10-K: Warby Parker Returns to Profitability in 2025

Warby Parker Inc. reported net income of $1.6 million for 2025, marking a significant turnaround driven by retail expansion and strategic AI partnerships.

Summary

• Net revenue increased 13.0% to $871.9 million in 2025, up from $771.3 million in 2024.
• The company achieved a net income of $1.6 million in 2025, a substantial improvement from net losses of $20.4 million in 2024 and $63.2 million in 2023.
• Adjusted EBITDA grew to $95.2 million in 2025, representing an Adjusted EBITDA Margin of 10.9%, compared to $73.1 million (9.5% margin) in 2024.
• Warby Parker expanded its retail footprint by opening 47 new stores in 2025, bringing the total to 323 stores, with 88.2% offering in-person eye exams.
• Active Customers increased by 7.0% to 2.689 million in 2025, and Average Revenue per Customer rose by 5.7% to $324.
• Gross margin decreased by 130 basis points to 54.0% in 2025, primarily due to tariff costs, increased sales of lower-margin contact lenses, higher doctor headcount, and increased customer shipping costs.
• Selling, General, and Administrative (SG&A) expenses increased 4.2% to $475.9 million but decreased as a percentage of net revenue by 460 basis points to 54.6%, reflecting improved cost management.
• A strategic partnership with Google and Samsung was announced in Q2 2025 to develop AI-enabled intelligent eyewear, with Google committing up to $75 million for product development and commercialization costs, plus an optional $75 million investment.
• The company decided to sunset its Home-Try On program by the end of 2025, resulting in a one-time inventory write-down of $2.456 million in Q2 2025.
• A share repurchase program of up to $100.0 million for Class A common stock was authorized by the Board of Directors in February 2026.
• A class action lawsuit regarding California wage and hour laws was settled for $1.95 million, receiving final court approval in February 2026.
• The U.S. Supreme Court issued a ruling in February 2026 striking down certain tariffs, creating uncertainty regarding potential refunds and the imposition of new tariffs.

Sentiment

Score: 7

Explanation: StockSavvy.ai views this as a positive report, highlighting a return to profitability and strong strategic initiatives like AI partnerships and retail expansion, despite some margin pressures and ongoing macroeconomic uncertainties.

Positives

• Achieved net income of $1.6 million in 2025, a significant turnaround from prior year losses.
• Strong net revenue growth of 13.0% in 2025, driven by retail expansion and increased customer engagement.
• Adjusted EBITDA margin improved to 10.9% in 2025, indicating enhanced operational efficiency.
• Expanded retail footprint with 47 new stores in 2025, increasing brand accessibility and awareness.
• Growth in Active Customers (7.0%) and Average Revenue per Customer (5.7%) demonstrates strong customer acquisition and retention.
• Strategic partnership with Google and Samsung for AI-powered intelligent eyewear positions the company for future market expansion and technological innovation.
• Google's commitment of up to $75 million for product development and commercialization costs, along with an optional $75 million investment, provides significant support for new initiatives.
• SG&A expenses decreased as a percentage of net revenue by 460 basis points, reflecting effective cost management and operational efficiencies.
• Maintained a strong cash position with $286.4 million in cash and cash equivalents as of December 31, 2025.
• Authorization of a $100.0 million share repurchase program signals management's confidence in future performance and commitment to shareholder value.
• Successful settlement of California wage and hour lawsuits for $1.95 million resolves a significant legal contingency.

Negatives

• Gross margin decreased by 130 basis points to 54.0% in 2025, primarily due to tariff costs and the increasing proportion of lower-margin contact lens sales.
• Incurred one-time inventory write-downs of $2.456 million in Q2 2025 related to the decision to sunset the Home-Try On program.
• Interest and other income, net, decreased by 20.9% in 2025, mainly due to unfavorable foreign currency fluctuations and lower interest rates on cash balances.
• The company has an accumulated deficit of $685.6 million as of December 31, 2025, and expects operating losses to continue in the foreseeable future as it invests in growth.
• The Supreme Court ruling on tariffs in February 2026 introduces uncertainty regarding potential refunds and the imposition of new tariffs, which could materially affect future financial results.
• Reliance on a limited number of suppliers and contract manufacturers, particularly for key components like cellulose acetate and contact lenses, poses supply chain risks.

