Shares of Tilray Brands (TLRY 1.71%) tumbled 10% Tuesday afternoon, despite the Canadian cannabis company reporting something of an "earnings beat" earlier in the morning.

Heading into the company's fiscal Q2 2024, analysts had forecast Tilray would lose $0.06 per share (adjusted for one-time items) on sales of $195.1 million. As it turned out, Tilray came really close to break-even profits ($0 loss per share). Its sales, however, came up just a wee bit short of expectations for $194 million.

Tilray sales and earnings

But isn't that good news? Tilray came very close to meeting sales expectations and beat earnings expectations by a solid margin. Didn't it come within a whisker's breadth of earning positive profits for the quarter?

Well, yes and no.

On one hand, Tilray succeeded in growing cannabis revenue 35% year over year, while its beer business (Tilray says it's now America's "fifth largest craft beer brewer") surged 117%. Distribution revenue dragged down the average, however, with a growth rate of only 12%, resulting in a companywide growth rate of 34%.

Profits were another story. Gross profit margins slumped in both the marijuana and beer businesses, falling 12 full percentage points to 31% (in cannabis) and 13 full percentage points to 34% (in beer). Distribution margins were also down -- 2 points to 11%.

While Tilray says its "adjusted net loss" was only zero, it still ended up losing $2.7 million (adjusted) for the quarter on the bottom line. Meanwhile, its net loss, as calculated according to generally accepted accounting principles (GAAP), was many times larger -- $46 million total, or $0.07 per share.

What's next for Tilray

Turning from Q2 to guidance to the rest of this year, Tilray mainly stuck with prior predictions, without providing more detail to help investors gauge how realistic these predictions are. For example, management didn't give an estimate for sales growth or for margins. Instead, it said that it expects to end 2024 with "adjusted" earnings before interest, taxes, depreciation, and amortization (EBITDA) between $68 million and $78 million. This would represent a growth rate of between 11% and 27%.

Management didn't promise actual GAAP profits, however. It's also worth pointing out that even 27% growth would be a slower rate than revenue grew in Q2.

On the plus side, Tilray is still saying it expects to generate positive adjusted free cash flow this year. On the minus side, through the end of Q2, the company has already burned through $56.2 million in negative free cash flow, which is twice the rate at which Tilray was burning cash by this time of year, last year. I would be curious to hear how Tilray intends to reverse that flow and emerge free-cash-flow positive by year-end.

If investors today are less than confident in Tilray's predictions through year-end, therefore ... well, that might be one good reason why they're skeptical.