Executive Summary

Q3 2025 delivered accelerating growth and strong profitability: revenue +15.2% YoY to $221.7M, Adjusted EBITDA +$8.4M YoY to $25.7M (11.6% margin), and GAAP diluted EPS of $0.05; active customers rose 9.3% to 2.66M and ARPC increased 4.8% to $320 .
Versus S&P Global consensus, WRBY posted an EPS beat but slight revenue miss: Primary EPS $0.124 vs $0.090 estimate; revenue $221.7M vs $224.5M estimate (−1.3%); management delivered margin outperformance despite lower-than-planned revenue via SG&A leverage and tariff mitigation . Values retrieved from S&P Global.*
Guidance: FY25 revenue cut to $871–$874M (from $880–$888M) while FY25 Adjusted EBITDA held at $98–$101M with higher margin (11.3–11.6% vs 11.1–11.4% prior). Q4 revenue guided to $211–$214M and Adjusted EBITDA to $18–$21M (9.2% margin midpoint) .
Strategic catalysts: “Act 3” centered on AI—virtual try-on/Advisor traction, optical lab upgrades, and intelligent eyewear with Google and Samsung—plus record retail productivity and densification (313 stores; first 5 Target shop‑in‑shops) .

What Went Well and What Went Wrong

What Went Well

Operating leverage and profitability: Adjusted EBITDA rose to $25.7M (+$8.4M YoY) with margin +260 bps YoY to 11.6% on non‑marketing SG&A leverage; cash ended at $280.4M; YTD FCF $35.6M .
Retail strength and productivity: Retail revenue +20.2% YoY, record retail productivity (103.8%), 15 new stores opened (313 total), and expanding exam capacity (275 stores with exam suites, 88% of fleet) .
AI/product roadmap momentum: Management framed “Act 3” around AI (Advisor increasing conversion, virtual try-on, content creation efficiencies) and revealed a Samsung partnership alongside Google to bring intelligent eyewear to market .

Management quotes:

“We’re energized to create new products like AI glasses, enhance the customer experience and drive productivity.” — Neil Blumenthal .
“We meaningfully expanded profitability this quarter… and are well‑positioned to take share in any environment.” — Dave Gilboa .

What Went Wrong

Top-line mix headwinds: A shift toward entry $95 frames weighed on ASP; contacts growth moderated in September/October due to softer consumer sentiment among younger cohorts .
Tariff pressure and gross margin: Reported gross margin dipped YoY to 54.1% (from 54.5%) on tariffs, contacts mix, and shipping costs (partially offset by progressive lens mix and selective price increases) .
FY revenue guide cut: FY25 revenue reduced to $871–$874M (from $880–$888M) as management adopted a more conservative view on macro/consumer trends; Q4 revenue growth guided to ~11–12% YoY .

Financial Results

Metric	Q3 2024	Q1 2025	Q2 2025	Q3 2025
Revenue ($USD Millions)	$192.4	$223.8	$214.5	$221.7
GAAP Diluted EPS ($)	$(0.03)	$0.03	$(0.01)	$0.05
Gross Margin (%)	54.5%	56.3%	53.0%	54.1%
Adjusted Gross Margin (%)	54.6%	56.4%	54.3%	54.2%
Adjusted EBITDA ($USD Millions)	$17.3	$29.2	$25.0	$25.7
Adjusted EBITDA Margin (%)	9.0%	13.1%	11.7%	11.6%

Estimates vs. actual (S&P Global):

Metric	Estimate*	Actual	Surprise
Revenue ($USD Millions)	$224.5*	$221.7	$(2.8), −1.3%
Primary EPS (S&P) ($)	$0.090*	$0.124*	+$0.034, +38%

Notes: EPS comparison uses S&P Global “Primary EPS” (normalized) framework; WRBY does not guide to non‑GAAP EPS and emphasizes Adjusted EBITDA. Values retrieved from S&P Global.*

KPI and mix (current quarter focus):

Active customers: 2.66M (+9.3% YoY TTM) .
ARPC: $320 (+4.8% YoY TTM) .
Store count: 313 (15 openings in Q3) .
Retail mix: 73% of overall business; retail revenue +20.2% YoY; e‑commerce +3.2% YoY .
Product/category: Glasses revenue +~13% YoY; contacts +21% YoY and 11.5% of revenue (vs 10.9% in Q3’24); eye exams +41% YoY and 6.5% of revenue .
Retail productivity: 103.8% (highest quarterly since 2022) .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Net Revenue ($M)	FY 2025	$880–$888	$871–$874	Lowered
Adjusted EBITDA ($M)	FY 2025	$98–$101	$98–$101	Maintained
Adjusted EBITDA Margin (%)	FY 2025	11.1–11.4	11.3–11.6	Raised
Store Openings (units)	FY 2025	45 (incl. 5 Target)	45 (incl. 5 Target)	Maintained
Net Revenue ($M)	Q4 2025	n/a	$211–$214	n/a
Adjusted EBITDA ($M)	Q4 2025	n/a	$18–$21	n/a
Adj. EBITDA Margin (%)	Q4 2025	n/a	~9.2% midpoint	n/a

Additional outlook commentary: Full-year gross margin expected “mid‑50s” with tariff mitigation; SBC 2–4% of revenue .

