Earnings call transcript: GigaCloud Technology’s Q2 2025 results beat expectations

GigaCloud Technology Inc. reported robust financial results for the second quarter of 2025, significantly surpassing earnings and revenue forecasts. The company’s earnings per share (EPS) came in at $1.14, more than double the expected $0.51, marking a 123.53% surprise. Revenue reached $323 million, exceeding the forecasted $303.21 million by 6.39%. Following the announcement, GigaCloud’s stock price surged 11.87% in premarket trading. According to InvestingPro data, the company maintains a strong financial health score of 3.51 (rated as "GREAT"), with impressive trailing twelve-month revenue growth of 43%.

Key Takeaways

• GigaCloud’s EPS of $1.14 far exceeded the forecast of $0.51.
• Revenue of $323 million surpassed expectations by $20 million.
• Stock price rose 11.87% in premarket trading to $24.78.
• Significant growth in European market, contributing 25% of global revenue.
• Expansion of fulfillment centers and SKU optimization efforts.

Company Performance

GigaCloud Technology demonstrated strong performance in Q2 2025, with a 4% year-over-year increase in total revenue. The company saw notable growth in its product segment, which increased by 5% to $226 million, while service revenue grew by 1% to $97 million. Net income reached $35 million, reflecting a net margin of 10.7%. The company’s strategic focus on SKU rationalization and market expansion, particularly in Europe, has contributed to its positive performance. InvestingPro analysis reveals the company trades at an attractive P/E ratio of 6.8x, significantly below many peers, while maintaining a healthy return on equity of 34%.

Financial Highlights

• Revenue: $323 million, up 4% year-over-year
• Earnings per share: $1.14, significantly higher than the forecast of $0.51
• Gross margin: Expanded by 50 basis points to 23.9%
• Net income: $35 million with a 10.7% net margin

Earnings vs. Forecast

GigaCloud’s Q2 2025 earnings significantly outperformed forecasts, with an EPS surprise of 123.53% and revenue exceeding expectations by 6.39%. This marks a substantial improvement from previous quarters, highlighting the company’s effective growth strategies and market expansion efforts.

Market Reaction

Following the earnings announcement, GigaCloud’s stock price increased by 11.87% in premarket trading, reaching $24.78. This movement reflects strong investor confidence in the company’s ability to exceed market expectations. The stock’s performance is notable as it approaches its 52-week high of $29.20, indicating positive market sentiment. InvestingPro’s Fair Value analysis suggests the stock remains undervalued despite recent gains, with additional upside potential. Investors should note the stock’s relatively high volatility, with a beta of 2.36, indicating larger-than-market price movements.

Outlook & Guidance

Looking ahead, GigaCloud anticipates Q3 revenue to range between $295 million and $310 million, despite expecting a 2.5% gross margin headwind due to tariffs. The company plans to implement targeted price increases and expects the Noble House portfolio to stabilize by next summer. Continued focus on disciplined execution and SKU optimization remains a priority.

Executive Commentary

"Our marketplace powered by SFR model is an adaptive channel agnostic ecosystem," stated Larry Wu, CEO. President Iman Shrock emphasized, "Europe is emerging not only as a growth region, but as a strategic pillar of our global expansion." CFO Erica Way highlighted the company’s focus on "disciplined execution."

Risks and Challenges

• Tariff impacts: Anticipated 2.5% gross margin headwind due to tariffs.
• Supply chain complexities: Navigating international trade dynamics.
• Market competition: Maintaining competitive edge in a rapidly evolving market.
• SKU rationalization: Ensuring effective product portfolio optimization.

Q&A

During the earnings call, analysts raised questions about the Noble House performance and sourcing strategies amid tariff changes. Tom Forte from Maxim Group inquired about these areas, while Matt Koranda from ROTH Capital sought insights on Q2 performance drivers and potential tariff impact mitigation strategies.

Full transcript - GigaCloud Technology Inc (GCT) Q2 2025:

Conference Call Operator: Welcome to Giga Cloud Technologies’ Second Quarter twenty twenty five Earnings Conference Call. Joining us today from Giga Cloud are the company’s Founder, Chief Executive Officer and Chairman, Larry Wu its President, Iman Shrock and its Chief Financial Officer, Erica Way. Larry will begin with some opening remarks, Iman will discuss the company’s operational progress, and Erica will review financial results. After that, we will open the call to questions. As a reminder, this conference call contains statements about future events and expectations that are forward looking in nature, and actual results may differ materially.

Additionally, today’s call will include the discussion of non GAAP measures within the meaning of SEC Regulation G. When required, a reconciliation of all non GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP can be found in the press release issued today by Giga Cloud as well as on the company’s website. I would now like to turn the call over to Larry. Please go ahead, sir.

