ThredUp (TDUP) Q2 2025: New Buyer Acquisition Surges 74%, Powering Marketplace Flywheel
ThredUp’s Q2 marked a pivotal inflection in marketplace momentum, with record new buyer acquisition and operational leverage driving both growth and profitability above expectations. The company’s AI-led product improvements and premium supply mix are compounding, fueling a self-reinforcing flywheel that is accelerating both sides of the marketplace. Management is reinvesting outperformance into customer acquisition while maintaining margin discipline, setting up a structurally higher growth trajectory into 2026.
Summary
- Marketplace Flywheel Accelerates: AI-driven product enhancements and premium supply unlocked record new buyer growth.
- Operational Leverage Surfaces: Gross margin and EBITDA expansion reflect supply chain and data infrastructure advantages.
- Strategic Reinvestment Signals Confidence: Management is channeling incremental gains into sustained customer and seller acquisition.
Performance Analysis
ThredUp delivered a breakout quarter, with revenue growth accelerating and profitability metrics exceeding internal targets. The company posted a 16.4% year-over-year top-line increase, outpacing its own expectations and driven by a 74% jump in new buyer acquisition—the highest in its history. Active buyers rose 17% and orders climbed 21%, signaling broad-based demand strength across the platform. Gross margin expanded to 79.5%, up 70 basis points from the prior year, reflecting a higher mix of premium supply and the benefits of operational scale.
Adjusted EBITDA margin doubled year-over-year, as ThredUp leveraged its multi-year investments in automation, data, and supply chain infrastructure. The company generated positive cash flow, ending the quarter with $56.2 million in cash and securities, and maintained disciplined capital expenditures. Notably, strong operational execution allowed ThredUp to beat on EBITDA even as it ramped marketing and inbound processing spend to fuel marketplace growth.
- Premium Supply Mix Drives ASPs: Higher-value items increased average selling prices, offsetting incentive costs for new buyers.
- AI Enhancements Boost Conversion: Visitor-to-signup rates rose 30% and signup-to-purchase improved 60%, yielding an 18% lift in customer conversion efficiency.
- Seasonal and Macro Caution Implied in Q4 Guide: Sequential step-down reflects historical resale trends and prudent macro conservatism.
Marketplace liquidity and supply-demand balance improved materially, with all-time records in seller requests and clean-out kits processed. The company’s marketplace model—matching supply from individual sellers with demand from value-focused buyers—showed growing network effects, with crossover between buyers and sellers accelerating.
Executive Commentary
"We acquired more new customers in the second quarter than at any other time in our history, with new buyer acquisition up 74% year over year. Active buyers were up 17% year over year, and orders were up 21% year over year. Again, our approach in 2025 is simple. maintain our gross margin and bottom line efficiency, and reinvest incremental dollars we generate back into growing new buyers and sellers in our marketplace."
James Reinhart, CEO and Co-founder
"We are extremely proud of our Q2 results in which we accelerated revenue growth, exceeded our adjusted EBITDA expectations, and generated cash. Our outperformance was driven by significant investments into marketing and inbound processing in order to drive our marketplace flywheel."
Sean Sober, Chief Financial Officer
Strategic Positioning
1. AI-Led Product and Funnel Optimization
ThredUp’s compounding AI investments are reshaping the customer journey, making secondhand shopping feel as seamless as new. Features like visual search, style chat, and AI-generated model images have raised visitor-to-signup and signup-to-purchase rates, driving an 18% improvement in conversion efficiency. Notably, AI model images resonated especially with new-to-secondhand customers, supporting broader market penetration. These product enhancements are directly lowering customer acquisition costs and improving funnel economics.
2. Premium Supply and Seller Innovation
Premium service kits, with fees up to $34.99, grew 44% quarter-over-quarter, attracting high-value sellers and lifting average selling prices. The company is also leveraging its returns supply chain, enabling buyers to resell returned items, which increased over 4x quarter-over-quarter. This dual-sided marketplace innovation is deepening engagement, lowering friction for both buyers and sellers, and reinforcing network effects.
