Scotts Miracle-Gro's Hawthorne segment, which provides hydroponics and indoor gardening products, reported $1.1B in revenue in Q4 2025, up 74.3% year-over-year. This represented 38% of the company's total $2.9B in quarterly revenue. The rapid growth of Hawthorne reflects the surging consumer demand for cannabis cultivation equipment as more states legalize marijuana for medical and recreational use. Scotts is well-positioned to capitalize on this trend given its leading market share and strong brand recognition in the hydroponics space. Gross margin in the Hawthorne segment was 31.4% in Q4 2025, compared to 34.0% for the company overall. As Hawthorne scales and achieves greater operational efficiencies, there is potential for margin expansion that could further boost Scotts' profitability. For the full fiscal year 2025, Hawthorne revenue grew 53.2% to $4.4B , or 34% of Scotts' $12.9B in total revenue. I expect Hawthorne to continue growing at a rapid clip, potentially reaching $6B in annual revenue within the next 2-3 years as cannabis legalization spreads. Scotts Miracle-Gro's exposure to the high-growth hydroponics market makes it an attractive investment. The company's leading market position, strong brand, and potential for margin expansion in this segment offset risks from potential regulatory changes or increased competition. I have a bullish conviction of 7/10 on SMG.

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