Yatsen Holding's Q2 2025: Contradictions in Profitability, Innovation, and Market Strategy

Revenue Growth and Skincare Dominance:
- Yatsen Holding Limited reported a significant 36.8% year-over-year increase in total net revenues for Q2 2025, with skincare brands posting an 78.7% increase.
- The growth was driven by strong performance of skincare brands, particularly Galénic and DR.WU, due to successful product innovations and marketing strategies.

Operational Efficiency and Cost Management:
- Yatsen achieved a non-GAAP net profit margin of 1.1% in Q2 2025, compared to a non-GAAP net loss margin of 9.4% in the prior year period.
- The improvement was due to operational leverage, improved efficiency in operations and marketing spend, and a reduction in general and administrative headcount.

Innovation and R&D Investment:
- Yatsen's continued focus on R&D has resulted in a strong pipeline of new products and brand equity growth.
- The company's aggressive investment in R&D and expansion of its international innovation network have laid the foundation for product innovation and brand equity.

Gross Margin and Premiumization:
- The company's gross margin increased to 78.3% in Q2 2025 from 76.7% in the prior year period, driven by an increase in sales of higher gross margin products.
- This trend is supported by the company's strategy of focusing on premium skincare brands such as Galénic and DR.WU, which tend to have higher gross margins.