While it demonstrates e.l.f. Beauty's ambition to capture more market share, it also puts the company in direct competition with established industry leaders. This could slow growth as ELF attempts to navigate a crowded market with players who already have loyal customer bases. On its first-quarter fiscal 2025 earnings call, e.l.f. Beauty noted that its second-quarter results are likely to face tough year-over-year comparisons. While gross margins are expected to remain stable, the company plans to increase marketing and digital investments during the quarter. These expenditures, projected to surpass the 21% of net sales spent last year, are part of a broader strategy to enhance brand visibility and digital engagement. However, this ramp-up in spending is likely to pressure adjusted EBITDA margins, which may fall to the low teens in the second quarter.