Larry Wu, Founder, CEO, and Chairman, Giga Cloud Technologies: Thank you, operator, and welcome, everyone, to our call today. Let me start by saying what the eventful quarter we had between supply chain disruption from tariff hikes, a challenging industry backdrop, and the continued execution of our SKU rationalization initiatives. We have a few curveballs. Yet despite it all, we delivered strong results. Revenue increased by 4% year over year, exceeding our own expectations.

And more importantly, we drove a greater share of that growth into bottom line performance, which grew 28% year over year. A few highlights on the key events of this quarter before we dive into details. We started this quarter facing heightened tariff on our key sourcing countries, including Vietnam, China, and Malaysia, With rapid changes that followed by that followed shortly after the initial announcement, the unprecedented level of uncertainty quickly led to disruptions in the overall ecosystem. A number of our 3P partners halted shipping for several weeks, adopting the wait and see approach, and we had to act quickly to ensure our own competitive sourcing. Despite this challenge, we saw marketplace GMV grow by 31% on the trailing twelve month basis.

Rather than a setback, I see this event as a proving ground for the marketplace. And the supplier fulfilled retailing or SFR model, one designed to bring agility and efficiency to global trade. As I said last quarter, but bears repeating, our marketplace powered by SFR model is an adaptive channel agnostic ecosystem purpose built to allow participants to pivot quickly by creating new path forward when old ones become hindered. In today’s environment, where efficiency and flexibility aren’t just advantages but necessities, our value proposition is critical. Momentum in Europe continued to build, with the GMV up 59% year over year.

To support that demand, we recently opened an additional fulfillment center in Germany, which is quickly becoming a key part of our global network. We’re also seeing growing interest from our 3P suppliers looking to diversify beyond The US market, especially in light of a recent trade tariff, a clear sign that Europe is shaping up to become more than just a growth market for us. Looking internally, our SKU rationalization effort for the Noble House portfolio are advancing as we continue to purposefully streamline our product portfolio by phasing out the low margin SKUs by replacing them with high performing profit driving product offering. Iman will share more details on this shortly. As we have communicated before, we have been and always will be focused Now I will turn the call over to Yimon to provide an update on our key operational goals.

Iman Shrock, President, Giga Cloud Technologies: Thank you, Larry. Despite continued market uncertainty, our marketplace once again delivered impressive results. For the trailing twelve months ending 06/30/2025, GMV increased over 31%, surpassing $1,400,000,000 as both sellers and buyers of large parcel goods capitalize on the advantages of our flexible SFR model. Our active 3P seller base continues to expand, standing at eleven sixty two, up about 25% from last year. GMV from this group rose roughly 32% year over year on a trailing twelve month basis to $758,000,000 Our active buyer base maintains strong momentum, surpassing 10,000 for the first time to almost 11,000, an increase of approximately 51% year over year.

As we continue to welcome a growing number of new buyers to our platform, we see a slight dip in average spend since newcomers typically start small before scaling up their activity over time. Europe continues to be one of our strongest growth areas. GMV in the region grew 59% year over year in the second quarter. While our 1P sales there remain robust, we are particularly excited about a notable and recent surge in interest from the 3P seller partners to enter this market. Historically 3P activity has been largely focused on The US domestic market.

But just in the past couple of months, we have seen a meaningful shift with 3P sellers now actively seeking expansion into Europe and other international markets as means to diversify their channels and better navigate evolving trade dynamics. Our platform and infrastructure empower our partner to scale quickly and efficiently without the burden of heavy capital commitments while remaining agile in a rapidly evolving environment. We are honored to be the partner they trust to facilitate this expansion and proud to play a role in their growth journey. This expansion of 3P into Europe is yet another example of Giga Cloud’s proven playbook. We go first.

We enter new markets first through 1P, validate scalability, profitability, and only then do we bring in 3P partners. By taking the lead, we ensure our partners step into a proven framework for success without the time investment risk or the risk associated with trial and error. Europe is emerging not only as a growth region, but as a strategic pillar of our global expansion. To support these demands, in July, we opened an additional fulfillment center in Germany, our sixth in the country, bringing our global footprint to approximately 11,200,000 square feet. Germany is now a vital hub for fulfillment across Europe.

With more sellers looking to expand beyond The US, we are scaling thoughtfully. Over time, we see Europe as having the potential of becoming a business of comparable scale and significance to our domestic US operations in the years ahead. Turning our attention to recent SKU rationalization efforts. As we shared in our previous earnings, the legacy Noble House operations have now been fully integrated into Giga Cloud, with everyone working as one team. Once operational processes have been successfully streamlined, we turned our attention to the product portfolio.

