Arizona’s cannabis industry struggles as Q1 sales plummet 13% from 2024 levels

After falling in 2024, marijuana sales in Arizona accelerated their slide in the first quarter of 2025, falling more than 13% over the prior year.

The decline was led by a sharp drop in recreational cannabis sales in March. Adults purchased just $82 million of marijuana products for the month, almost $20 million less than they did in 2024. Those sales reports are likely to be revised upward next month, but revisions typically only reflect minor adjustments.

For the first three months of the year, adult-use marijuana sales were $261 million — down more than $27 million, a 9.6% drop from last year. 

But that’s nothing compared to the foundering medical marijuana industry, which saw a 28.3% year-over-year decrease. The $52 million in sales for the quarter were almost $21 million less than in 2024.

The industry is struggling to reverse course from 2024, which was the second consecutive year of lower sales and broke a three-year streak of at least $1.4 billion in legal cannabis purchases.

The $1.3 billion in combined medical and recreational sales in 2024 was almost 10% less than in 2023, and about 14% lower than 2022 sales figures.

As the market has matured, and softened, the disparity between medical and adult-use cannabis sales continues to expand. In 2021, the year the recreational industry launched, sales were nearly evenly split, with 48% of purchases coming from medical marijuana cardholders.

But as the recreational market emerged from its infancy, its sales surged and quickly swamped the medical marijuana market. In 2022, adult use purchases skyrocketed to almost 66% of sales. They increased to 73% of sales in 2023 and grew again to 81% in 2024.

Medical sales now represent less than one-third of what they had been in 2021, when the first recreational dispensary opened.

The state collects a 16% excise tax on recreational sales in addition to the standard 5.6% sales tax; medical patients pay just the state sales tax. Local jurisdictions charge an additional 2% or so for all marijuana sales.

One-third of revenue raised by the excise tax is dedicated to community college and provisional community college districts; 31% to public safety, including police, fire departments, fire districts and first responders; 25% to the Arizona Highway User Revenue Fund; and 10% to the justice reinvestment fund, which is dedicated to providing public health services, counseling, job training and other social services for communities that have been adversely affected and disproportionately impacted by marijuana arrests and criminalization.

Overall cannabis tax collections in 2024 were almost $190 million; about $170 million came from the excise tax on adult-use sales, with a bit more than $20 million the result of medical marijuana purchases.