Zepp Health's Q2 2025: Unpacking Contradictions on Tariffs, Product Launches, and Margin Expectations

Tariff impact and mitigation, product launch strategy and timing, product launch strategy and focus, gross margin expectations, and product launch strategy and gross margin expansion are the key contradictions discussed in Zepp Health's latest 2025Q2 earnings call.



Strong Revenue Growth and Market Share Expansion:
- Zepp Health reported a remarkable 46% year-over-year increase in revenue to $59.4 million for Q2 2025, marking the first quarter of year-over-year revenue growth since Q2 2021.
- The growth was driven by a strategic shift to a single-branded product ecosystem, with all revenue contributed by the Amazfit brand, alongside strong sales of entry-level products like the Bip 6 and Active 2 series and successful new product launches.

Premiumization and Product Innovation:
- The introduction of the Balance 2 smartwatch and the Helio Strap widened the premium product portfolio, with the Balance 2 priced at $299 and the Helio Strap at $99, both offering advanced features and high gross margins.
- These products have been well-received by consumers and KOLs, expanding Zepp's target audience and setting a foundation for future growth.

Operational Resilience and Diversification:
- The company's flexible supply chain and multi-region sourcing strategy successfully mitigated tariff impacts, with manufacturing capacity diversified across China and Vietnam to maintain competitive edge.
- Operational efficiency gains and strategic pricing helped drive sales growth, despite evolving market dynamics and uncertainties.

Marketing and Branding Success:
- Successful brand awareness initiatives, strategic partnerships with global athletes, and effective digital marketing campaigns elevated Zepp Health's global brand perception, resonating with the target audience.
- The strong performance during Amazon Prime Day, with Amazfit ranking as the second most improved wearable brand year-over-year in the U.S., highlighted the effectiveness of these efforts.

Strong Third Quarter Guidance:
- Zepp Health provided strong guidance for Q3 2025, expecting revenue between $72 million and $76 million, representing a 70% to 79% year-over-year growth.
- Growth drivers include continued traction of entry-level products, full quarter performance of new Balance 2 and Helio Strap, sustained popularity of the T-Rex 3 series, and anticipation of new product launches in Q3.

Financial and Cost Management:
- Despite a slight year-over-year decrease in gross margin due to product mix and promotional activities, the company expects gross margin to expand in Q3 and beyond, as new products and a more favorable product mix take effect.
- Efforts to reduce operating costs, with a target run rate of approximately $25 million per quarter, are progressing, supported by strong working capital management and a committed focus on R&D and marketing investments.