10-Q: Warby Parker Q2 2025: Revenue Growth, Google AI Eyewear Deal

Warby Parker reports strong Q2 2025 revenue growth and announces a strategic partnership with Google for AI-powered glasses development.

Summary

• Net revenue increased by 13.9% to $214.5 million for the three months ended June 30, 2025, compared to $188.2 million in the prior year period.
• For the six months ended June 30, 2025, net revenue grew 12.9% to $438.3 million, up from $388.2 million in the same period of 2024.
• Gross profit for Q2 2025 was $113.6 million, an increase of 7.8% from $105.4 million in Q2 2024, but gross margin decreased to 53.0% from 56.0%.
• For H1 2025, gross profit was $239.6 million, a 9.5% increase from $218.8 million in H1 2024, with gross margin decreasing to 54.7% from 56.4%.
• The company reported a net loss of $1.8 million for Q2 2025, a significant improvement from a net loss of $6.8 million in Q2 2024.
• Net income for H1 2025 was $1.7 million, a substantial turnaround from a net loss of $9.4 million in H1 2024.
• Adjusted EBITDA increased by 27.7% to $25.0 million for Q2 2025 and by 29.2% to $54.2 million for H1 2025.
• Active Customers grew 9.0% to 2.602 million as of June 30, 2025, and Average Revenue per Customer increased to $316 from $302.
• The company expanded its retail footprint to 298 stores by June 30, 2025, up from 256 stores in the prior year.
• A strategic partnership with Google was announced to develop AI-powered glasses, with Google committing up to $75 million for product development and commercialization costs, and an option to invest up to $75 million in Warby Parker.
• One-time inventory write-downs of $2.5 million were incurred, primarily related to the decision to sunset the Home Try-On program by the end of the year.
• A preliminary court approval was received in June 2025 for a $1.95 million settlement of a class-action lawsuit, with a final approval hearing scheduled for February 2026.

Sentiment

Score: 8

Explanation: Strong revenue and Adjusted EBITDA growth, significant improvement in profitability, and a transformative partnership with Google for AI-powered glasses indicate a very positive outlook despite some gross margin pressure and one-time write-downs. The strategic initiatives position the company well for future growth and innovation.

Positives

• Net revenue increased by 13.9% in Q2 2025 and 12.9% in H1 2025, demonstrating strong top-line growth.
• The company achieved net income of $1.7 million for H1 2025, a significant improvement from a net loss of $9.4 million in H1 2024.
• Net loss for Q2 2025 was substantially reduced to $1.8 million from $6.8 million in Q2 2024.
• Adjusted EBITDA showed robust growth, increasing 27.7% in Q2 2025 to $25.0 million and 29.2% in H1 2025 to $54.2 million.
• Active Customers grew by 9.0% to 2.602 million, indicating continued customer acquisition and retention.
• Average Revenue per Customer increased to $316 from $302, driven by higher-priced frames, precision progressives, and multi-product purchases.
• A strategic partnership with Google for AI-powered glasses includes up to $75 million in product development funding and a potential $75 million equity investment from Google.
• Selling, general, and administrative expenses decreased as a percentage of net revenue by 570 basis points in Q2 2025 and 490 basis points in H1 2025, reflecting improved operational efficiency.
• The retail footprint expanded to 298 stores, enhancing brand awareness and customer accessibility.

Negatives

• Gross margin decreased by 300 basis points in Q2 2025 (to 53.0%) and 170 basis points in H1 2025 (to 54.7%), primarily due to product mix shifts towards lower-margin contact lenses, increased store occupancy costs, doctor headcount, and tariff-related costs.
• Cost of goods sold increased by 21.8% in Q2 2025 and 17.3% in H1 2025, outpacing revenue growth.
• One-time inventory write-downs of $2.5 million were recorded in Q2 2025, mainly due to the decision to sunset the Home Try-On program.
• Interest and other income, net, decreased by 22.7% in Q2 2025 and 13.4% in H1 2025, primarily due to unfavorable foreign currency fluctuations and lower interest rates on cash balances.
• The company expects operating losses to continue in the foreseeable future as it invests in business expansion.

