Viomi (VIOT) Q2 2025: Overseas Sales Triple on Amazon, Offsetting Domestic Subsidy Drag
Viomi’s overseas push delivered triple-digit Amazon growth, even as domestic subsidy roll-offs pressured core water systems revenue. Strategic investment in international brand-building and premium product launches is reshaping the business mix, with management targeting low double-digit normalized growth as domestic headwinds abate. Investors should watch for margin leverage as branded sales and consumables scale globally.
Summary
- International Expansion Accelerates: Amazon channel in North America achieved triple-digit growth, driving global diversification.
- Domestic Market Faces Subsidy Cliff: National subsidy phase-out led to sharp revenue declines in home water systems.
- Margin Upside Hinges on Brand and Consumables: Management targets higher profitability via branded product mix and recurring consumables revenue.
Business Overview
Viomi is a water technology company specializing in smart water purification systems, kitchen appliances, and related consumables. The business generates revenue through sales of home water systems, replacement filters (consumables), and kitchen appliances, with growing exposure to international markets via both online and offline channels. Major segments include home water systems (core hardware), consumables (recurring filter sales), and kitchen appliances, with a strategic focus on expanding branded product sales and global distribution.
Performance Analysis
Viomi’s second-half 2025 results reflect diverging trends across geographies and product lines. While total revenue for the period declined sharply year-over-year, driven by a 32% drop in home water systems and a 17.9% fall in consumables, these declines were concentrated in the domestic market, where the phase-out of national home appliance subsidies created a high base and abrupt demand contraction. Kitchen appliances and other products were more stable, declining only 4.5%.
Gross margin improved to 23.5%, up modestly from the prior year, as the company cycled past one-off costs related to divesting non-core IoT assets. However, total operating expenses rose 12%, led by a nearly 30% surge in selling and marketing spend, reflecting the company’s aggressive investment in brand building and international channel expansion. R&D investment also increased, supporting new product launches and AI-driven innovation. The company ended the year with a healthy cash position and continued to return capital to shareholders through dividends and buybacks.
- International Sales Surge: North America Amazon channel delivered triple-digit sequential growth, with new product launches and offline channel entry planned for 2026.
- Brand Investment Drives OpEx: Elevated selling and marketing spend reflects a pivot toward premium positioning and global brand recognition.
- Consumables Revenue Lags Hardware: Filter sales declined due to lower shipments to Xiaomi, but management expects recurring revenue to accelerate as installed base grows.
The full-year picture is more resilient, with total revenue up 14.6% and kitchen appliances growing nearly 48%, signaling traction in product diversification. Margin expansion remains a key opportunity as branded product sales and consumables scale globally.
Executive Commentary
"With AI technology, we will use it to bring better product experience. We will become the world's leading water technology company. In the North American market, our Amazon channel is outstanding. In the second half of last year, we made a three-digit growth."
Xiaoping Chen, Founder, Chairman and CEO
"Our global water strategy has continued to achieve milestones highlighted by the establishment of a multinational professional team covering North America, Southeast Asia, and Europe. Empowered by a global perspective across R&D and market expansion, we have constantly achieved technological breakthroughs addressing users' diverse drinking water demands."
Claire Gee, IR Director (translation of CEO remarks)
Strategic Positioning
1. Overseas Market Prioritization
Viomi is aggressively shifting resources to international markets, especially North America and Southeast Asia. The company’s Amazon channel in the US posted triple-digit growth, and offline expansion is underway with tailored product launches for local preferences. Malaysia serves as an offline pilot, with products customized for local drinking habits.
2. Brand-Driven Product Mix Upgrade
Management is doubling down on its own branded products, which currently represent a small share but are positioned for faster growth and higher margins. Efforts include premium launches like the Master One mineral water purifier, differentiated branding for online and offline channels, and celebrity-driven marketing to build global recognition.
3. Technology and AI Integration
AI is becoming central to Viomi’s product roadmap, with new features in water quality algorithms, precision mineral control, and intelligent self-cleaning. The company’s R&D spending is up, and global patent filings now exceed 1,950, supporting premium positioning and product differentiation.