When we first acquired Noble House out of bankruptcy, we inherited a portfolio of over 8,000 SKUs that had been stale for more than a year, posing a significant challenge to profitability. Since then, our team has worked diligently to develop new SKUs that align with today’s market demands. I am proud to share that as of today, we have retired 3,800 outdated SKUs, introduced approximately 1,200 new ones, and continue to carry around 3,000 original SKUs with plans to expand further throughout the year. In addition to new product offerings, we’ve also gained significant efficiencies by embracing the marketplace with this portfolio and benefiting from the differentiating advantages brought to us by the SFR business model. The strengthened SKU lineup coupled with lean execution enabled by our marketplace has significantly improved the margin profile of Noble House portfolio, now just three points behind legacy Giga Cloud.

We remain focused on disciplined execution. And by next summer, we expect portfolio to settle into a more stable rhythm, shifting from a full overhaul to a balanced ongoing cadence of SKU refreshes and retirements as is typical for any healthy product portfolio. Now I’d like to turn things over to Erica for a discussion of our second quarter financial results.

Erica Way, Chief Financial Officer, Giga Cloud Technologies: Thank you, Aman, and hello, everybody. A quick note before we dive in. All figures I cover today are rounded, and unless otherwise noted, comparisons are against the same period last year. With that, let’s take a look at this quarter’s results. Total revenues grew 4% to $323,000,000 as a result of increased market recognition and scale of our Giga Cloud Marketplace.

We will now break this down across our product and service revenue streams. Starting with product. Total product revenue grew by approximately 5% year over year to $226,000,000 largely outpacing our expectations. Our main growth contributor this quarter was international momentum, once again led by Europe’s impressive 59% year over year revenue growth. With this performance, Europe now represents roughly a quarter of our global revenue, underscoring its critical role in our diversified growth strategy.

The strong growth seen in Europe was partially offset by an 11% decline in U. S. Domestic product sales. Of this decline, approximately 5% was attributable to our proactive SKU rationalization efforts, and 6% was due to broader industry headwinds felt in The U. S.

Notably, our outperformance was largely due to the legacy Noble House portfolio. While we had initially modeled a larger year over year decline of revenue as we went through SKU rationalization, performance for this portfolio pleasantly surprised us and contributed a little under 25% to our global product sales. Product margin improved by 174 basis points sequentially to 29.2%. The main driver of this improvement was our recent efforts for the legacy Noble House portfolio. Over the last twelve months, we have focused on introducing new products and SKUs that better align with customer demand, while simultaneously benefiting from the efficiencies brought by the marketplace and our large network of suppliers.

These efforts are now paying dividends, and we expect further benefits as we refine execution. Moving on to services. Service revenue grew modestly year over year at approximately 1%, reaching $97,000,000 for the 2025, driven by strong 3P GMV growth. Growth brought by overall volume increase was offset by lowered ocean freight revenue as we saw market spot rates decline compared to prior periods, and ocean shipping volume declined due to temporary disruptions in April and May as many of our 3P suppliers halted shipments while waiting for policy clarity. Service margin came in at 11.4%, down sequentially by 4.5%, largely reflecting the impact of lowered ocean spot rates and lower warehousing utilization during the quarter due to the temporary April and May supply chain disruptions discussed earlier.

After the temporary slowdown in shipping demand driven by tariff related uncertainty, we have since seen volume largely return to their normal levels. On a company wide basis, gross margin was 23.9 for the second quarter, a 50 basis point sequential expansion from the 2025. Total operating expenses were 13% of total revenue, roughly in line with the first quarter, but substantially lower than 16% from prior year quarter. The year over year decrease was mainly a result of lower stock based compensation in the current year. As you may recall, stock based compensation is provided to most employees once a year and vests upon grant.

As such, expense amount directly correlates with share price at the time of grant, which was lower than that of prior year. This year, we also adjusted our annual bonus structure by shifting from 100% stock based bonus payments to a 50% stock and 50% cash bonus. This change was designed to reduce sell pressure from team members due to taxes, while still aligning incentives with company long term performance. Net income grew to $35,000,000 for the second quarter with net margin of 10.7%. We ended the second quarter with liquidity of nearly $300,000,000 which includes cash, cash equivalents, restricted cash, and short term investments.

To date, in 2025, we generated operating cash flows of $48,000,000 executed $46,000,000 in share buybacks, and made net purchases of liquid investments consisting of treasuries and deposits of approximately $20,000,000 And even with all that capital deployment, our liquidity position has remained largely steady compared to end of last year, which speaks to the strength of our cash generation and disciplined approach. We will be coming up on our three year anniversary as a public company soon on August 18. I would like to take this as an opportunity to reflect on how we have deployed capital over the last three years. We received gross proceeds of $41,000,000 from our IPO in 2022. Since then, we have executed $71,000,000 in share buybacks and $87,000,000 in strategic acquisitions to create value.

