Chagee's Strategic Dual-Listing Ambitions and Growth Resilience: Navigating Regional Expansion, Financial Pressures, and Capital-Raising Challenges

In the dynamic landscape of global tea retail, Chagee Holdings Limited (NASDAQ: CHA) has emerged as a formidable player, leveraging its dual-listing strategy and aggressive regional expansion to counterbalance domestic market headwinds. As the company navigates a challenging U.S. market and intensifying competition in China, its ability to balance growth ambitions with financial prudence will determine its long-term resilience. This analysis examines Chagee's strategic priorities, financial performance, and capital-raising adjustments, offering insights into its path forward.

Regional Expansion: A Dual-Listed Catalyst for Global Dominance

Chagee's 2025 expansion strategy has been nothing short of aggressive, with the company adding 300 net new locations in Q3 alone to reach a global total of 7,338 tea houses. The Asia-Pacific region remains a cornerstone of its growth, with Indonesia, the Philippines, and Vietnam emerging as key markets. By October 2025, Malaysia had become its flagship international hub, boasting 200 locations, while Singapore and Thailand saw continued momentum.

The U.S. market, however, presents a mixed picture. While the opening of Chagee's first Los Angeles store in 2025 marked a symbolic entry, the company's 75 overseas company-owned stores as of June 2025 suggest a cautious approach. Localization efforts, such as the Philippines' pet-friendly tea house and Singapore's Orchid Biluochun Milk Tea, underscore Chagee's commitment to cultural relevance. Yet, the U.S. market's underperformance-driven by high competition and consumer price sensitivity-has forced the company to recalibrate its ambitions.

Chagee's dual-listing on NASDAQ and its focus on Southeast Asia have provided a financial and strategic buffer. The company's overseas GMV surged 75.3% year-over-year to RMB 300.3 million in 2025, while its international store count nearly doubled to 208 locations by mid-2025. This regional diversification not only mitigates domestic risks but also positions Chagee to capitalize on the growing global demand for premium tea.

Financial Performance: Profit Margins Under Pressure

Despite its expansion successes, Chagee's Q3 2025 financial results revealed a narrowing profit margin. Net revenues fell to RMB 3,208.3 million (US$450.7 million), a 9% year-over-year decline, attributed to intensified subsidy competition in China and reduced cup sales. Operating income dropped to RMB 454.4 million (US$63.8 million), with an operating margin of 14.2%, down from 22.4% in Q3 2024.

The company's reliance on franchised stores-accounting for 87.6% of total net revenues-has been a stabilizing factor. Franchised teahouse revenue reached RMB 2,811.6 million (US$394.9 million) in Q3 2025, while company-owned stores saw a 63.8% year-over-year increase to RMB 396.7 million (US$55.7 million). However, rising general and administrative expenses, driven by share-based compensation and expansion costs, eroded profitability. General and administrative expenses surged 59.7% to RMB 517.4 million (US$72.7 million) in Q3 2025.

Chagee's cash reserves, however, remain robust. As of September 30, 2025, the company held RMB 9,142.0 million (US$1,284.2 million) in cash and equivalents, nearly double the amount from late 2024. This liquidity provides flexibility to fund further expansion or weather short-term market volatility.

Capital-Raising Adjustments: Navigating U.S. Market Challenges

Chagee's post-IPO journey has been marked by volatility. After raising $61.7 million through an over-allotment option in April 2025, its stock price plummeted by over 50% by December 2025, trading at $13.73-a 52-week low. This decline reflects broader skepticism toward China-based companies in the U.S. equity market and Chagee's own struggles with domestic revenue growth.

To address these challenges, Chagee has shifted its capital-raising strategy. The company reduced marketing and promotional expenses by 13.4% year-over-year in Q3 2025, prioritizing margin preservation over aggressive domestic expansion. Simultaneously, it has doubled down on international markets, where GMV growth outpaced domestic declines. For instance, overseas GMV hit RMB 300 million (US$42 million) in Q3 2025, a 75.3% year-over-year increase.

Investor Sentiment and Strategic Outlook

Investor sentiment toward Chagee is bifurcated. On one hand, the company's human-centric business model-emphasizing customer experience and employee well-being-has garnered praise. On the other, analysts caution that sustainable profitability remains elusive. JPMorgan's downgrade to "underweight" underscores concerns about domestic market saturation and margin pressures.

Chagee's 2028 target of 5,000 global stores hinges on its ability to balance expansion with profitability. The franchise model, which accounts for 90.7% of net revenues, offers scalability but requires careful management to maintain brand consistency. In the U.S., the company's focus on high-traffic urban centers and localized product offerings may yet unlock growth, though competition from established players like Starbucks and regional chains remains fierce.

Conclusion: Resilience Through Diversification

Chagee's strategic dual-listing and regional expansion have positioned it as a global tea retail leader, even as U.S. market underperformance and domestic competition test its resilience. While financial metrics like declining margins and stock volatility raise concerns, the company's strong cash reserves, international traction, and adaptive capital strategy offer a counterbalance. For investors, the key will be monitoring Chagee's ability to sustain overseas growth while optimizing domestic operations-a delicate but achievable balance that could redefine its trajectory in the coming years.