Risks

• Ability to manage future growth effectively.
• Increases in component and shipping costs and changes in supply chain, including potential impacts from tariffs.
• Changes to U.S. or other countries' trade policies and tariff and import/export regulations, which could increase costs and reduce margins.
• Reliance on information technology systems and enterprise resource planning systems for business operations and safeguarding confidential information.
• Ability to invest in and incorporate new technologies, including artificial intelligence, into products and services.
• Ability to engage existing customers and obtain new customers in a competitive market.
• Ability to expand in-network access with insurance providers.
• An overall decline in the health of the economy and other factors impacting consumer spending, such as recessionary conditions, inflation, infectious diseases, government instability, and geopolitical unrest.
• Ability to compete successfully against other eyewear providers.
• Ability to manage inventory balances and shrinkage effectively.
• Ability to recruit and retain optometrists, opticians, and other vision care professionals.
• Effects of seasonal trends on results of operations, which may cause fluctuations in quarterly results.
• Ability to stay in compliance with extensive laws and regulations applicable to the business.
• Ability to adequately maintain and protect intellectual property and proprietary rights.
• Reliance on third parties for products, operations, and infrastructure.
• Duties related to being a public benefit corporation.
• The significant influence of Co-Founders and Co-CEOs over matters submitted to stockholders for approval due to the multi-class stock structure.
• Volatility in the trading price of Class A common stock.
• Ability to achieve milestones necessary for Google's equity investment and contributions to product development and commercialization costs.
• Ability to recognize the anticipated benefits from the partnership with Google.
• Increased expenses associated with being a public company.

Future Outlook

The company expects operating losses to continue in the foreseeable future as it invests in business expansion. Management believes existing cash and cash equivalents, funds available under the credit facility, and cash flows from operating activities will be sufficient to fund operations for at least the next 12 months. The partnership with Google aims to launch a series of AI-powered smart glasses over time. The company plans to adopt ASU 2023-09 in the fourth quarter of its 2025 fiscal year, which will result in additional income tax disclosures, and is evaluating the impact of ASU 2024-03, effective for fiscal years beginning after December 15, 2026.

Management Comments

• Our business model, focused on providing an exceptional value and experience to our customers, along with mitigating measures we are taking, will help offset the impact of many of these macroeconomic factors.
• Our ongoing efforts to diversify and expand our supply chain network, both internationally with our frame manufacturers and domestically with our wholly owned and partner optical laboratories, has been a key strategy which we believe has helped to insulate us from supply chain disruption and allowed us to continue to meet growing customer demand over the last several years while maintaining our exceptional quality and customer satisfaction standards.
• We have implemented additional mitigation plans to offset the impact of increasing tariffs, including by continuing to diversify our supplier base in locations outside of China, making strategic price adjustments, and reducing planned expenses.
• We are working closely with Google on the development of future smart glasses and intend to launch a series of products over time.

Industry Context

Warby Parker operates in the dynamic holistic vision care market, characterized by a blend of technology, design, healthcare, and social enterprise. Its direct-to-consumer model, combined with a growing physical retail footprint, positions it as an omnichannel player. The strategic partnership with Google for AI-powered glasses places the company at the forefront of innovation in the eyewear industry, potentially disrupting traditional segments and creating new market opportunities in smart wearables. This move aligns with broader tech trends integrating AI into daily consumer products. The company's focus on value and customer experience helps it navigate competitive pressures and macroeconomic challenges like inflation, which are impacting consumer spending across various sectors.

Comparison to Industry Standards

• The filing does not provide specific comparable companies or industry benchmarks for direct comparison of financial metrics.
• Warby Parker's 9.0% growth in active customers and 13.9% Q2 revenue growth suggest a healthy expansion rate, potentially outperforming some traditional eyewear retailers facing slower growth.
• The gross margin compression, while a negative, is attributed to strategic product mix shifts (e.g., lower-margin contact lenses) and investments in retail expansion, which are common for growth-oriented companies expanding their service offerings and physical presence.
• The strategic partnership with Google for AI-powered glasses is a significant differentiator, positioning Warby Parker as an innovator in the smart eyewear space, a segment where most traditional eyewear companies have limited or no presence.

