Warby Parker (WRBY) Q2 2025: Retail Revenue Jumps 19% as Store Expansion and AI Drive Growth

2025-08-07 | By EarningsIQ Research

Warby Parker’s Q2 2025 results spotlight the compounding impact of physical retail expansion, AI-driven digital tools, and disciplined cost management, with retail revenue up sharply and adjusted EBITDA margin expanding. Strategic bets on new channels, insurance integration, and the Google AI eyewear partnership underscore a multi-year growth runway, while the sunsetting of legacy programs signals a full pivot to omnichannel scale. Management’s raised guidance signals confidence in continued acceleration, but margin headwinds from tariffs and shifting mix remain key watchpoints.

Summary

• Physical Retail Scale Accelerates: Store openings and densification strategies are fueling robust customer acquisition and higher retail productivity.
• AI and Digital Evolution: Proprietary digital tools and the Google partnership are redefining omnichannel engagement and future product innovation.
• Margin Discipline Amid Tariff Volatility: Cost controls and selective pricing offset external headwinds, supporting sustained margin expansion.

Performance Analysis

Warby Parker delivered a 14% year-over-year revenue increase for Q2 2025, outpacing expectations and marking its eighth consecutive quarter of accelerating active customer growth. The company ended the quarter with 2.6 million active customers, up 9% on a trailing 12-month basis, and average revenue per customer rose 4.6%. Retail revenue surged 19% year over year, accounting for 73% of total revenue, underscoring the ongoing primacy of physical stores in Warby Parker’s model. E-commerce revenue grew 2%, with digital initiatives partially offsetting the planned sunset of the legacy home try-on program.

Gross margin, excluding stock-based compensation and one-time items, landed at 54.3%, in line with expectations but down year over year due to tariff-related headwinds and increased contact lens and doctor-related costs. Adjusted EBITDA margin expanded by 130 basis points to 11.7%, driven by 360 basis points of leverage in non-marketing SG&A (selling, general, and administrative expenses). Free cash flow was strong at $24 million, and the company finished the quarter with $286 million in cash, providing ample flexibility for continued store expansion and technology investment.

• Retail Channel Outperformance: New stores and densification in suburban markets drove both traffic and higher per-store revenue, with mature stores averaging $2.2 million in sales and 35% four-wall margins.
• Product Mix and Pricing: Glasses revenue grew 11%, with progressives now 23% of prescription units sold; selective price increases had minimal impact on conversion, highlighting strong value perception.
• Vision Care and Insurance Momentum: Eye exam revenue grew 44% and contacts 28%, while insurance integration (notably Versant Health) continued to drive higher-value, more loyal customer cohorts.

Despite tariff pressures, the company’s flexible supply chain and cost discipline enabled it to raise full-year guidance for both revenue and adjusted EBITDA, reflecting confidence in the underlying growth trajectory and margin resilience.

Executive Commentary

Strategic Positioning

1. Retail Footprint as Growth Engine

Physical retail remains Warby Parker’s core growth driver, with 11 new stores opened in Q2 and a total footprint now exceeding 300 locations. Expansion is focused on underpenetrated suburban markets, with over half of metro areas still hosting just a single store. The densification strategy is yielding higher brand awareness and even boosting e-commerce growth in mature markets, reinforcing the value of omnichannel presence.

2. Digital Tools and AI-Driven Personalization

Warby Parker continues to evolve beyond its legacy home try-on program, launching Advisor, an AI-powered recommendation tool that replicates the in-store experience online. This digital investment, alongside the company’s proprietary virtual try-on, is designed to drive higher online conversion and customer satisfaction. The Google partnership to develop AI-enabled eyewear signals a bold leap into the next generation of wearables, positioning Warby Parker at the intersection of health, fashion, and technology.

3. Insurance and Vision Care Integration

Insurance is emerging as a structural tailwind, with the Versant Health integration ramping faster than prior cohorts. Insurance customers spend more, select higher-value products, and repeat more frequently, providing a durable boost to both top-line and customer lifetime value. The company is also expanding its holistic vision care offering, with eye exams and contacts now representing a growing share of revenue and driving incremental traffic to stores.

