Why Cannabis Investors Are Pivoting to Tilray Brands Over Canopy Growth

When it comes to Canadian cannabis companies positioned for the North American market, Tilray Brands (NASDAQ: TLRY) and Canopy Growth (NASDAQ: CGC) have long been the household names. Both firms are waiting for potential federal legalization in the U.S., but their execution paths have diverged dramatically. Today, Tilray’s multifaceted approach positions it as the more compelling opportunity.

The Divergent Paths: Cannabis-Only vs. Portfolio Expansion

Canopy Growth’s Bet on Pure Cannabis Legalization

Canopy Growth has built its entire thesis around American cannabis legalization. The company established a special purpose vehicle called Canopy USA to hold U.S. cannabis investments, navigating the regulatory reality that it cannot directly acquire U.S. cannabis companies while maintaining Nasdaq listing status. This focused approach keeps the company laser-targeted on cannabis market timing—but it also leaves Canopy entirely dependent on Washington’s legislative timeline.

Tilray’s Aggressive Diversification Strategy

Rather than waiting idly for policy shifts, Tilray has pursued aggressive expansion into adjacent markets. The company has strategically acquired multiple alcohol beverage brands, establishing itself as one of North America’s leading craft beer producers. This portfolio approach transforms Tilray from a cannabis-dependent play into a company with multiple revenue streams, including a thriving craft beer brands segment that generates immediate cash flows and profitability opportunities.

Financial Performance: The Numbers Don’t Lie

Tilray’s Margin Advantage

The diversification strategy is yielding tangible financial results. In Tilray’s alcohol division, adjusted gross margins reached 53%, substantially outpacing the 40% margins in its cannabis operations. This margin differential is crucial—it demonstrates how exposure to the alcohol and craft beer sector provides more profitable economics than cannabis-only operations.

For the period ending May 31, Tilray reported an operating loss of just $16.5 million, down dramatically from $90 million in the prior year. Simultaneously, the company expanded aggressively, with net revenue climbing 25% to $229.9 million. This rare combination of shrinking losses while growing revenue signals improving operational efficiency.

Canopy Growth’s Contraction Challenge

Canopy Growth has pursued a leaner strategy, divesting key assets to restore sustainability. The company sold off BioSteel, once considered integral to its growth roadmap. For the quarter ending June 30, Canopy reported an operating loss of CA$29.1 million ($21.2 million USD), an improvement from CA$54.7 million a year prior.

However, this progress came at a cost: revenue declined 14%, falling to CA$75.8 million from CA$88.6 million year-over-year. Investors are left questioning whether a smaller, slower-growing Canopy justifies the extended timeline to profitability.

The Risk-Reward Calculus

Both stocks have been battered historically—Tilray down 87% over three years, Canopy down 97%. Yet Tilray’s pivot into craft beer and broader alcohol beverages offers a redemption narrative that Canopy lacks.

That said, neither security represents a straightforward buy. Tilray’s growth remains acquisition-dependent and will inevitably decelerate. The path to sustainable profitability remains uncertain. Canopy’s existential bet on U.S. legalization carries political and timeline risk that could extend indefinitely.

For cannabis investors seeking exposure, cannabis-focused exchange-traded funds may provide better risk-adjusted returns than picking individual stocks with execution uncertainty. While Tilray Brands has constructed the more resilient business model, both companies require investors with substantial risk tolerance and long-term conviction.