higher revenues in winter and spring, experienced a decrease in adjusted gross margin to 6% from 18% in Q1 2026 due to a nonrecurring inventory write-off and surplus crops. Excluding these one-time costs, margins would have aligned with historical trends.

Balance Sheet Strength and Capital Allocation

Aurora maintains one of the strongest balance sheets in the global cannabis industry. As of the end of Q1 2026, the company held a sizable cash balance of $186 million, with its cannabis business entirely debt-free. This robust financial position provides significant flexibility and eliminates the need for dilutive capital-raising programs, such as at-the-market (ATM) offerings, which some competitors utilize.

The company's capital allocation strategy is three-pronged: prioritizing internal investments, maintaining a clean balance sheet, and being opportunistic for M&A. Aurora continuously invests in its EU GMP and TGA GMP facilities, advanced genetics, and scientific innovation to enhance production efficiency and product quality. The full acquisition of MedReleaf Australia in February 2024 exemplifies its opportunistic M&A approach, targeting accretive opportunities that align with its core medical cannabis competency. While Bevo's plant propagation business holds non-recourse debt, a temporary reclassification of its liabilities as current due to a covenant issue is expected to be resolved quickly and does not pose a significant concern to Aurora's overall financial health.

Outlook and Risks

Looking ahead to Q2 2026 (ending September 30, 2025), Aurora anticipates continued positive momentum. Consolidated net revenue is expected to increase year-over-year, primarily driven by an 8% to 12% growth in the Global Medical Cannabis segment. Plant propagation revenue is projected to align with traditional seasonal trends, with 25% to 35% of its annual revenue typically earned in the second half of the calendar year. Consolidated adjusted gross margins are forecast to increase, with the cannabis business expected to see a 250 to 475 basis point improvement. These factors are expected to lead to continued strong positive adjusted EBITDA, which management anticipates will grow sequentially from Q1 2026. While free cash flow is expected to be positive on an annual basis for the second consecutive year, the company notes that Q2 2026 will include several significant cash outflows consistent with historical trends, impacting quarterly results.

Despite this optimistic outlook, Aurora operates within a dynamic and evolving regulatory landscape that presents inherent risks. In Germany, a new government is in place, and while regulatory changes are expected, management does not foresee an immediate significant rollback in medical cannabis regulations that would impact current growth plans. Historically, more restrictive market environments have favored established operators like Aurora, given their experience in navigating complex regulatory frameworks. The temporary headwinds experienced in Poland due to regulatory changes impacting prescription volumes have since been resolved, demonstrating the company's ability to adapt. Operational challenges, such as the non-recurring quality issue at Bevo, also highlight the complexities of managing a diverse business portfolio. Furthermore, the cannabis industry remains challenging to forecast due to varying country-specific regulations, sudden policy shifts, and cultural factors influencing demand.

Competitive Edge in an Evolving Market

Aurora's "medical first" strategy and expansive global footprint provide a distinct competitive advantage against its peers. In contrast to the highly fragmented Canadian recreational market, international medical cannabis markets are more consolidated, with the top five companies often representing two-thirds or three-quarters of the total business. This environment favors companies like Aurora that have made significant investments in product innovation, regulatory compliance, and on-the-ground infrastructure.

Compared to some North American competitors focused on broader consumer markets or aggressive M&A, Aurora's deep investment in science, genetics, and patient-centric services creates a specialized moat. Its EU GMP and TGA GMP certifications are formidable barriers to entry, which many aspiring international players struggle to achieve. The company's ability to consistently supply high-quality, compliant products is a critical differentiator, particularly in markets like Germany where consistent stock is paramount for patient and physician trust. While precise, directly comparable market share figures for all niche competitors are not publicly detailed, Aurora's strong performance in key international markets suggests its strategy is effective. The company's financial discipline, marked by a debt-free cannabis business and positive free cash flow, also contrasts with some peers who have faced challenges with dilution and profitability.

Conclusion

Aurora Cannabis Inc. has successfully repositioned itself as a global leader in the high-margin medical cannabis sector, demonstrating a clear path to sustainable profitability. The company's strategic pivot to international markets, underpinned by its robust technological capabilities in cultivation and manufacturing, has yielded impressive financial results, including significant revenue growth, expanding gross margins, and consistent positive adjusted EBITDA and free cash flow. While the evolving regulatory landscape and inherent competitive pressures in the global cannabis industry present ongoing challenges, Aurora's established infrastructure, scientific expertise, and disciplined capital allocation strategy provide a strong foundation. The company's focus on premium, high-quality medical products and its ability to navigate complex international frameworks are critical differentiators that should continue to drive market share gains and long-term shareholder value in a rapidly expanding global market.