4. Supply Chain Agility and Tariff Mitigation

Warby Parker’s ability to rapidly shift its supplier mix and implement selective pricing adjustments has insulated margins from tariff volatility. By year-end, China will represent a low teens percentage of cost of goods sold, down sharply as the company diversifies sourcing. These actions, combined with ongoing cost discipline, have offset external shocks and underpinned margin expansion.

5. Operating Model Evolution and Cost Leverage

The phase-out of the home try-on program and restructuring of customer experience teams are enabling further SG&A leverage. The company is reallocating resources towards higher-ROI marketing and customer acquisition, while also leveraging AI to streamline operations and enhance service delivery.

Key Considerations

This quarter underscores Warby Parker’s maturation from an online disruptor to a scaled omnichannel operator, with a clear strategy for balancing growth, innovation, and margin discipline.

Key Considerations:

• Store Network Expansion: The pace and productivity of new store openings will be critical to sustaining double-digit revenue growth and maximizing omnichannel benefits.
• AI and Wearable Innovation: The Google partnership on AI eyewear has the potential to redefine the category, but execution risk and consumer adoption timelines remain uncertain.
• Insurance Penetration: Continued ramp and new carrier partnerships could drive higher-value cohorts and reduce churn, but integration complexity is a watchpoint.
• Margin Management: Tariff volatility and product mix shifts (e.g., growth in lower-margin contacts) require ongoing cost vigilance to protect profitability.
• Leadership Transition: CFO Steve Miller’s departure introduces some uncertainty, though interim coverage and a seasoned finance team are in place.

Risks

Tariff unpredictability and global supply chain shifts remain a structural risk, potentially impacting gross margin if not offset by further pricing or sourcing actions. Product mix shifts toward contacts and insurance—while driving growth—may pressure margins if not managed carefully. The Google partnership introduces both upside and execution risk, as consumer adoption of AI eyewear is unproven and development timelines are uncertain. Leadership transition at the CFO level could disrupt financial discipline or strategic continuity if not managed effectively.

Forward Outlook

For Q3 2025, Warby Parker guided to:

• Net revenue of $223 to $225 million (16-17% YoY growth)
• Adjusted EBITDA of $24 to $25.5 million (11% margin at midpoint)

For full-year 2025, management raised guidance:

• Net revenue of $880 to $888 million (14-15% YoY growth)
• Adjusted EBITDA of $98 to $101 million (11.1-11.4% margin, up to 190 basis points expansion)
• 45 new store openings, including five Target shop-in-shops

Management highlighted several factors that support the outlook:

• Acceleration in both retail and e-commerce channels since May
• Continued SG&A leverage from cost discipline and operational efficiencies

Takeaways

Warby Parker’s Q2 results reinforce the company’s ability to execute across multiple growth vectors while maintaining cost discipline, positioning it for sustained expansion and innovation leadership.

• Omnichannel Growth Flywheel: Store expansion and digital tools are driving higher customer engagement, spend, and cross-channel growth, validating the company’s hybrid model.
• Strategic Innovation Bets: The Google AI eyewear partnership and insurance integration both offer multi-year upside, but will require careful execution and ongoing investment.
• Margin and Mix Management: Sustained SG&A leverage and flexible supply chain strategies are offsetting headwinds, but investors should monitor mix shifts and tariff risk closely in future quarters.

Conclusion

Warby Parker’s Q2 2025 marks a decisive step forward in scaling its physical and digital ecosystem, with robust retail growth, disciplined execution, and a clear path to future innovation. While the raised outlook and strategic partnerships offer compelling upside, investors should remain attentive to margin pressures, operational complexity, and leadership transition risks as the company navigates its next phase of growth.

Industry Read-Through

The quarter’s results signal several key trends for the broader optical retail and consumer health sectors. Physical retail remains a critical growth lever even for digitally native brands, especially when paired with localized marketing and insurance integration. AI-powered personalization and omnichannel experiences are quickly becoming table stakes for customer engagement and conversion. The move to sunset legacy online programs in favor of in-store and digital innovation reflects a wider industry pivot toward scalable, high-ROI channels. Finally, the Warby Parker-Google partnership underscores the growing convergence of health, fashion, and technology in wearables, a space that could reshape consumer expectations and competitive dynamics across retail and healthcare verticals.

WRBY Consumer Discretionary Retail Omnichannel AI Eyewear Store Expansion Insurance