Zepp Health's Q3 2025 Earnings Call: Contradictions on Helio Strap Supply-Demand, North America Shipment Share, and Tariff Mitigation Strategies

Date of Call: November 4, 2025

Financials Results

• Revenue: $75.8M, up 78.5% YOY
• Gross Margin: 38.2% (39.4% excluding tariffs); down 2.4 percentage points YoY from 40.6% in Q3 2024; improved ~2% sequentially (from ~36.2% to ~38% vs Q2 2025)
• Operating Margin: Operating breakeven in Q3 2025; adjusted operating expenses 37.7% of sales (vs 67.3% in Q3 2024); adjusted operating loss was $11.3M in Q3 2024; expect operational profitability in Q4 2025

Guidance:

• Q4 revenue expected $82M–$86M, representing +38%–45% YoY vs $59.5M in Q4 2024
• Expect to be operationally profitable in Q4 2025
• Gross margin expected to continue expanding as new products scale and mix shifts premium
• Cash balance expected to grow; inventory intentionally built for holiday season
• Marketing spend to remain disciplined (~$10–11M/quarter) with selective, ROI-driven promotions

Business Commentary:

* Revenue Growth and Product Strategy: - Zepp Health Corporation reported a significant revenue growth of 78.5% year-over-year, reaching $75.8 million in Q3 2025. - This growth was driven by the successful execution of the company's multi-tier product strategy, highlighted by the launch of the Amazfit T-Rex 3 Pro, which enhanced product offerings across segments.

• Gross Margin Expansion:
• The company's gross margin expanded sequentially from 36.2% to 38% in Q3 2025.

• This increase was attributed to effective mix management and the ongoing execution of margin improvement initiatives implemented in late 2023.

• Operational Efficiency and Cost Management:

• Adjusted operating expenses in Q3 2025 remained stable at $28.6 million, representing 37.7% of sales.

• The company maintained a cost-conscious approach, aiming for a run rate of approximately $25 million per quarter for operating costs, supported by streamlined overhead and disciplined cost control.

• Cash Flow and Debt Optimization:

• Zepp Health's cash balance turned from outflow to inflow, reaching $103 million by the end of Q3 2025.
• This improvement was driven by enhanced operational efficiency and working capital management, alongside the optimization of debt structures through the retirement of $64.5 million of debt since the beginning of 2023.
  

  Sentiment Analysis:

  Overall Tone: Positive

  • CEO: "revenue grew 78.5% year-over-year"; CFO: "we achieved operating breakeven in the third quarter"; Guidance: "Q4 revenue to be between USD 82 million and USD 86 million, delivering 38% to 45% year-over-year growth."

Q&A:

• Question from Siddharth Rajeev (Fundamental Research Corp.): The press release mentioned supply constraints on the Helio Strap. Do you mind giving more color on this?
  Response: Shortage driven by industry-wide memory chip lead-times and elevated demand; typhoon-related shipping delays exacerbated regionally; supply should improve in Q4 into Q1.

• Question from Siddharth Rajeev (Fundamental Research Corp.): Would you say North America still accounts for approximately 15% of total shipments?
  Response: North America is ~15–20% of shipments and most U.S. supply is dual-sourced from Vietnam, so tariff impact is minimal.

• Question from Siddharth Rajeev (Fundamental Research Corp.): Was the T‑Rex Pro the only product launched last quarter? How many launched last quarter and expected in Q4?
  Response: Q3's only new launch was T‑Rex 3 Pro (48mm); Helio Strap and Balance 2 launched in June and sold through Q3; T‑Rex 3 Pro 44mm began sales Oct 25; additional Q4 products exist but are undisclosed.

• Question from Dylan Chu (Point72 HK): Can you give more color on the T‑Rex 3 Pro launch and 44mm initial feedback, holiday demand signals, and why the Q4 guide is slightly conservative?
  Response: T‑Rex 3 Pro (48mm) is performing very well—outpacing prior T‑Rex 3 at launch; 44mm is early but activations are rising; holiday demand signals are positive but guidance is prudent due to supply and conservatism in forecasting.

• Question from Dylan Chu (Point72 HK): How do you plan to grow channel reach into Q4 and next year—online vs offline focus and low-hanging fruits?
  Response: Online (Amazon, brand.com) is the primary growth driver with better margins and still-room to grow; offline expansion will accelerate once supply constraints (e.g., Helio Strap) are resolved and after prioritizing online visibility.

