Zepp Health's Path to Recovery: From Revenue Drops to Future Potential

Zepp Health Corporation's revenue dropped and net income turned negative despite its transition to a new independent brand. However, the company's last quarter results show potential for future growth, making it a good buy option.

Zepp Health Corporation (NYSE: ZEPP), previously known as Huami Corp., has been navigating through challenging times following its aggressive transition to an independent brand. Despite revenue drops and negative net income, the company's recent quarterly results indicate a promising turnaround. The stock has seen a significant increase, reflecting a shift in market perception from skepticism to optimism.

In Q2 2025, Zepp Health reported a revenue of $59.4 million, marking a 54.2% increase from the previous quarter and a 46.2% increase from the same period last year. This growth is the first since 2021, when the company began its strategic shift. Although the net loss was still negative, it decreased by 28.6% compared to the previous quarter, with a gross margin of 36.2%. The gross profit generated by the new Amazfit brand was sufficient to cover a portion of its fixed expenses, signaling progress toward profitability.

The company projects optimistic growth for Q3, with an expected increase of 70% to 79%. This growth is anticipated due to the launch of new products that could boost sales and net income, gradually moving the company out of its negative net income status. Considering execution risks, a more conservative estimate projects a 55% growth, resulting in a total revenue of $92.07 million [1].

The global market for wearable technology is one of the fastest-growing sectors, with a projected value of $365 billion by 2034, growing at a CAGR of over 300% [2]. Zepp Health is positioned to benefit from this growth by focusing on health and well-being, leveraging its investment in AI to create a unique ecosystem for users. The company's existing base of over 200 million devices and 40 million active users presents an opportunity for future monetization through subscription services.

Despite the challenges, Zepp Health has optimized its balance sheet by reducing leverage by $68 million, freeing up significant capital. The company's revenue history shows a decline since 2020, but projections for 2025 and 2026 indicate a more conservative yet promising growth trajectory. The company's P/E and EV/EBITDA multiples are currently negative, but its P/S multiple of 1.40x suggests a modest target price increase for 2026.

The biggest long-term catalyst for Zepp Health is the growth of its Amazfit brand. As consumer perception of the brand improves, it will gain pricing power, allowing the company to transition to a premium brand and expand its subscription service offerings. Future partnerships with insurers and corporate health companies could further enhance its revenue streams.

In conclusion, while Zepp Health has faced significant challenges during its transition, its recent quarterly results and market projections indicate a promising turnaround. The company's strategic focus on health and well-being, combined with its investment in AI, positions it well for future growth. Investors should closely monitor the company's progress and consider the potential for long-term gains.

References:
[1] https://seekingalpha.com/article/4810795-zepp-health-stock-successful-strategic-shift-signal
[2] https://www.zionmarketresearch.com/press-release/wearable-technology-market