HIMS: The 2 Things Most Investors Completely Missed on the Earnings Call
$HIMS Q2 2026 ER Update
Q2 earnings were great, closely matching my expectation for a beat and raise (check my Q1 update for reference). But during the call, there were two powerful takeaways that I think most investors missed, and I will walk you through them.
Before doing that, let me highlight one positive insight from the first release of the new AI features to some cohorts: AI is making the service more engaging and improving retention. This is excellent news because it derisks the whole thesis. One of the most critical factors for Hims’ success is increasing subscribers and scale. Once it has scale and organic growth, almost everything else follows as a consequence.
… we spoke around how with a more immersive experience through the next evolution of the app and some of the AI tools as well as physical tools like the scale of the consumers are getting, that enables more connectivity with their providers. And ultimately, we’re already seeing signs of lower cancellation rates for the cohorts of users that are receiving that. And as we look to continue invest in the experience, and we see opportunities as we gain more efficiencies to make price points more affordable, we see an already solid retention rate getting stronger and stronger.
On the same topic:
Patients are interacting and messaging with their care teams 3x as much with the new care operating plan and operating system that we’ve rolled out. And at the same time, the actual tasks for humans has dropped 50% when you’re talking about nonclinical tasks
Hims Is Planning to Become the Backbone of the Healthcare Industry
We are excited to bring the experience to more of our customers across the world, and we think we are moving closer to a future where the model we are building becomes the backbone for health platforms beyond Hims & Hers.
Mohamed ElShenawy, the CTO recently hired to build the Hims AI infrastructure, explained this during his AI update.
This is not a random comment that can be dismissed as buzzwords or hype to reinforce the AI thesis. This is Hims explaining in plain English what the company’s ultimate goal is as it works to accomplish its mission.
Becoming the backbone of the healthcare industry.
As I have envisioned since my first Hims write-up more than one year ago, and reiterated in my Q1 update, Hims is an AI company, and its value is in the closed loop. I will not describe it again; just read the paragraph “Hims is an AI company and providers are training the model” in my previous article.
Hims is actually pushing it even further, trying not only to create the only vertical ontology for healthcare, but also to create the layer where all healthcare actors will operate.
Andrew Dudum elaborated on it better later in the call:
…building the operating system and kind of this AI platform that can connect to pharmacists, a doctor, care coaches, agents all together in that environment, we thought was the best place to start
Having the best longevity and healthcare AI model in the world - which they will, if they can keep executing for a few years - is already a strong incentive, but it is not enough. Big Pharma is not moved by good intentions. It is moved by making more and more money, whatever the outcome for patients.
Andrew understood this, of course, and is trying to make them happy enough to join the system:
Hims’ platform becomes a distribution layer for Big Pharma (see the Novo partnership). The bigger it gets, the higher the FOMO to get in.
Hims does not compete with Big Pharma because it quit mass compounding.
The next obvious step, in my view, will be for Hims to sell anonymized data to Big Pharma and biotech companies for their R&D.
What are the most common and painful problems suffered by patients?
How much are patients willing to spend on them?
What are the most likely solutions to such problems—APIs, proteins, molecules, and so on?
What is the addressable market?
Such information is worth billions.
Here is Andrew telling you in plain English during the call, when addressing the Novo partnership:
I think there’s an increasing amount of collaboration around key strategic markets that are valuable to both businesses and thinking about how to collaborate into expanding the market and getting people more access I think there is increasing ability to share data with regard to what’s working for patients, adherence benefits, what we’re seeing with regard to side effects or how to mitigate that in different dosing regimens.
So I think there’s a really powerful flywheel here when you start getting the leading drug manufacturers actually closer to the data on the ground of the consumers in a way that can not only help when it comes to commercializing therapies but also thinking through how we bring new therapies to market. And so I think there’s a growing set of opportunities that I think both of the teams are very excited by.
The Freemium Model
I think this also sets up a really powerful freemium offering for Hims & Hers, where patients could just have the opportunity to come leverage these tools at Hims & Hers in a free manner to just get benefits of the 360 view of their health, a unified platform with an ecosystem, all powered by AI on the bottom layer of actual doctors, actual trained nutritionalists as well as agents and care pilots. And so when you really step back, like what is this that we’re building is currently available. This is what most would consider concierge care today. And it costs anywhere from $50,000 to $150,000 annually. I think in the simplest way, my vision is to make that same level of proactive, preventative, always-on care affordable to everybody globally for a price that is universally accessible.
Andrew is basically thinking of delivering a Duolingo-like model, where anyone can join for free, dump all their health problems into the app - every person on Earth has a lot of them - chat with AI about them, and actually get contextualized answers instead of only a recommendation to consult with a doctor.
You may be able to use the Hims app for free to track your diet progress and blood analysis, and get useful insights and recommendations.
In other words, a no-brainer.
From there to buying a product or service, the step is very short.
Combined with the already good marketing ROI Hims is delivering, this could be a total game changer for Hims’ top of the funnel.
Conclusion
As I correctly predicted two quarters ago, growth is reaccelerating. After a beat and raise in Q2, I expect another beat and raise in Q3.
Why do I say this? Because I noticed some patterns in how management presented the guidance. I will point you to my post on X for more details.
The only thing I did not like about Q2 was management not being fully transparent about guidance and subscriber numbers excluding Eucalyptus. This is not to diminish the importance of the Eucalyptus acquisition or to say that it was not a good thing. It was. But it makes it impossible to track organic growth and retention, which is crucial for a company like Hims that is betting the house on its ability to acquire new customers and retain them.
Besides that, I think we will have a good end to the year. Peptides are coming, the Novo partnership is bringing a lot of new business, and the international business is growing fast. We could not ask for better.
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