Risks

• Limited experience at current scale: Inability to manage growth effectively could harm brand, company culture, and financial performance.
• Supply chain disruptions: Reliance on a limited number of international suppliers and contract manufacturers, and potential impacts from tariffs, geopolitical conflicts, and natural disasters.
• Information technology and cybersecurity risks: Heavy reliance on IT systems and third-party vendors, vulnerability to cyber-attacks, data breaches, and system failures, potentially leading to operational disruptions, reputational harm, and liabilities.
• Artificial intelligence risks: Use of AI may result in operational disruptions, reputational harm, competitive challenges, regulatory scrutiny, liability, or security risks (e.g., unexpected biases, misuse of PHI, new cybersecurity risks).
• Highly competitive optical industry: Competition from large integrated players and low-priced online-only players could lead to lost market share or reduced margins.
• Failure to maintain and enhance brand: Impaired ability to engage or expand customer base if brand appeal or reputation suffers.
• History of losses and inability to sustain profitability: Continued operating losses expected in the foreseeable future, with no guarantee of sustained profitability.
• Failure to recruit and retain eye care professionals: Difficulty in hiring and retaining optometrists, opticians, and other eye care professionals could adversely affect operations and growth.
• Strategic investments, partnerships, alliances, or acquisitions risks: Difficulties in identification, integration challenges, management distraction, dilution of stockholder value, and potential failure to achieve expected outcomes.
• E-commerce and omnichannel business risks: Uncertainties with websites, mobile apps, technical failures, reliance on third parties for hardware/software/delivery, payment processing issues, and compliance with evolving regulations.
• Dependence on third-party payors: Future operational success depends on developing and maintaining relationships with managed vision care companies and vision insurance providers; increasing consolidation could adversely affect negotiation power and reimbursement rates.
• Inventory management risks: Inability to effectively manage inventory balances, leading to obsolescence, write-downs, or shortfalls, and increased costs from shrinkage or damage.
• Seasonality: Business is subject to seasonal fluctuations, particularly higher demand in December, which can impact quarterly results predictability.
• Vision correction alternatives: Technological advances or increased consumer preference for alternatives (e.g., LASIK, new drugs) could reduce demand for products.
• Environmental, social, and governance (ESG) matters: Failure to meet ESG expectations, disclosure standards, or public benefit purposes could harm reputation, lead to loss of customers/employees/suppliers, regulatory fines, or litigation.
• Dependence on highly skilled personnel: Inability to hire, retain, and motivate management and skilled employees could hinder growth.
• Product liability, product recall, or personal injury issues: Risks from defective products, counterfeit infiltration, product mishandling, and professional liability claims from eye care services.
• Refunds, cancellations, and warranty claims: Significant increases could harm business and financial results.
• Fluctuating results of operations and cash flows: Variability due to forecasting challenges, accounting standard changes, product/channel mix, internal controls, seasonality, and macroeconomic/political conditions.
• Need for additional capital: May require additional equity or debt financing to support growth, which might not be available on acceptable terms or could dilute stockholders.
• Credit agreement restrictions: Covenants in the 2024 Credit Facility limit operational flexibility and could lead to debt becoming immediately due if violated.
• Extensive vision care and healthcare laws/regulations: Failure to adhere to federal and state anti-kickback, false claims, self-referral, HIPAA, and licensing laws could result in significant penalties.
• Corporate practice of medicine/optometry and fee-splitting laws: Violation could result in penalties and adversely affect contractual relationships with eye care professionals.
• Privacy, data security, and data protection laws: Rapidly changing and stringent laws impose restrictions and costs, and non-compliance could lead to liabilities, fines, and reputational harm.
• Reliance on Amazon Web Services (AWS): Any disruption or interference with AWS could impair business operations.
• Dependence on marketing and advertising efforts: Reliance on search engines, social media, digital app stores; changes in algorithms, increased costs, or ad-blocking software could reduce customer acquisition effectiveness.
• Insufficient insurance coverage: Third-party insurance policies may not be adequate to cover all losses, or providers may become insolvent.
• Limitations on NOL carryforwards: Ability to utilize net operating loss carryforwards may be limited by ownership changes or future regulatory changes.
• Changes in effective tax rate or liability: Fluctuations due to income mix, tax law changes, audits, or expansion into new geographies.
• Changes in tax treatment of e-commerce: New or revised taxes could increase costs and decrease online attractiveness.
• Public benefit corporation duty: Duty to balance stockholder and public benefit interests may result in actions that do not maximize stockholder value and could lead to increased derivative litigation.
• Class A common stock volatility: Trading price has been volatile and could decline due to various factors.
• Multi-class structure: Co-Founders and Co-CEOs have significant voting influence, potentially limiting other stockholders' ability to influence corporate matters and affecting stock price.
• Projections differ from actual performance: Actual results may differ materially from disclosed projections.
• No dividends for foreseeable future: Stockholders must rely on price appreciation for gains.
• Additional stock issuances/sales: Could result in significant dilution and negatively impact stock price.
• Share repurchase program effectiveness: No guarantee it will be fully implemented or enhance long-term value.
• Public company requirements: Strains resources, diverts management attention, and affects ability to attract/retain talent.
• Changing climate and weather patterns: Severe weather and disasters may cause significant business interruptions and expenditures.
• Legal challenges to business model: Telehealth services subject to evolving state laws and regulations, potential for legal challenges or restrictions.
• Open-source software liability: Use of third-party open-source software could lead to litigation or require proprietary code disclosure.
• Anti-corruption, anti-bribery, anti-money laundering laws: Non-compliance can lead to criminal/civil liability and harm business.
• Environmental, health, and safety laws: Non-compliance or new regulations could result in fines, penalties, or increased costs.
• FDA regulation of medical devices: Failure to obtain/maintain marketing authorizations or comply with QMSR could lead to enforcement actions, recalls, or production termination.

