Zepp Health’s Earnings Call: Strong Growth Amid Challenges

Zepp Health Corporation ((ZEPP)) has held its Q3 earnings call. Read on for the main highlights of the call.

Zepp Health’s recent earnings call conveyed a positive sentiment, underscored by robust revenue growth and successful product launches. The company demonstrated improvements in cash flow and strategic inventory management, though it faced challenges such as supply constraints, shipment delays, and a year-over-year decline in gross margin due to pricing and promotions. Despite these hurdles, the outlook for the upcoming quarter remains optimistic.

Significant Revenue Growth

Zepp Health reported an impressive 78.5% year-over-year revenue increase, reaching $75.8 million in the third quarter of 2025. This achievement met the upper end of their guidance, showcasing the company’s ability to capitalize on market opportunities and drive financial performance.

Gross Margin Improvement

The company’s gross margin saw a sequential increase from 36.2% to 38%, attributed to effective mix management and margin improvement initiatives. This reflects Zepp Health’s strategic efforts to enhance profitability despite market challenges.

Successful Product Launches

The launch of the Amazfit T-Rex 3 Pro, Balance 2, and Helio Strap was met with strong market reception, significantly contributing to the quarter’s exceptional performance. These products have bolstered Zepp Health’s position in the competitive market.

Positive Outlook for Q4 2025

For the fourth quarter of 2025, Zepp Health has set a revenue guidance range of $82 million to $86 million, indicating a 38% to 45% year-over-year growth. This optimistic forecast reflects the company’s confidence in its product pipeline and market strategy.

Cash Flow and Inventory Management

Zepp Health successfully turned its cash balance from outflow to inflow, increasing it to $103 million. The company also strategically increased inventory to meet demand and mitigate risks, demonstrating prudent financial management.

Decline in Gross Margin Year-over-Year

Despite the sequential improvement, the gross margin experienced a 2.4% year-over-year decline, primarily due to lower pricing of entry-level products and promotional discounts. This highlights the competitive pressures in the market.

Supply Constraints and Shipment Delays

The company faced supply constraints on the Helio Strap and typhoon-related shipment delays, which affected product availability. These challenges underscore the importance of robust supply chain management.

Impact of Memory Chip Prices

Memory chip prices more than doubled, posing a significant challenge. However, Zepp Health managed to secure favorable pricing to mitigate the impact, showcasing their strategic procurement capabilities.

Forward-Looking Guidance

Looking ahead, Zepp Health anticipates a revenue range of $82 million to $86 million for Q4 2025, representing a 38% to 45% year-over-year growth. The company plans to leverage its strong product pipeline and maintain operational discipline and innovation to drive future success.

In summary, Zepp Health’s earnings call highlighted a positive sentiment with significant revenue growth and successful product launches. While challenges such as supply constraints and a decline in gross margin were noted, the company’s strategic management of cash flow and inventory positions it well for future growth. The optimistic outlook for the next quarter further underscores Zepp Health’s resilience and potential in the market.