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Introduction & Market Context
Luxury resale platform TheRealReal Inc . (NASDAQ:REAL) presented its Q1 2025 financial results on May 8, 2025, highlighting continued revenue growth and improving profitability metrics. The company, which operates an online marketplace for authenticated luxury consignment, reported its third consecutive quarter of positive Adjusted EBITDA while growing its active buyer base.
Despite these positive developments, the stock fell 8.09% in aftermarket trading to $6.70, reflecting investor skepticism about the company’s path to sustainable profitability despite recent improvements. TheRealReal’s stock has shown significant volatility over the past year, trading between $2.24 and $11.38.
Quarterly Performance Highlights
TheRealReal reported strong growth across key metrics for Q1 2025, with Gross Merchandise Value (GMV) reaching $490 million, a 9% increase year-over-year. Revenue grew 11% to $160 million, slightly exceeding analyst expectations of $159.83 million.
As shown in the following chart of quarterly GMV and active buyers:
The company’s active buyer base grew to 985,000, representing a 7% year-over-year increase on a trailing 12-month basis. This growth in the customer base, combined with an increase in average order value from $538 to $564, contributed to the overall revenue improvement.
Revenue and Adjusted EBITDA trends demonstrate TheRealReal’s progress toward profitability:
Notably, the company achieved an Adjusted EBITDA of $4.1 million (2.6% of revenue), marking its third consecutive quarter of positive results. This represents a $6 million improvement compared to the same period last year.
Gross margin expanded to 75%, up 40 basis points year-over-year, while operating expenses as a percentage of revenue improved by 410 basis points:
The company highlighted that its operating expense improvements were driven by AI-led efficiency efforts and increased automation, with reductions across marketing, operations & technology, and selling, general & administrative expenses.
Strategic Initiatives & Technology Investments
TheRealReal emphasized its strategic focus on three key pillars: unlocking supply through its growth playbook, driving operational efficiency, and obsessing over service. The company’s presentation highlighted how these elements are supported by proprietary technology and data.
A central component of TheRealReal’s competitive advantage is its technology platform, which leverages over 13 years of accumulated data:
In February 2025, the company launched Athena, an AI-driven intake process that has already reduced processing time by up to 20% compared to last year. According to the presentation, 10% of items are now processed through this system. Additionally, algorithmic pricing modules are now applied to more than 85% of items, with ongoing work to extend algorithmic pricing to discounting strategies.
The company’s value proposition centers on its position as a trusted market leader in luxury resale:
TheRealReal reported its highest new consignor growth in over two years during Q1, indicating success in expanding its consignment network through partnership programs and dropship initiatives.
Financial Analysis
TheRealReal’s Q1 2025 results showed several positive financial trends. The company’s key highlights included:
While the presentation emphasized these positive developments, it’s worth noting that TheRealReal reported earnings per share of -$0.08, slightly better than the forecasted -$0.09. This discrepancy between positive Adjusted EBITDA and negative EPS highlights the impact of non-operational items and ongoing challenges in achieving GAAP profitability.
The company’s income statement reveals significant non-operational items affecting net income, including a $42.5 million change in fair value of warrant liability and a $37.1 million gain on extinguishment of debt. These one-time items contributed to a reported net income of $62.4 million, despite the negative EPS.
Forward Guidance
Looking ahead, TheRealReal provided guidance for both Q2 2025 and the full year:
For Q2 2025, the company expects GMV between $476 million and $486 million, with revenue ranging from $157 million to $161 million. Adjusted EBITDA is projected to be between $3.0 million and $4.0 million.
Full-year 2025 guidance projects GMV of $1.96 billion to $1.99 billion, representing approximately 8% growth. Revenue is expected to reach between $645 million and $660 million, with Adjusted EBITDA of $20 million to $30 million, indicating continued profitability improvement.
Market Reaction & Analyst Perspectives
Despite the positive quarterly results and improved profitability metrics, TheRealReal’s stock declined in aftermarket trading, suggesting investor concerns about the company’s long-term profitability and growth trajectory. The 8.09% drop to $6.70 reflects skepticism about the sustainability of recent improvements.
During the earnings call, analysts focused on the company’s "Get Paid Now" program, which offers selective high-value item purchases. Management noted that direct revenue margins improved significantly to 25.5% from 3.3% year-over-year. Analysts also questioned the sustainability of consumer behavior trends in buying and selling luxury items.
TheRealReal concluded its presentation by highlighting its key advantages and market positioning:
While the company emphasizes that it’s at an "inflection point" poised for sustained growth and improved profitability, the market reaction suggests investors may require additional evidence of consistent profitability before fully embracing this narrative. The company’s ability to continue expanding its active buyer base while improving operational efficiencies will be crucial for its long-term success in the competitive luxury resale market.
Full presentation:
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