The Honest 2025 Q3 Earnings Net Income Surges 359.4% Amid Revenue Decline

The Honest Company (HNST) reported Q3 2025 earnings on November 6, 2025, with revenue falling short of expectations and full-year guidance slashed. While net income surged, the stock plummeted 16.88% month-to-date, reflecting investor concerns over declining sales and strategic shifts.

Revenue

Revenue declined 6.7% year-over-year to $92.57 million, missing analyst estimates of $99.53 million. Diapers and apparel sales faltered amid softer consumer demand and reduced promotions, while wipes and personal care segments showed resilience. Gross margin contracted to 37.3% due to lower sales volume and tariff pressures.

Earnings/Net Income

Net income surged to $758,000, a 359.4% increase from $165,000 in 2024 Q3, driven by cost discipline and strategic exits from low-margin categories. Despite stable EPS at $0.01, the sharp revenue decline and margin compression raised questions about long-term growth sustainability.

Post-Earnings Price Action Review

A backtest of buying HNST shares after revenue raises yielded mixed results over three years. Two quarters (Q1 2023 and Q2 2024) delivered positive returns (10% and 8%, respectively), but Q3 2025 saw a 15.46% drop post-earnings, eroding gains. The average return of 0.3% underscored the strategy’s volatility and risk, particularly when revenue growth expectations are unmet.

CEO Commentary

CEO Carla Vernón attributed the profit improvement to disciplined execution under “Transformation 2.0,” including exiting apparel, Honest.com fulfillment, and Canada operations. She emphasized focus on core categories and operational efficiency, though macroeconomic challenges persisted.

Guidance

The company revised 2025 revenue guidance to -3% to flat (from 4–6%), with organic growth of 4–6% excluding exited segments. Adjusted EBITDA guidance was cut to $21–23 million (from $27–30 million), citing lower volumes and margin pressures.

Additional News

1. Strategic Restructuring: The Honest Company announced “Transformation 2.0,” exiting non-core categories like apparel and Canada, representing 22% of Q3 sales.

2. Leadership Stability: CEO Carla Vernón reaffirmed confidence in the brand’s long-term value despite short-term challenges.

3. Tariff Exposure: Tariff costs on Chinese-sourced wipes pressured gross margins, prompting operational adjustments.

The revised outlook and strategic pivot highlight the company’s focus on profitability over top-line growth, though risks from macroeconomic uncertainty and category exits remain. Investors are advised to monitor execution of Transformation 2.0 and its impact on core business performance.