Legal Proceedings

• On March 13, 2023, a former employee filed a class-action complaint (Pham v. Warby Parker Inc., et al., Case No. 5:23-cv-01884-NC; N.D. Cal.) alleging violations of various California wage and hour laws.
• On June 16, 2023, another former employee filed a related representative action (Chery v. Warby Parker Inc., et al., Case No. 23CV417693; Cal. Super. Ct.) under California's Private Attorneys General Act, asserting largely overlapping claims.
• An additional follow-on Private Attorneys General Act lawsuit (Jacobsen, et al. v. Warby Park Inc., et al., Case No. 23CV421588; Cal. Super. Ct.) was filed.
• Following a voluntary mediation in April 2024, the company reached an agreement in principle to consolidate and settle these matters for a total of $1.95 million.
• A final settlement agreement was entered into on October 1, 2024, which the court preliminarily approved in June 2025.
• A notice of settlement was sent to the class in July 2025, with a final approval hearing scheduled for February 2026.
• The company has accrued for the full amount of the proposed settlement.
• Other legal proceedings are ongoing but are not expected to materially affect the company's financial position, results of operations, or cash flows.

Related Party Transactions

• Secured promissory notes, collateralized by stock purchased by certain Company executives in relation to the exercise of employee stock options, had a balance of $2.2 million at both June 30, 2025, and December 31, 2024. No new promissory notes have been issued since 2021.

Stakeholder Impact

• Shareholders: Positive impact from strong revenue and Adjusted EBITDA growth, significant improvement in profitability, and a strategic partnership with Google that could drive future innovation and market expansion. Potential for long-term value creation.
• Employees: Growth in the retail workforce and investments in marketing contribute to higher payroll-related costs. Stock-based compensation programs are in place, and the company continues to recruit vision care professionals.
• Customers: Benefit from an expanded retail presence (298 stores), a holistic vision care offering, and the potential for innovative AI-powered glasses from the Google partnership. Some selective price increases were implemented.
• Suppliers: The company is diversifying its supply chain network to mitigate risks from tariffs and supply chain disruptions, which may impact existing supplier relationships and create opportunities for new ones.
• Creditors: The company maintains a $120.0 million revolving credit facility with an option to increase to $175.0 million, with no outstanding borrowings other than letters of credit, indicating a healthy liquidity position.

Next Steps

• Launch a series of AI-powered smart glasses in collaboration with Google over time.
• Attend a final approval hearing for the legal settlement scheduled for February 2026.
• Adopt Accounting Standards Update (ASU) 2023-09 in the fourth quarter of the 2025 fiscal year, leading to additional income tax disclosures in the 2025 Form 10-K.
• Evaluate the impact of ASU 2024-03, which is effective for fiscal years beginning after December 15, 2026.
• Continue to invest in the expansion of the business, including new retail stores and capitalized software development costs.
• Evaluate the effect of the recently enacted One Big Beautiful Bill Act (OBBBA) on condensed consolidated financial statements.

Key Dates

Recommendation

The company demonstrated strong top-line growth and a significant improvement in profitability, moving from a net loss to net income in the first half of 2025. The strategic partnership with Google for AI-powered glasses, including substantial funding commitments, represents a major catalyst for future innovation and market expansion, positioning Warby Parker at the forefront of an emerging technology. While gross margins faced some pressure from product mix and one-time write-downs, the underlying business performance and strategic initiatives suggest strong long-term potential. The increase in active customers and average revenue per customer further reinforces a healthy and growing customer base, making it an attractive investment.

Keywords

Warby Parker, eyewear, vision care, AI-powered glasses, Google partnership, Q2 2025 earnings, SEC 10-Q, retail expansion, direct-to-consumer, optical, smart glasses, financial results, profitability, customer growth