Earnings Call Themes & Trends

Topic	Q1 2025 (Prev)	Q2 2025 (Prev)	Q3 2025 (Current)	Trend
AI/Technology initiatives	Strong start; e‑commerce growth highest since 2021	“Advisor” AI recommendations launched; Google partnership for intelligent eyewear	“Act 3” centered on AI; Samsung partnership; AI virtual try‑on, content creation efficiency; lab upgrades for AI glasses	Accelerating
Supply chain/tariffs	Not highlighted	Gross margin impacted by tariffs; mitigation underway	Tariff headwinds persisted but mitigated via supplier diversification and selective pricing	Mitigated/stable
Product performance & pricing	Double-digit revenue; selective price actions helped margins	One-time HTO inventory write-downs; higher priced frames/lenses penetration	Glasses +~13% YoY; $95 frames mix weighed on ASP; contacts +21% YoY; progressives resilient	Mixed; value mix shift
Retail footprint & productivity	+11 net stores; 287 total	+11 net stores; 298 total; 300th store	+15 openings (313 total); record productivity; 5 Target shop‑in‑shops	Expanding/densifying
Exams/health features	—	—	Eye exams +41% YoY; 6.5% of revenue; retinal imaging scaled	Growing
Channel evolution	—	HTO sunset decision signaled by write-down	Sunsetting Home Try-On and Scout; AI Advisor supporting e‑com; retail densification lifts omni	Simplifying; omni focus
Macro/consumer	—	—	Younger cohorts softer; older/progressive customer resilient; September moderation	More cautious on top line

Management Commentary

Strategic direction: “We believe we are entering Warby Parker’s third act… defined by innovation through AI… to create beautifully designed intelligent eyewear” (partners Google and Samsung) .
Operating discipline: “Adjusted EBITDA profitability ahead of our guidance on lower‑than‑planned revenue… raising our Adjusted EBITDA margin expectations” .
Retail and exams: “Retail revenue grew 20%… highest number of openings in a single quarter… eye exam business grew 41% YoY to 6.5% of revenue” .
Channel/product: “$95 frame styles outperformed relative to higher price points, which impacted ASP… contacts growth decelerated as broader consumer sentiment softened” .
Tariffs: “Mitigation strategies… offset the impact of tariffs… holding full‑year Adjusted EBITDA guidance” .

Q&A Highlights

Mix and ASP: Younger/single‑vision customers showed smaller baskets and shift to $95 frames; progressives and higher‑income cohorts remain resilient; selective price increases on premium lenses did not drive trade‑down in progressive cohort .
Long‑term algorithm: Confidence in sustained high growth with 100–200 bps annual Adjusted EBITDA margin expansion; long‑term target ~20% Adjusted EBITDA .
AI initiatives: Broad adoption across design, CX, and content creation; Advisor improves conversion; every corporate team member using AI tools .
Target shop‑in‑shops: Early performance in line with expectations; learning on placements; plan to open a similar number next year .
Channel evolution: Sunsetting Home Try‑On and Scout to simplify ops and reallocate resources; e‑com direct frame purchases showing healthy growth as HTO headwind diminishes .
Pricing philosophy: Prioritize sustainable growth and customer value over category price‑led growth; maintain $95 entry point while expanding higher‑end options (precision progressives, lens enhancements) .

Estimates Context

Q3 2025 results vs S&P Global consensus: Primary EPS $0.124 vs $0.090 estimate (beat); revenue $221.7M vs $224.5M estimate (miss ~1.3%). Management exceeded internal margin expectations via non‑marketing SG&A leverage despite lower revenue . Values retrieved from S&P Global.*
Implications: Street models likely shift mix/ASP assumptions lower and SG&A leverage higher; FY revenue cut formalizes a more conservative near‑term macro view while EBITDA dollars and margin improve, suggesting estimate revisions skew neutral-to-positive on profit metrics despite slightly lower top-line.*

Key Takeaways for Investors

Profit over growth near term: Despite a modest revenue miss and guide cut, WRBY is delivering consistent margin expansion and maintained FY25 Adjusted EBITDA, highlighting operating discipline and tariff mitigation .
AI as multiple catalysts: Near‑term conversion and cost benefits (Advisor, content efficiencies), and medium‑term product optionality via intelligent eyewear with Google and Samsung .
Retail engine remains robust: Record productivity, expanding exams, and densification (incl. Target shop‑in‑shops) continue to compound store economics and omni demand capture .
Mix watchouts: $95 frame outperformance and softer contacts in Sept/Oct reflect younger‑cohort pressure; monitor ASP and contacts mix into Q4 seasonality .
Guide construction is prudent: Q4 guide assumes September/October trends persist; execution on SG&A leverage and gross margin “mid‑50s” supports continued EBITDA beats risk .
Cash/FCF strength: $280M cash, third consecutive year of positive FCF expected; undrawn $120M facility provides flexibility for growth investments .
Trading setup: Near‑term stock moves likely hinge on revenue trajectory vs conservative Q4 guide and AI/retail catalysts; sustained EBITDA momentum and AI narrative could drive rerating if top line stabilizes.

Footnote: *Values retrieved from S&P Global.

Warby Parker Inc. (WRBY)·Q3 2025 Earnings Summary