Zepp Health Corporation ((ZEPP)) has held its Q1 earnings call. Read on for the main highlights of the call.
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Zepp Health Corporation’s recent earnings call conveyed a generally positive sentiment, driven by notable growth in Amazfit revenue, successful product launches, and an expanding market share. Despite these achievements, the company faces challenges with operating profit pressure and increased operating expenses. Zepp Health is optimistic about mitigating tariff impacts and anticipates substantial growth in the upcoming quarters.
Amazfit Revenue Growth
Amazfit revenue experienced a 10% year-over-year growth, marking a significant milestone for Zepp Health after two years of transformation. This growth highlights the company’s successful adaptation and strategic initiatives in the competitive wearables market.
New Product Launch Success
The launch of Amazfit Active 2 and Bip 6 has been met with positive reviews and strong market reception. These new products have significantly boosted sales momentum, showcasing Zepp Health’s ability to innovate and meet consumer demands effectively.
Market Share Expansion
In Italy, Amazfit’s market share of no SIM smartwatch unit sales reached 23.3% in March 2025, securing the second position after Apple. This expansion underscores the brand’s growing influence and competitive positioning in the European market.
Improved Gross Margin
Zepp Health achieved a gross margin of 37.3% in Q1 2025, surpassing both Q4 2024 and Q1 2024. This improvement is attributed to the successful launch of new products, which have enhanced the company’s profitability.
Successful Cost Management
Despite reporting a net loss, Zepp Health managed to limit its cash balance decline to approximately $6 million, thanks to enhanced working capital management. This demonstrates the company’s commitment to maintaining financial stability.
Operating Profit Pressure
The company faced pressure on operating profit as fixed operating expenses were not fully absorbed by increased sales. This challenge highlights the need for Zepp Health to optimize its cost structure to improve profitability.
Increased Operating Expenses
Operating expenses rose to $31.5 million in Q1 2025, primarily due to higher R&D and marketing expenses. This increase reflects Zepp Health’s investment in innovation and market expansion, which are crucial for long-term growth.
Tariff Impact
Tariffs on China-made products reduced Zepp Health’s gross margin by approximately 1 percentage point, with an expected full-year impact of $2 million to $3 million. The company is actively seeking ways to mitigate these effects.
Foreign Exchange Headwinds
Zepp Health encountered approximately $1 million in foreign exchange headwinds during the quarter, adding another layer of complexity to its financial performance.
Forward-Looking Guidance
Zepp Health’s guidance for the year is optimistic, with expectations of a 23% to 35% year-over-year revenue increase in Q2 2025. This growth is anticipated to be driven by new product launches and strategic partnerships. The company aims to improve profitability and expand its gross margin throughout 2025, while managing operating expenses between $25 million and $27 million per quarter. Zepp Health is confident in achieving its first year-over-year growth in overall sales since 2021, supported by product innovation and a strengthened global presence.
In conclusion, Zepp Health Corporation’s earnings call reflects a positive outlook, with significant achievements in revenue growth and market expansion. While challenges remain, particularly with operating expenses and profit pressures, the company’s strategic initiatives and forward-looking guidance suggest a promising future. Investors and market enthusiasts will be keenly watching Zepp Health’s progress in the coming quarters.