3. Open Source Resale as a Service (RAS) Model
ThredUp’s pivot to an open source RAS model is gaining traction with over 60 brands re-engaged, positioning the company as the “universal e-commerce layer” for resale. While RAS is unlikely to be material in 2025, management expects this platform approach to drive incremental supply and ecosystem value as brand resale becomes mainstream, laying groundwork for future growth and margin expansion.
4. Structural Supply Chain and Data Moat
Years of investment—over $400 million—in automation, proprietary data, and infrastructure have built a durable moat. ThredUp’s ability to process, authenticate, and fulfill millions of unique SKUs daily is unmatched in the sector and underpins both margin resilience and capacity for scale. The proprietary resale database is a key enabler of the company’s AI acceleration.
5. Marketplace Network Effects and Liquidity
Marketplace liquidity improved as crossover between buyers and sellers accelerated, with buyers increasingly becoming sellers and vice versa. This dynamic is strengthening the platform’s competitive position, lowering acquisition costs, and supporting higher engagement and retention rates.
Key Considerations
ThredUp’s Q2 results underscore a business model entering a phase of self-reinforcing growth, but investors should weigh both the durability of these trends and the sensitivity to macro and competitive variables.
Key Considerations:
- AI Product Leverage: Compounding AI-driven improvements are lowering acquisition costs and raising conversion, but continued innovation is required to maintain the edge.
- Premium Supply Mix: Growth in high-value supply is driving margin expansion, but maintaining supply quality and diversity will be crucial as scale increases.
- RAS Platform Optionality: Open source RAS could unlock new revenue streams, but timing and magnitude remain uncertain until more brand deals are inked.
- Macro and Ad Market Volatility: Q4 guidance reflects caution amid soft consumer signals and dynamic ad rates, which could impact both top-line and acquisition efficiency.
- Marketplace Liquidity: The balance between new buyer growth and seller supply is healthy, but requires ongoing investment in both operational capacity and user experience.
Risks
ThredUp faces several risks, including macroeconomic headwinds, such as weak jobs and housing data, which could affect discretionary spending. Ad market volatility, driven by competitors like Shein and Timu, may impact customer acquisition costs. Execution risk remains in scaling RAS partnerships and integrating new sellers without diluting supply quality, while the closure of the de minimis loophole could introduce both opportunity and operational complexity.
Forward Outlook
For Q3 2025, ThredUp guided to:
- Revenue of $76 to $78 million (25% YoY growth at midpoint)
- Gross margin of 77% to 79%
- Adjusted EBITDA margin of approximately 4.5%
For full-year 2025, management raised guidance:
- Revenue of $298 to $302 million (15% YoY growth at midpoint)
- Gross margin of 78% to 79%
- Adjusted EBITDA margin of approximately 4.2%
Management highlighted the following factors influencing the outlook:
- Seasonal Q4 Downshift: Resale historically slows around holidays, and ad rates rise, prompting conservative marketing investment.
- Continued Reinvestment: Incremental EBITDA dollars will be funneled into growth drivers, with a focus on maintaining cash generation and margin discipline.
Takeaways
ThredUp’s Q2 performance signals a business model that is compounding operational and strategic advantages, with AI and premium supply acting as force multipliers for both growth and profitability.
- Marketplace Flywheel in Motion: Record new buyer and seller engagement, underpinned by product and supply chain innovation, is accelerating growth and engagement.
- Disciplined Capital Allocation: Management is balancing reinvestment in growth with EBITDA expansion and cash generation, supporting long-term scalability.
- Structural Tailwinds into 2026: AI-driven product improvements, RAS platform expansion, and network effects position ThredUp for continued share gains and margin leverage.
Conclusion
ThredUp’s Q2 results mark a clear inflection, with record new buyer acquisition and operational leverage underpinning a structurally higher growth outlook. The company’s marketplace flywheel is accelerating, and reinvestment discipline suggests durable momentum heading into 2026.
Industry Read-Through
ThredUp’s accelerating buyer and seller growth, powered by AI-led product innovation and premium supply, signals rising consumer acceptance of managed resale platforms and the growing importance of data-driven operational scale. The open source RAS model is a potential blueprint for apparel brands seeking circularity and incremental revenue, while the closure of the de minimis loophole could reshape supply chains and value propositions across the broader apparel and retail sectors. Competitors lacking proprietary infrastructure and data moats may struggle to keep pace as network effects compound.