Future Outlook

The company expects operating losses to continue in the foreseeable future as it invests in business expansion. Plans include leveraging AI for new product development, such as AI-powered intelligent eyewear with Google and Samsung, and enhancing customer experience through tools like Virtual Try-On and Advisor. Warby Parker aims to expand its U.S. retail footprint to over 900 stores and grow its holistic vision care offerings, including glasses, progressives, contact lenses, eye exams, and vision insurance scaling. The long-term effects of the One Big Beautiful Bill Act (OBBBA) on the company's results of operations and cash flows remain uncertain.

Management Comments

• We aim to provide customers with the highest-quality product possible by designing glasses at our headquarters in New York City, using custom materials, and selling direct to the customer. By cutting out the middleman, we are able to sell our products at a lower price than many of our competitors and pass the savings on to our customers.
• We've built a seamless shopping experience that meets customers where and how they want to shop, whether that's on our website, on our mobile app, or in our 323 retail stores as of December 31, 2025.
• We've crafted a holistic vision care offering that extends beyond glasses to include contacts, vision tests and eye exams, vision insurance, and more.
• We believe our business model, which emphasizes an outstanding value-driven experience, provides a durable foundation.
• Our ongoing efforts to expand our supply chain network, both through international frame manufacturing partnerships and our domestic optical laboratories, are a key strategy intended to insulate us from localized disruptions.
• We believe our retail stores embody our brand, drive brand awareness, and serve as efficient customer acquisition vehicles.
• We believe our digital heritage positions us to continue innovating at a faster pace than the rest of the optical industry as we invest in AI-enabled capabilities across our business.
• We believe glasses are the perfect form factor to leverage AI, enabling the delivery of real-time personalized insights tailored to what the wearer sees and hears as they move through the world.
• We believe AI will further improve fit visualization, style guidance, and personalization, supporting greater engagement, higher conversion, and enhanced customer satisfaction over time.

Industry Context

StockSavvy.ai notes that Warby Parker operates in a highly competitive U.S. eyewear market, estimated at $70 billion, characterized by consistent, stable growth due to the medical and non-discretionary nature of vision correction. The industry is concentrated among a few large players like EssilorLuxottica and VSP Vision Care, which control much of the value chain. Warby Parker's direct-to-consumer and omnichannel model, coupled with its focus on design, technology, and accessible pricing, positions it as a disruptor against traditional retailers and integrated optical giants. The company's investment in AI-powered eyewear and telehealth services aligns with broader tech integration trends in healthcare and retail, aiming to capture market share from both traditional and online-only low-cost competitors like Zenni Optical. The rising incidence of myopia and increased screen time usage are tailwinds for the overall market.

Comparison to Industry Standards

• Warby Parker's gross margin of 54.0% in 2025 is competitive within the optical retail sector, though it saw a slight decrease from 55.3% in 2024, partly due to increased contact lens sales which typically have lower margins compared to glasses.
• The company's penetration of progressives (22.3% of prescription units in 2025) is significantly lower than the industry-wide average of nearly 40% for progressives, bifocals, and multifocals, indicating a substantial growth opportunity in premium lenses.
• Contact lenses contributed only 11.1% to net revenue in 2025, despite the estimated $10.4 billion contact lens market where over 80% of wearers purchase annually, suggesting underpenetration relative to the broader market.
• Eye exams and vision care contributed only 6.4% to net revenue in 2025, compared to an estimated $11.4 billion market, highlighting another area for significant expansion, especially given that approximately 75% of customers purchase eyewear where they receive their exam.
• Insurance-backed orders contributed only 8.3% of 2025 revenue, significantly underpenetrated compared to the industry average of approximately 60% of U.S. vision care purchases using insurance.
• The expansion to 323 retail stores by December 31, 2025, with a long-term target of over 900 stores in the U.S., demonstrates an aggressive retail growth strategy, contrasting with the approximately 45,000 optical stores in the U.S. market.