4. Channel and Partnership Expansion
Strategic collaborations are unlocking new distribution opportunities, such as partnerships with China Gas and other utilities, giving Viomi access to 50 million households through showroom and service center networks. These partnerships are expected to accelerate penetration in lower-tier domestic markets.
5. Product Portfolio Diversification
Viomi is broadening its lineup beyond under-sink purifiers, adding countertop dispensers, ice-making units, and whole-home filtration systems. These higher-ASP, higher-margin products are aimed at both international and domestic markets, supporting long-term margin and revenue growth.
Key Considerations
Viomi’s 2025 results underscore a business in strategic transition, as management pivots from reliance on domestic hardware sales to a global, brand-led, technology-driven model. Execution risk is elevated as the company invests heavily in marketing, R&D, and channel development, but the payoff could be substantial if branded and consumables revenue scale as planned.
Key Considerations:
- Overseas Revenue Mix Shift: International sales, especially via Amazon US, are becoming a larger share of growth, reducing reliance on volatile domestic demand.
- Brand and Consumables Leverage: Higher-margin branded products and recurring consumables revenue are essential for margin expansion, but require sustained investment and time to scale.
- Domestic Headwinds Persist: Subsidy removal and softening consumer demand will pressure core water system sales in China through at least the first half of 2026.
- Partnership-Driven Channel Entry: Collaborations with gas utilities could accelerate penetration in lower-tier cities, but require careful execution and integration.
Risks
Viomi faces material risks from domestic policy changes, notably the end of appliance subsidies that drove prior year comps. Execution risk is high as the company ramps overseas operations and brand investment, with geopolitical and regulatory volatility in international markets adding uncertainty. Margin improvement depends on successful scaling of branded and consumables revenue, which is not guaranteed given competitive intensity and the time lag between hardware sales and recurring filter revenue.
Forward Outlook
For the first half of 2026, Viomi expects:
- Domestic water system demand to remain soft due to subsidy roll-off and high prior-year base.
- Triple-digit overseas revenue growth, led by new product launches and offline channel expansion in North America.
For full-year 2026, management targets:
- Low double-digit normalized revenue growth, with overseas markets as the primary driver.
Management highlighted several factors that will shape results:
- Brand and product portfolio expansion in North America and Southeast Asia.
- Incremental growth from partnerships with utilities and offline retail channels.
Takeaways
Viomi’s transformation is accelerating, with international sales and branded products set to drive the next phase of growth. Domestic headwinds remain, but the strategic mix shift could yield margin and revenue upside if executed well.
- International Traction: Triple-digit Amazon growth and new offline channel launches point to early success in global expansion, but scaling branded sales remains a multi-year effort.
- Margin Pathway: Brand and consumables mix are the key levers for profitability, with management investing heavily to accelerate adoption and repeat revenue streams.
- Watch Execution in New Channels: The pace and quality of rollout in North America, Malaysia, and with domestic utility partners will determine whether Viomi can deliver on its growth and margin ambitions.
Conclusion
Viomi’s 2025 results reflect a business in transition, with overseas markets and premium products offsetting domestic policy headwinds. Success will depend on scaling branded sales, recurring consumables, and executing channel partnerships, all while navigating a more competitive and volatile global landscape.
Industry Read-Through
Viomi’s results highlight the vulnerability of appliance makers to subsidy withdrawal, a warning for peers in China’s home technology sector. The pivot to international markets and premium branding is increasingly necessary as domestic growth matures and policy support fades. Triple-digit growth on Amazon signals that global e-commerce remains a viable path for Chinese hardware brands, but also underscores the need for local adaptation and channel diversification. Partnerships with utilities and offline retail networks may become a blueprint for other appliance and IoT firms seeking access to fragmented lower-tier markets. AI-driven product innovation and recurring consumables revenue are emerging as critical differentiators, setting the stage for a new phase of competition in smart home and water technology verticals.