First Watch 2025 Q2 Earnings Sharp Earnings Decline Amid Strong Revenue Growth

First Watch (FWRG) reported its fiscal 2025 Q2 earnings on August 6, 2025, delivering robust top-line growth but missing expectations on the bottom line. The results reflect solid demand amid ongoing cost discipline, though earnings pressure remains a key concern.

Revenue
First Watch achieved a notable 19.1% year-over-year revenue increase, reaching $307.89 million in Q2 2025, compared to $258.56 million in the prior-year period. The company's core Restaurant segment drove the majority of the revenue with $304.98 million, while Franchise revenues contributed an additional $2.90 million, rounding out the total revenue to $307.89 million.

Earnings/Net Income
The company’s earnings performance faced considerable headwinds, as its net income dropped to $2.11 million in Q2 2025, a 76.3% decline from $8.90 million in the same period last year. Similarly, earnings per share fell sharply by 80.0% to $0.03, compared to $0.15 in Q2 2024, signaling significant downward pressure on profitability.

Price Action
Following the earnings report, First Watch’s stock experienced mixed short-term price movements. On the latest trading day, shares dropped 8.30%, but bounced back with a 5.75% gain over the preceding week. Month-to-date, the stock has seen a modest 1.08% increase.

Post-Earnings Price Action Review
The post-earnings trading strategy of purchasing First Watch shares on the report date and holding for 30 days yielded a -7.82% return, significantly underperforming the 48.58% benchmark return during the same period. This led to an excess return of -56.40% and an annualized return of -2.77%. The strategy, while having a maximum drawdown of 0.00%, posted a negative Sharpe ratio of -0.06, highlighting its underperformance relative to broader market benchmarks.

CEO Commentary
CEO John K. Schnatter emphasized the company’s focus on balancing operational efficiency with customer experience. He pointed to positive momentum in breakfast and weekend lunch offerings and noted the team's continued discipline in managing costs and optimizing the supply chain. Schnatter also highlighted strategic initiatives such as digital engagement expansion and new unit development in high-growth urban areas. He expressed optimism about First Watch’s ability to deliver consistent growth and operational excellence in the coming period.

Guidance
While the company expects to maintain mid-single-digit revenue growth for the remainder of the year, it did not provide specific forward-looking revenue or EPS guidance during the call.

Additional News
On August 6, 2025, First Watch announced plans to expand its footprint with 62 to 67 new locations in 2025, signaling its commitment to growing its unit base in high-potential urban markets. The move aligns with the company’s broader strategy to enhance brand visibility and drive long-term value. Though details on unit economics or capital allocation were not disclosed, the announcement reflects the company’s confidence in its operational model.