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WI

Wayfair Inc. (W)·Q2 2025 Earnings Summary

Executive Summary

  • Wayfair delivered a strong Q2 2025 with net revenue of $3.273B (+5.0% YoY; +6.0% ex-Germany) and Adjusted EBITDA of $205M (6.3% margin), marking its highest growth and profitability since 2021 .
  • Results beat Wall Street consensus: revenue $3.27B vs $3.12B* and Adjusted EPS $0.87 vs $0.334*; gross margin at 30.1% remained within the guided range. The beat was driven by AOV mix, advertising efficiency, and CastleGate penetration .
  • Q3 guidance implies continued operating leverage: gross margin at the lower end of 30–31%, advertising at 11–12% (lower vs Q2 guide), SOT G&A $360–370M, and Adjusted EBITDA margin 5–6% (raised vs prior quarter) .
  • Strategic catalysts: expanding multichannel 3PL offering (accretive to margins), loyalty and app engagement gains, physical retail expansion, and GenAI enhancements to the customer and supplier experience .
  • Balance sheet de-risking continues: $1.4B cash, $1.8B liquidity; near-term convertible maturities largely retired, leaving a clean runway to Sept 2027 .

What Went Well and What Went Wrong

What Went Well

  • Accelerating growth and profitability: net revenue $3.273B (+5.0% YoY; +6.0% ex-Germany), Adjusted EBITDA $205M (6.3% margin), Free Cash Flow $230M (strongest since 2020) .
  • Advertising leverage and contribution margin improvement: ad expense fell to 11.4% of revenue with rigorous ROI discipline, supporting a 15.2% contribution margin (30.1% GM – 3.6% CS&MF – 11.4% ads) .
  • Strategic logistics and multichannel: CastleGate penetration ~25% (+~400 bps YoY); speed badging up ~800 bps; multichannel 3PL (pick-and-ship) scaling with hundreds of suppliers and accretive economics .
    Quote: “Multichannel…provides a competitive 3PL alternative…variable profit profile closer to its gross margin making for accretive economics as this business grows” .

What Went Wrong

  • Active customers declined: 21.0M (-4.5% YoY), though LTM revenue per active customer improved to $572 (+5.9%) .
  • International profitability remains a drag: International Adjusted EBITDA was -$19M in Q2 despite modest revenue growth (+3.1% YoY) .
  • Macro/home category remains weak: management assesses category “flat to down low single digits”; housing turnover still depressed; broader demand not driven by tariff pull-forward .

Financial Results

P&L vs Prior Periods

MetricQ4 2024Q1 2025Q2 2025
Net Revenue ($USD Millions)$3,121 $2,730 $3,273
Gross Margin %30.2% 30.7% 30.1%
Adjusted EBITDA ($USD Millions)$96 $106 $205
Adjusted EBITDA Margin %3.1% 3.9% 6.3%
Diluted EPS (GAAP) ($)-$1.02 -$0.89 $0.11
Adjusted Diluted EPS ($)-$0.25 $0.10 $0.87

Actual vs Consensus (S&P Global)

MetricQ4 2024Q1 2025Q2 2025
Revenue Consensus Mean ($USD)$3,073.96M*$2,707.79M*$3,123.53M*
Revenue Actual ($USD)$3,121M $2,730M $3,273M
Primary EPS Consensus Mean ($)-$0.00912*-$0.19658*$0.33397*
Adjusted Diluted EPS Actual ($)-$0.25 $0.10 $0.87
Revenue - # of Estimates30*29*30*
Primary EPS - # of Estimates29*25*30*

Values retrieved from S&P Global.*

Segment Revenue and Profitability

MetricQ4 2024Q1 2025Q2 2025
U.S. Net Revenue ($USD Millions)$2,740 $2,429 $2,874
International Net Revenue ($USD Millions)$381 $301 $399
U.S. Adjusted EBITDA ($USD Millions)$110 $95 $224
International Adjusted EBITDA ($USD Millions)-$14 $11 -$19

