What happened

Shares of Tilray (NASDAQ:TLRY) tumbled nearly 26% last month, according to data from S&P Global Market Intelligence, following the cannabis company's first-quarter results.

So what

Tilray's revenue surged 195% to $23 million. Management credited the gains to the legalization of adult-use recreational marijuana in Canada, Tilray's acquisition of hemp-based food producer Manitoba Harvest, and the growth of the international medical cannabis market. 

"We are pleased with our first-quarter results and the ongoing, substantial progress our team has made to position Tilray as a global leader in the cannabis industry," CEO Brendan Kennedy said in a press release. "We have made significant progress integrating our recent acquisitions of Manitoba Harvest and Natura Naturals, accelerating our entry into the United States hemp and CBD markets, and increasing our production and manufacturing capacity in North America and Europe." 

Still, there were multiple red flags in Tilray's report. Tepid growth in its Canadian medical marijuana sales, low gross margin, and ballooning operating costs all weighed on the company's results. In turn, Tilray generated an adjusted net loss of $25.2 million, or $0.27 per share, compared with a loss of $5.2 million, or $0.07 per share, in the prior-year period. 

Now what

In a surprising move, Tilray has shifted its focus away from the Canadian cannabis market and toward the U.S. and European markets. Although international cannabis sales represent a sizable long-term opportunity, the costs associated with expanding into these regions are likely to weigh on Tilray's profitability in the quarters ahead. So while Tilray's revenue gains may continue to impress, profits are likely to remain elusive.