ThredUp (TDUP) Q3 2025: New Buyer Acquisition Surges 54%, Unlocking Peer-to-Peer Supply Flywheel
ThredUp delivered its fastest growth in four years, fueled by a record 54% jump in new buyer acquisition and the rollout of direct peer-to-peer selling. Strategic investments in AI-powered personalization, premium supply, and a rebranded experience are strengthening both buyer and seller engagement, while management signals a methodical approach to sustaining margin expansion and marketplace scale into 2026.
Summary
- Peer-to-Peer Launch Expands Supply Moat: Direct selling beta positions ThredUp to capture long-tail sellers and unlock new profit pools.
- AI-Driven Personalization Boosts Conversion: Proprietary models power daily curation and trend feeds, driving customer engagement.
- Margin Discipline Funds Growth: Management reinvests incremental dollars into marketplace expansion and brand elevation.
Performance Analysis
ThredUp posted its fourth consecutive quarter of accelerating revenue growth, with Q3 revenue up 33.6% year-over-year and gross margin at 79.4%. New buyer acquisition soared 54% year-over-year, marking the highest quarterly influx in company history and pushing active buyers to 1.6 million, up 25.6%. Orders increased 37.2%, reflecting both the influx of new customers and improved conversion rates among existing users.
Growth was supported by targeted investments in marketing and inbound processing, which, combined with a series of new AI-powered customer features, drove the marketplace flywheel. Premium Kits, now over 20% of marketplace supply, contributed to higher average selling prices and accretive margins. Adjusted EBITDA margin expanded by 410 basis points year-over-year, as ThredUp leveraged prior infrastructure investments while maintaining discipline on cash use and capital expenditures.
- Marketplace Flywheel Acceleration: Repeat purchases and improved buyer metrics amplified top-line momentum.
- Premium Supply Mix: Premium Kits and branded offerings are attracting high-value buyers and supporting margin expansion.
- Free Cash Flow Inflection: ThredUp generated positive free cash flow for both the quarter and year-to-date, reflecting operational leverage.
Despite a cautious consumer backdrop, ThredUp outperformed expectations across all key metrics, with management raising full-year revenue and margin guidance on the back of continued new buyer strength and supply-side innovation.
Executive Commentary
"We acquired more new customers in the third quarter than at any other time in our history, with new buyer acquisition up 54% year over year. Our approach in 2025 and into 2026 is straightforward. Maintain our gross margin efficiency, gradually expand the bottom line, but largely reinvest incremental dollars we generate back into growing our marketplace through product improvements, marketing spend, and long-term innovation."
James Reinhart, CEO & Co-Founder
"Our performance was driven by investments into marketing and inbound processing that drove our marketplace flywheel. These drivers resulted in another record quarter for new buyer acquisition, with new buyers up 54% year over year. We also benefited from repeat purchases by new buyers acquired earlier in the year, as well as improved conversion for both new and existing buyers."
Sean Sobers, Chief Financial Officer
Strategic Positioning
1. Peer-to-Peer Direct Selling: Unlocking the Long-Tail Supply
ThredUp’s beta launch of direct peer-to-peer selling marks a significant strategic shift, targeting the underserved casual seller segment. The model leverages ThredUp’s existing infrastructure to vet sellers, offer premium listing tools, and enable seamless switching between traditional consignment and direct sales. This initiative is designed to address friction points endemic to legacy peer-to-peer platforms—listing complexity, trust deficits, and lack of curation—while positioning ThredUp to monetize both buyer and seller sides through value-added services and returns management.
2. AI-Powered Personalization and Trend Curation
Q3 saw the launch of AI-driven features such as the Daily Edit and Trend Report, which deliver personalized, real-time curated feeds to each user. These tools, powered by proprietary in-house models, improve conversion rates and deepen engagement, supporting both new buyer acquisition and repeat activity. The ability to rapidly deploy AI-based experiences is rooted in years of infrastructure and data investment, creating a defensible technology moat.
3. Marketplace Flywheel: Premium Kits and RAS Expansion
Premium Kits now represent over 20% of supply, delivering superior monetization for sellers and higher-quality inventory for buyers. The Resale-as-a-Service (RAS) business, providing white-label resale programs for brands, gained momentum with new partner launches, supported by a robust contract renewal pipeline. This multi-pronged supply strategy increases ThredUp’s ability to capture share as consumer price sensitivity rises, especially amid tariff-driven apparel inflation.