KPIs

KPIQ4 2024Q1 2025Q2 2025
Active Customers (Millions)21.4 21.1 21.0
LTM Net Revenue per Active Customer ($)$555 $562 $572
Orders Delivered (Millions)10.7 9.1 10.0
Average Order Value ($)$290 $301 $328
Repeat Orders (% of total)79.4% 80.5% 80.7%
Repeat Orders (Millions)8.5 7.3 8.1
Mobile Orders (% of total)64.5% 63.4% 62.9%

Cash Flow and Liquidity

MetricQ4 2024Q1 2025Q2 2025
Net Cash from Operating Activities ($USD Millions)$162 -$96 $273
Capital Expenditures ($USD Millions)$60 (PPE $20 + Site/Software $40) $43 (PPE $5 + Site/Software $38) $43 (PPE $13 + Site/Software $30)
Free Cash Flow ($USD Millions)$102 -$139 $230
Cash & ST Investments ($USD Billions)$1.4 $1.4 $1.4
Total Liquidity ($USD Billions)$1.9 $1.8 $1.8

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Revenue YoYQ3 2025N/A (no top-line guide in Q2; Q1 framed P&L at flat revenue assumption) Mid single-digits QTD; low to mid single-digits for full quarter (incl. ~100 bps Germany drag) Introduced
Gross Margin %Q2 2025 vs Q3 202530–31% (lower end) 30–31% (lower end) Maintained
Customer Service & Merchant Fees %Q2 vs Q3Just below 4% Just below 4% Maintained
Advertising % of RevenueQ2 vs Q312–13% (midpoint) 11–12% Lowered
SOT G&A ($)Q2 vs Q3$360–$370M $360–$370M Maintained
Adjusted EBITDA Margin %Q2 vs Q34–5% (under flat revenue assumption) 5–6% Raised
SBC ($)Q2 vs Q3$70–$90M $75–$95M Raised
D&A ($)Q2 vs Q3$75–$80M $73–$79M Lowered
Net Interest Expense ($)Q2 vs Q3~$30M ~$30M Maintained
Weighted Avg SharesQ2 vs Q3~128M ~130M Raised
CapEx ($)Q2 vs Q3$60–$70M $55–$65M Lowered

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4’24 and Q1’25)Current Period (Q2’25)Trend
Tariffs/MacroCategory contraction persisted; Q1 framing of P&L under flat revenue assumption due to macro/timing; management emphasized platform resilience Category “flat to down low single digits”; no evidence of tariff-driven pull-forward demand; higher-end stronger than mass Stable macro headwinds; Wayfair outperformance
Supply Chain/LogisticsQ1: CastleGate used to forward-position inventory amid tariff uncertainty; near-term GM headwind, future benefits CastleGate penetration ~25% (+~400 bps YoY); speed badging +~800 bps YoY; >30% increase in long-term inbound commitments; multichannel 3PL scaled to hundreds of suppliers Strengthening logistics moat
Marketing Mix/InfluencersQ1: Q4 spend surge into upper/mid funnel; testing with longer paybacks; discipline by payback thresholds Ads at 11.4%; trimmed low-ROI pockets; growing influencers/TikTok/YouTube; direct/app traffic momentum (~30% of U.S. revenue via app) Improving efficiency, diversified channels
Product/Mix (AOV)Q1: AOV rise driven by mix; specialty brands & Perigold higher AOV; seasonality consistent AOV $328 vs $313 prior year (+4.8% YoY); mix primary driver; Wayfair Professional posted double-digit growth Positive mix; B2B momentum
Physical RetailLate Q4/Q1: announced store expansion (Atlanta, Perigold opening plan) Chicago DMA: +50% lower-ticket frequency; +35% higher-consideration purchases; new Wayfair stores planned in Atlanta (2026), NY (2027), Denver (late 2026); Perigold store opened in May (Houston), second in West Palm Beach this fall Expanding footprint, omnichannel lift
AI/TechnologyQ1: replatforming largely complete, capacity shifting to feature/function GenAI enhancements across search/order/imagery/descriptions; Decorify & Muse experiences; rising LLM referral traffic (small but growing) Accelerating AI-driven experience

