Cricut (NASDAQ: CRCT), the maker of Cricut cutting machines and the Cricut Access design subscription, reported a 58% jump in second-quarter 2026 operating income even as revenue fell 9%. Deep Sail Capital, a long/short fund, re-entered a short position on September 29, 2026, arguing that $20.3 million of IEEPA tariff refunds and a royalty reserve release flattered the quarter while the hardware business shrinks. The next test is Cricut's third-quarter 2026 report, the first without the refund boost.
This is journalism and commentary, not investment advice. We hold no position unless stated.
Key facts
- Ticker: Cricut, Inc., CRCT, Nasdaq Global Select Market.
- Situation type: Earnings-quality short on a consumer hardware and subscription company.
- The call: Deep Sail Capital said on September 29, 2026 it "Added back $CRCT short too."
- The one-time items: IEEPA tariff refunds of $20.3 million (including interest) and a $6.4 million royalty settlement release in the quarter ended June 30, 2026.
- The quarter: Revenue of $156.3 million (down 9%), Products revenue of $71.3 million (down 22%) and operating income of $47.4 million.
- Price: $6.33 at the September 28, 2026 close before the post; $6.40 at the October 8, 2026 close.
- Main risk to the short: Cricut held $266.9 million of cash on June 30, 2026 and keeps paying dividends and buying back stock.
Is Cricut a good bet right now?
It depends on what Cricut earns without one-time help.
Bulls see a cash-rich company whose subscription business now outsells its hardware. Bears see a quarter dressed up by refunds that will not repeat. Cricut's next two quarterly reports should show which view holds.
Why is Deep Sail bearish on Cricut?
Deep Sail's reasons, from its September 29, 2026 post:
- Non-recurring profit. Deep Sail says roughly half of the $47.4 million of operating income came from tariff refunds and the reserve release.
- Shrinking hardware. Products revenue fell 22%, which Deep Sail ties to lower prices on new machines and heavier promotion.
- Slow platform growth. Platform revenue grew 5% and Paid Subscribers grew 3% to 3.10 million.
- Flat engagement. 90-Day Engaged Users were 3.494 million versus 3.482 million a year earlier.
- Tough comparison. Deep Sail expects the second-quarter 2027 year-over-year comparison to be difficult.
Our check of the 10-Q mostly supports the math, with one nuance. Of the $20.3 million refund, $17.9 million reduced product cost of revenue, $1.7 million reduced inventory and $0.7 million was interest income. Removing the $17.9 million and the $6.4 million release leaves about $23.1 million of operating income by our arithmetic, below the $30.1 million Cricut earned in the second quarter of 2025.
Who's making this call and why?
Deep Sail Capital (@DeepSailCapital) is a long/short fund run by founder and portfolio manager Sean Westropp. Its X bio describes a quality, growth and microcap approach, and it has about 57,300 followers.
The Cricut post came in a thread where Deep Sail asked followers for their best short ideas. Deep Sail wrote that one-time tariff impacts make the financials look good, "but the company is in structural decline."
Track record. In our tracking of Deep Sail's public calls posted from October 2024 to April 2026, it is 13-12 (a .520 win rate) on 25 calls scored at 180 days against the S&P 500. Its average edge is +8.9 percentage points (median +3.2), and it is 9-4 on short calls. Its best call was a long on AXTI (+116.7 points); its worst, a long on PNG.V (-57.4 points).
Supporters: We found no other credible investor on X making the same short case in the past 60 days.
Who disagrees?
Cricut itself. CEO Ashish Arora said in the August 4, 2026 earnings release that the results "reinforce our confidence that our platform-first strategy" is positioning Cricut for growth. CFO Kimball Shill acknowledged the quarter benefited "from some unique items."
The bull points are concrete:
- Platform revenue of $85.0 million exceeded Products revenue of $71.3 million.
- Cricut generated $50 million of cash from operations in the quarter.
- Cricut launched a new StickerPix printer line on September 24, 2026, priced from $169 to $299.
- A $0.10 semi-annual dividend equals about a 3.1% annual yield at $6.40, by our arithmetic.
What are the key facts to verify?
- The second-quarter 2026 10-Q details the IEEPA refund after the U.S. Supreme Court's February 20, 2026 ruling, the $6.4 million royalty settlement and cash of $266.9 million.
- The same 10-Q shows a $0.75 special dividend plus a $0.10 dividend paid July 21, 2025, totaling $204.8 million.
- Cricut's 2026 proxy statement says Petrus Trust Company controls a majority of the voting power, making Cricut a "controlled company" under Nasdaq rules.
- In the quarter, Cricut repurchased 1,742,294 shares for $7.5 million, with $21.6 million left on its authorization.
What would prove it right or wrong?
Signals the short is working:
- Third-quarter 2026 gross margin falls back toward the 59.0% of a year earlier.
- Products revenue keeps falling by double digits.
- Paid Subscribers stall or decline.
Signals it is failing:
- Operating income holds up without one-time items.
- StickerPix and holiday sales lift hardware revenue.
- Petrus or the board announces another large special dividend or a strategic deal.
This is journalism and commentary, not investment advice. We hold no position unless stated.