Management Changes

Corporate Governance

Legal Proceedings

• A class action lawsuit (Pham v. Warby Parker Inc., et al.) and two related Private Attorneys General Act lawsuits (Chery v. Warby Parker Inc., et al. and Jacobsen, et al. v. Warby Park Inc., et al.) alleging violations of California wage and hour laws were settled for $1.95 million. Final court approval was granted on February 25, 2026, with payment due in March 2026.
• The Office for Civil Rights (OCR) investigated a 2018 credential stuffing attack; the company paid a civil monetary penalty in December 2024, and the investigation was formally closed in February 2025.

Related Party Transactions

• Secured promissory notes collateralized by stock purchased by certain Company executives in relation to employee stock option exercises, with a balance of $2.2 million at both December 31, 2025 and 2024. No new notes have been issued since 2021.
• Three of the company's directors serve on the Board of Directors of the Warby Parker Impact Foundation (WPIF), to which the company makes annual stock donations (e.g., 179 shares of Class A common stock in May 2025, May 2024, and August 2023).

Stakeholder Impact

• Shareholders: Potential for increased value from the share repurchase program, but dilution from future equity issuances is a risk. Concentrated voting power with Co-Founders and Co-CEOs limits influence. The return to profitability is a positive development.
• Employees: Increased payroll costs due to retail workforce growth. Stock-based compensation programs are a key part of compensation. Potential for increased compensation for eye care professionals. The settlement of wage and hour lawsuits addresses employee claims.
• Customers: Benefits from an expanded retail footprint, holistic vision care offerings, and AI-enhanced shopping experiences. Potential for higher prices due to tariffs. Risks from product liability or service disruptions.
• Suppliers: Dependence on a limited number of suppliers creates risk. Diversification efforts are underway to mitigate this.
• Creditors: Subject to covenants in the 2024 Credit Facility, which could restrict operations if violated.
• Communities: Continued commitment to social impact through the 'Buy a Pair, Give a Pair' program and public benefit corporation status.

Next Steps

• Launch a series of AI-powered intelligent eyewear products in partnership with Google and Samsung over time.
• Continue to invest in AI-enabled capabilities across the business to enhance customer and patient experiences.
• Expand retail footprint in the U.S. towards a long-term target of over 900 stores, exploring additional formats like shop-in-shops.
• Expand holistic vision care offerings, including new eyewear collections, sizes, progressives and other premium lenses, contact lenses, and eye exams.
• Scale vision insurance penetration by expanding in-network access and investing in tools to maximize out-of-network benefits.
• Continue to diversify supplier base outside of China and implement additional mitigation strategies to offset tariff impacts.
• Implement the $100.0 million share repurchase program authorized in February 2026.
• Adrian Mitchell will assume the role of Senior Vice President, Chief Financial Officer.
• The company will continue to assess the realizability of deferred tax assets and the valuation allowance.
• Monitor the financial impact of the Supreme Court's tariff ruling and any subsequent new tariffs.
• Comply with new accounting guidance for expense disaggregation (ASU 2024-03) and internal-use software (ASU 2025-06).

Key Dates

Recommendation

Warby Parker's return to profitability in 2025 and strategic moves into AI-powered eyewear and retail expansion are positive indicators. However, the declining gross margin, ongoing macroeconomic uncertainties, and the inherent risks of a highly competitive industry, coupled with the concentrated voting power of the co-founders, suggest a 'hold' recommendation. The share repurchase program offers some support, but the long-term impact of new tariffs and the significant investments required for growth warrant a cautious stance until sustained profitability and margin expansion are clearly demonstrated.

Keywords

eyewear, optics, retail, e-commerce, vision care, glasses, contact lenses, eye exams, AI-powered eyewear, omnichannel, public benefit corporation, SEC filing, 10-K, financial results, profitability, growth strategy, supply chain, cybersecurity, data privacy, corporate governance, stock repurchase, tariffs, Google partnership, Samsung partnership