4. Brand Repositioning: Emotional Engagement and Value Messaging
The company’s “Fashion Meet Forever” rebrand aims to shift the customer relationship from transactional to emotional, leveraging storytelling and cultural relevance. October delivered a record 81% year-over-year increase in new customer acquisition, attributed to historically low acquisition costs and the brand refresh. This positions ThredUp to capture both lapsed and new buyers as it moves up the marketing funnel.
Key Considerations
ThredUp’s Q3 results reflect a deliberate balancing act between margin discipline and aggressive reinvestment in growth levers. The company is methodically layering new supply vectors and AI-powered experiences atop a robust operational backbone, while navigating a volatile consumer environment and evolving competitive landscape.
Key Considerations:
- Supply Chain Leverage: Over $400 million invested in infrastructure enables rapid product innovation and defensible scale.
- Peer-to-Peer Monetization Pathways: Early peer-to-peer economics favor high-margin, variable cost structures, with future monetization likely via buyer fees, returns “insurance,” and seller tools subscriptions.
- Marketing Efficiency: Historically low customer acquisition costs and improved conversion rates allow for continued investment in buyer growth without eroding margin progress.
- Contract-Driven RAS Growth: Visibility on new Resale-as-a-Service partners is tied to multi-year contract renewal cycles, supporting confidence in continued B2B expansion.
Risks
ThredUp faces several risks as it scales new business models: macroeconomic uncertainty could constrain discretionary apparel spending, while the holiday season historically diverts wallet share to new goods. Peer-to-peer rollout introduces operational complexity and potential for fraud or quality lapses, requiring sustained investment in vetting and customer support. Competitive intensity in resale and digital advertising markets may pressure both supply acquisition and marketing efficiency if conditions shift.
Forward Outlook
For Q4 2025, ThredUp guided to:
- Revenue of $76 to $78 million, representing 14% year-over-year growth at the midpoint
- Gross margin of 78% to 79%
- Adjusted EBITDA of approximately 3% of revenue
For full-year 2025, management raised guidance:
- Revenue of $307 to $309 million, up 18% year-over-year at the midpoint
- Gross margin of 79% to 79.2%
- Adjusted EBITDA of approximately 4.2% of revenue
Management highlighted several factors that will shape 2026:
- Revenue growth in the low double digits, in line with online resale industry trends
- Continued margin expansion, with incremental dollars reinvested in marketing and product innovation
Takeaways
ThredUp’s multi-vector supply strategy, blending managed marketplace, RAS, premium kits, and now peer-to-peer, positions the company to capture share as consumer value-seeking intensifies. AI-driven product experiences and a sharpened brand message are driving both new buyer acquisition and higher lifetime value, while operational leverage is translating into positive free cash flow and margin expansion.
- Marketplace Defensibility: Infrastructure and data moats enable rapid deployment of new business lines and customer experiences, supporting durable growth.
- Peer-to-Peer as a Growth Catalyst: The direct selling initiative targets a vast, underpenetrated segment, with early signals suggesting superior economics and user engagement.
- Holiday Season and Macro Sensitivity: Q4 growth is expected to moderate due to seasonal wallet shifts, but underlying buyer trends remain strong. Investors should watch for sustained new buyer momentum and peer-to-peer adoption rates into 2026.
Conclusion
ThredUp’s Q3 marked a pivotal inflection, with record new buyer growth and the launch of peer-to-peer selling expanding both its supply and demand flywheels. Margin discipline and data-driven innovation underpin a credible path to sustainable, rule-of-40 growth, with 2026 set to test the scalability and defensibility of its evolving marketplace model.
Industry Read-Through
The rapid adoption of AI-powered personalization and the expansion into peer-to-peer selling signal a broader shift in resale and circular economy platforms toward hybrid models that blend managed and direct listings. ThredUp’s success in lowering customer acquisition costs and scaling premium supply suggests that value-driven consumers are increasingly receptive to secondhand channels, especially as tariffs and inflation drive up new apparel prices. Competitors in resale, apparel, and adjacent marketplaces should note the importance of infrastructure investment, data-driven curation, and flexible supply models as differentiators in an increasingly crowded landscape. The evolving economics of peer-to-peer, with a focus on trust, returns, and seller tooling, may set new standards for profitability and user experience sector-wide.