Wayfair's Q2 Earnings Show 5% YoY Revenue Growth, But Active Customer Base Shrinks 4.5%

Wayfair's Q2 revenue grew 5% YoY to $3.3 billion, but its active customer base shrunk 4.5% YoY to 21 million. The company's profit spike can't hide intense competition, ongoing consumer spending pressures, and a contracting customer base. Despite a 50% stock rally in the last six months, Wayfair is bearish due to these factors and its rich valuation.

Wayfair Inc. (NYSE: W) reported its second-quarter (Q2) financial results on August 4, 2025, showcasing a significant revenue growth of 5% year-over-year (YoY) to $3.3 billion, surpassing analysts' expectations [1]. However, the company's active customer base declined by 4.5% to 21 million, raising concerns about its long-term growth prospects.

The company's adjusted diluted earnings per share (EPS) of $0.87 exceeded analyst estimates by $0.54 and rose by 85.1% YoY, indicating a robust profit performance [2]. Despite this positive earnings beat, the stock experienced a 50% rally in the last six months, reaching a valuation that some analysts consider rich.

Wayfair's revenue growth was driven by a 6% increase in sales excluding the impact of an exit from Germany, marking the company's highest growth rate since early 2021 [1]. The company's average revenue per customer (ARPB) rose nearly 6% to $572, and repeat buyers accounted for over 80% of orders. However, the decline in the active customer base suggests that Wayfair may be facing intense competition and consumer spending pressures.

Analysts have mixed opinions on Wayfair's future prospects. Citigroup recently raised its 12-month price target on Wayfair stock by 190% to $93, upgrading its recommendation to Buy [2]. However, the company's rich valuation and ongoing challenges in customer acquisition could pose risks to its long-term growth.

In conclusion, Wayfair's Q2 results demonstrate the company's ability to grow profitably despite a challenging economic environment. However, the shrinking customer base and intense competition are significant concerns that investors should consider. Wayfair's future success will depend on its ability to address these issues and maintain its profitability.

References:
[1] https://sherwood.news/markets/wayfair-soars-after-posting-strongest-revenue-growth-since-2021/
[2] https://www.ainvest.com/news/citigroup-boosts-wayfair-price-target-190-2508/