• Question from Yuan Zhu (Guosen Securities): For Q4 guidance, what are your assumptions for price vs volume growth, discounting approach, and planned marketing/S&M spend?
  Response: Assumes holiday-driven volume plus higher ASPs from Balance 2 (~$300) and T‑Rex 3 Pro (~$400); selective, ROI-focused promotions expected; marketing spend to remain ~ $10–11M/quarter, with potential front‑loading if high-ROI opportunities arise.

• Question from Yuan Zhu (Guosen Securities): Any other new product launches this year and plans for product iteration next year—will cadence intensify?
  Response: 44mm T‑Rex 3 Pro is on sale in Q4 and several pipeline products exist but undisclosed; plan to maintain ~2–3 launches per quarter in 2026 with a recurring annual cadence (Q1 entry refresh, Q2 premium challengers, Q3 sports/T‑Rex).

Contradiction Point 1

Helio Strap Supply and Demand

It involves disparities in the reported causes and expected timeline of supply constraints for a significant product, the Helio Strap, which directly impacts revenue and market perception.

What is the impact of supply constraints on Helio Strap? - Siddharth Rajeev (Fundamental Research Corp.)

2025Q3: The Helio Strap supply constraints are due to two main factors: a global shortage of memory chips with long lead times and increased consumer demand, leading to a shortage in every region. Additionally, a typhoon in southern China exacerbated the situation. - Leon Cheng Deng(CFO)

What will be the main driver for the strong Q3 guidance? - Unidentified Analyst (Brooks Investments)

2025Q2: In terms of Helio Strap, our supply chain has been working very well. They've been able to deliver and execute on that, and the ramp ramp has been very smooth. Now, in terms of some of these [ Technology Meta Platforms ], we're not yet at 100% of our design capacity but we're getting there. - Ray Zhou(COO)

Contradiction Point 2

North America's Share of Total Shipments

It involves discrepancies in the reported percentage of total shipments accounted for by North America, which could impact regional sales strategies and market distribution.

What percentage of total shipments does North America account for? - Siddharth Rajeev (Fundamental Research Corp.)

2025Q3: Approximately 15% to 20% of total shipments are accounted for by North America, with a dual sourcing strategy that minimizes tariff impacts by supplying most products from Vietnam. - Leon Cheng Deng(CFO)

What sales contribution do you expect from the new Helio Strap launch? What gross margin do you expect for the product? - Dylan Chu (Point72 Hong Kong)

2025Q2: So far, we are very happy with the sales momentum in North America. And currently, the demand is much stronger than supply. We are working diligently to improve the supply chain of our North America market. - Ray Zhou(COO)

Contradiction Point 3

Tariff Impact and Mitigation Strategies

It involves changes in company strategy and financial forecasting regarding tariff impacts, which could influence investor expectations and company operations.

Can you clarify the impact of tariffs? Are your Vietnam-produced products subject to a 10% U.S. tariff? How are you preparing for a potential 46% tariff increase in July? - Siddharth Rajeev (Fundamental Research Corp.)

2025Q3: We expect the full-year tariff impact to be around $2 million to $3 million, which will be fully offset by global operating efficiency gains. - Leon Cheng Deng(CFO)

What are you seeing in the market currently? Are you and your competitors planning to raise prices or pass costs to consumers? - Sidharth Rajeev (Fundamental Research Corp.)

2025Q1: We're preparing for potential tariff changes by front-loading inventories into U.S. warehouses and exploring long-term triple sourcing opportunities, including in the NAFTA region. - Leon Cheng Deng(CFO)

Contradiction Point 4

Supply Constraints on Helio Strap

It highlights differing explanations for supply constraints, which could impact production timelines, delivery capabilities, and overall business performance.

What is the impact of supply constraints on Helio Strap? - Siddharth Rajeev(Fundamental Research Corp.)

2025Q3: The Helio Strap supply constraints are due to two main factors: a global shortage of memory chips with long lead times and increased consumer demand, leading to a shortage in every region. Additionally, a typhoon in southern China exacerbated the situation. - Leon Cheng Deng(CFO)

What specific production constraints caused the Q1 to Q3 delay? - Siddharth Rajeev(Analyst)

2024Q4: Our production needs another 2 months plus to reach the full production ramp-up due to various factors, which include the tightening of labor policies, supply chain disruptions, and other various external factors. - Wang Huang(CEO)