We remain focused on this disciplined approach to support long term growth strategies and returning shareholder value. Turning to our outlook for the third quarter. Total revenue is expected to between $295,000,000 and $310,000,000 I would like to take a moment to discuss how recent tariff developments may impact the coming quarter. As we all know, April saw a short lived but sharp spike in tariffs. While these tariffs have since stabilized, this resulted in cost increases for products procured during that period, which as discussed last quarter, will largely cycle through our Q3 sales.

As a result, we expect an around 2.5% gross margin headwind in the coming quarter. While we anticipate offsetting these cost pressures through targeted price increases, the supply chain will require some time to fully absorb and adjust to these changes. As a result, we may still see temporary near term impact before normalization occurs. Thank you all for your time and attention today. With that, I will turn it over to the operator for Q and A.

Conference Call Operator: Thank you. Your first question comes from Tom Forte with Maxim Group. Please go ahead.

Tom Forte, Analyst, Maxim Group: Great. So one question and one follow-up. So congratulations on the quarter. Can you give a little more details on Noble House’s performance in the June? And then where you stand on your skew rationalization efforts as we enter the 2025 as it pertains to Noble House.

Erica Way, Chief Financial Officer, Giga Cloud Technologies: Thank you, Tom. So, I think we’ve made pretty good progress, with the SKU rationalization efforts overall. Like Iman talked about earlier, we’ve since introduced 1,200 new SKUs and also trimmed down the overall portfolio to kind of, remove a lot of the older ones that weren’t contributing positively. So, the results of these efforts combined with kind of working that in with the marketplace and leveraging the efficiencies have really, I think performed quite well in Q2. And overall, I think our project is a little bit ahead of schedule and it’s kind of being meaningful margins a little earlier than we expected during the peak season of outdoors in Q2.

Moving ahead, the SKU rationalization efforts will be continued And hopefully by next Q2, which is the coming, the next peak sales season for outdoors is when we expect the portfolio to reach kind of a stabilized stage where there’s just a normal stable amount of skews being retired and introduced rather than an entire overhaul.

Tom Forte, Analyst, Maxim Group: Thank you. My follow-up, we’re hearing from suppliers that with the dynamic tariff environment, sometimes you’re seeing things, for example, go from China to Southeast Asia and then successfully capture a lower tariff rate but then face a higher build cost. So as it pertains to where your items are sourced from, how should we think about not just the tariff impact inside and outside China, but the relative sourcing costs?

Erica Way, Chief Financial Officer, Giga Cloud Technologies: So, I think the key here is really flexibility, especially during times where things seem to change quite rapidly. And even though things are a little calmer now, there still is a decent amount of uncertainty. This is kind of, what we have always focused on, and one of the things we do best is maintaining strong relationships with a very, very large network of suppliers and having a dynamic portfolio that allows us to react quickly based on what current policies are and where we need to be sourcing from.

Tom Forte, Analyst, Maxim Group: Thank you for taking my questions.

Erica Way, Chief Financial Officer, Giga Cloud Technologies: Thank you, Tom.

Conference Call Operator: Your next question comes from Matt Koranda with ROTH Capital. Please go ahead.

Matt Koranda, Analyst, ROTH Capital: Hey, guys. Thanks. Just on the second quarter, curious where like sort of the upside to your initial guidance came from? Maybe do you want to discuss sort of how things progressed through the quarter and what surprised you to the upside that drove the strong execution in the second quarter?

Erica Way, Chief Financial Officer, Giga Cloud Technologies: Yes. Thank you, Matt. So the big surprise for us was Noble House. Originally, when we gave Q1 guidance, we were modeling in a larger year over year decline because of the skew rationalization. We might have been a little bit conservative in our estimate given this is the first outdoor seasons that we’ve had the opportunity to try out all of our new SKUs and the performance was a bit better than expected.

Matt Koranda, Analyst, ROTH Capital: Okay. And then the tariffs impact that you mentioned toward the end of the prepared remarks, 2.5%, I assume that’s gross margin headwind. That unmitigated so that you have essentially levers at your disposal to pull to offset some of that 2.5%, so 2.5 is as bad as it’ll get? Maybe just talk a little bit about the mitigation efforts.

Erica Way, Chief Financial Officer, Giga Cloud Technologies: Yep. That’s right. That’s unmitigated. So the strategy is to moving down the line, have targeted price increases on certain products where market allows. But naturally, this isn’t something that I think the entirety of the supply chain adjusts to and digests overnight.

It’ll likely take a bit of time and we don’t know if the levers will allow us to absorb the 2.5% estimated headwind right away 100%.

Matt Koranda, Analyst, ROTH Capital: Okay, I’ll leave it there. Thank you.

Erica Way, Chief Financial Officer, Giga Cloud Technologies: Thank you.

Conference Call Operator: There are no further questions at this time, and that does conclude our conference for today. Thank you for participating. You may now disconnect.

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