Zepp Health's Q1 2025: Navigating Tariff Challenges and Product Strategies Amid Contradictions

Tariff impact on sales, pricing strategy in response to tariffs, new product launches and refresh strategy, operational expenses (OpEx) and cost management, tariff exemption status are the key contradictions discussed in Zepp Health's latest 2025Q1 earnings call.



Revenue Growth and Product Success:
- Zepp Health Corporation reported a 10% year-over-year growth of Amazfit revenue in Q1 2025, marking the first such increase in two years following a strategic transformation period.
- This growth was attributed to the successful launch of new products like the Amazfit Active 2 and Bip 6, which secured top positions in Amazon's smartwatch category and increased market share in Italy and Spain.

Operating Challenges and Cost Management:
- Despite increased sales, the first quarter aligned with guidance, but fixed operating expenses were not fully absorbed, impacting operating profit.
- The company remains committed to cost management, aiming for quarterly operating costs between $25 million to $27 million per quarter, with a focus on optimizing supply chain and reducing expenses.

Gross Margin Expansion and Tariff Impact:
- Gross margin improved to 37.3% in Q1 2025, driven by new product launches, despite a 1% reduction due to a 20% U.S. tariff on China-made products.
- Excluding tariff impacts, gross margin would have been 38.4%, with expectations for continued expansion throughout 2025.

Geopolitical Diversification and Supply Chain Strategy:
- The company proactively diversified its supply chain, expanding in Vietnam and exploring opportunities within the NAFTA region.
- This effort is aimed at mitigating trade complexities and optimizing production costs, ensuring operational agility amid geopolitical uncertainties.