Management Commentary

  • “Year-over-year revenue growth of 6%—excluding the impact of Germany—marks the highest growth rate we have seen since early 2021. Our over 6% adjusted EBITDA margin demonstrates the significant leverage in our model…” — Niraj Shah, CEO .
  • “We drove a [contribution] rate of 15.2% in the second quarter…critical to the success we had on driving EBITDA and free cash flow dollars in the quarter.” — Kate Gulliver, CFO .
  • “Multichannel…now has hundreds of suppliers utilizing the offer…accretive to adjusted EBITDA margins…opens up the next leg of CastleGate penetration…” — Niraj Shah .
  • “We will guide you to the lower end of the 30% to 31% [gross margin] range once again…Advertising…11% to 12%…SOT G&A…$360M to $370M…Adjusted EBITDA margin…5% to 6% for Q3.” — Kate Gulliver .

Q&A Highlights

  • Demand and share gains: Category stable but weak; Wayfair’s strength “structural,” driven by improved recipe (price/selection/availability/speed), tech cycles back to features, and new programs (Rewards, Verified, stores) .
  • Pricing/tariffs: No evidence of tariff-driven pull-forward; suppliers reluctant to raise prices; platform competition and CastleGate logistics help maintain value .
  • Advertising: Efficiency gains from trimming low-ROI pockets while growing emerging channels (influencers/TikTok); overall ad leverage improving .
  • Gross margin reinvestment: Company tactically reinvests upside into price and delivery speed based on elasticity to maximize multi-quarter EBITDA dollars .
  • AI and LLMs: GenAI features expanding; external LLM referrals (ChatGPT/Perplexity/Gemini) rising from a small base; Wayfair optimizing partnerships .

Estimates Context

  • Q2 2025 beat: revenue $3.273B vs $3.124B* (+$149M; +4.8%), Adjusted EPS $0.87 vs $0.334*; magnitude suggests upward pressure on near-term EPS and revenue estimates, particularly with Q3 EBITDA margin guided to 5–6% .
  • Q1 2025 beat: revenue $2.73B vs $2.708B*, Adjusted EPS $0.10 vs -$0.197* .
  • Q4 2024 revenue modest beat vs consensus; Adjusted EPS missed (actual -$0.25 vs -$0.00912*) .

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Delivery of a significant beat and strong FCF suggests continued multiple support; focus on sustained contribution margin at ~15% and advertising leverage into Q3 .
  • Multichannel 3PL and CastleGate penetration are durable margin/cash flow drivers; expect incremental accretion and better conversion via speed badging .
  • Mix-driven AOV strength (specialty brands, Perigold, B2B) offsets active customer declines; narrative supports higher-quality revenue growth .
  • Q3 guide raises adj. EBITDA margin to 5–6% and lowers ad expense to 11–12%, indicating improving flow-through; monitor execution vs GM lower-end guidance .
  • AI-enabled shopping and supplier tools should enhance conversion and NPS; rising app engagement (~30% of U.S. revenue via app) adds to direct traffic tailwinds .
  • Macro/home category remains tepid; risk from tariffs/housing turnover persists, but Wayfair’s platform/scale/logistics give relative resilience .
  • Near-term trading implications: positive estimate revisions likely; watch seasonal events (e.g., Black Friday in July) and loyalty/app momentum as catalysts .

Additional Notes

  • Non-GAAP measures: Adjusted EPS ($0.87) and Adjusted EBITDA ($205M) exclude D&A, SBC, and other items; reconciliations provided in the 8-K .
  • Events: Black Friday in July promotion (July 24–28) offered up to 80% off across categories and app early access—supportive of Q3 momentum .
  • Balance sheet: $1.4B cash, $1.8B liquidity; near-term notes retired at discount; maturities clean to 2027 .