Chagee (CHA) Q1 2026 earnings review
The Bleeding Stops: Turnaround Shows Early Signs of Life
After a disastrous Q4 2025 defined by restructuring costs and collapsing margins, Chagee is showing signs of stabilization. Total revenue grew 4.5% YoY to RMB3.55B, but the real story is sequential recovery. The aggressive decline in Same-Store GMV is reversing, improving to -16.0% from -25.5% in the prior quarter. Non-GAAP net margin rebounded to a healthy 14.3% from Q4's dismal 3.4%, proving that management's shift from blind expansion to 'high-quality growth' is starting to yield operational leverage. A newly authorized $150M share repurchase program signals strong management confidence that the worst of the domestic price war impact is in the rearview mirror.
🐂 Bull Case
Average monthly GMV per teahouse in Greater China grew 5.5% sequentially from Q4. Combined with a sharp recovery in Non-GAAP net margin (14.3%), this validates the company's refusal to engage in margin-destroying price wars.
Overseas GMV accelerated to 139% YoY growth (RMB426.4M), proving international expansion is now a legitimate, high-growth second engine rather than just an experiment.
🐻 Bear Case
Franchised revenue in Greater China fell 12.9% YoY. While overall revenue grew, the core legacy business is still shrinking under intense delivery platform subsidy competition.
G&A expenses surged 30.9% YoY to RMB462M, eating up 13.0% of total revenues (up from 10.4% last year). Global expansion is expensive, and these fixed costs carry structural risk if top-line growth stalls.
⚖️ Verdict: 🟢
Bullish. The multi-quarter deterioration in unit economics has broken its downward trend. Combined with hyper-growth in overseas markets and a $150M buyback, the risk/reward is heavily skewed to the upside.
Key Themes
Overseas Growth is Accelerating Rapidly
International expansion is executing flawlessly. Overseas GMV hit RMB426.4M in 26Q1, accelerating to a staggering 139.0% YoY growth rate. The overseas store count grew to 374 locations (up from 169 a year ago). Importantly, overseas same-store GMV contraction narrowed significantly to -12.0% from -25.5% in Q4, showing that the international customer base is stabilizing while total volume scales.
Structural Shift to Company-Owned Stores
Chagee is quietly executing a massive business model transition. Net revenues from company-owned teahouses surged 230.4% YoY to RMB802.1M, now representing 22.6% of total revenue (up from roughly 7% a year ago). This shift grants Chagee tighter control over brand standards and store experience, but requires significantly higher capital intensity. Consequently, company-owned teahouse operating costs spiked 216.6% YoY to RMB497.2M.
Domestic Franchised Revenue Decelerating
While the headline revenue number looks healthy, the core profit engine—domestic franchised teahouses—is sputtering. Franchised revenue dropped 12.9% YoY to RMB2.74B. Management explicitly blamed 'economic headwinds as well as intense industry competition.' This underscores that the domestic price war, driven by third-party delivery platform subsidies, continues to suppress legacy store volumes.
G&A Expense Creep
General and administrative expenses are decelerating overall profitability, jumping 30.9% YoY to RMB462.0M. Management attributes this to RMB52.1M in share-based compensation and rising payroll/travel costs associated with global expansion. With G&A now consuming 13.0% of total revenue (vs 10.4% last year), investors must monitor if these upfront investments in global infrastructure will yield expected operational leverage.
Active Member Ecosystem Expanding
Chagee reported 50.0 million active members in 26Q1, an 11.7% sequential increase from 25Q4. Building a massive, proprietary, direct-to-consumer channel is management's primary defense mechanism against aggressive third-party delivery platform subsidies. This captive audience directly supports their 'value first' premium pricing strategy.
Other KPIs
Reversing the disastrous Q4 2025 performance. While still down 25% YoY (from RMB 677.3M), the sequential recovery from Q4's RMB 100M highlights that the severe restructuring costs are in the past and core operations have stabilized. Non-GAAP net margin sits at a healthy 14.3%.
Down slightly from RMB 7.89B at the end of 2025, largely due to RMB 675.4M in investing cash outflows (likely related to the rapid build-out of company-owned stores). The balance sheet remains highly liquid, easily supporting the new buyback and ongoing international expansion.
Decreased 1.0% YoY despite total revenue growing 4.5%. This indicates accelerating gross margins and validates management's claim of enhanced cost management initiatives and improved pricing power within the supply chain.
Guidance
Authorized over a 12-month period commencing June 1, 2026. While the company maintains its policy of not providing formal numerical revenue/earnings guidance, this substantial capital return commitment signals deep management confidence in their cash flow generation and a belief that the stock is undervalued following 2025's operational detours.
Key Questions
Company-Owned Mix Target
Net revenue from company-owned teahouses surged 230% YoY. What is the long-term target for the mix between franchised and company-owned stores, and how does this shift impact your long-term consolidated margin profile?
Overseas Unit Economics
With overseas GMV growing 139% YoY, can you provide an update on the timeline for the international segment to achieve corporate-average profitability, considering the heavy G&A investments currently masking segment-level margins?
Franchise Support
Franchise revenues declined 12.9% YoY due to intense competition. How is the new GMV-based revenue-sharing model (rolled out in early 2026) performing in terms of alleviating franchisee margin pressure and preventing store closures?