Viomi (VIOT) Q4 2025 earnings review
Subsidy Cliff Crushes H2 Earnings Amid Painful Global Transition
While management highlighted full-year revenue growth of 14.6%, the real story is a reversing trajectory in the second half of 2025. Following the phase-down of China's national home appliance trade-in subsidies, 25H2 revenues collapsed 25.9% YoY. More alarmingly, aggressive overseas expansion drove Selling & Marketing expenses up nearly 30%, decimating operating leverage and causing H2 net income to plummet 70.2%. Viomi is executing a high-risk transition from a subsidized domestic player to a global brand, but the near-term financial toll is severe. A special dividend softens the blow, but the core business is highly unstable.
🐂 Bull Case
Despite operational struggles, Viomi's balance sheet remains robust with over RMB 1.25B in cash, equivalents, and deposits. This allows them to fund international expansion while paying a US$0.066 per ADS special dividend.
The 'Global Water' strategy is showing green shoots, with the North American Amazon channel delivering triple-digit sequential growth and strong Black Friday rankings for tankless under-sink segments.
🐻 Bear Case
The immediate 32.1% revenue drop in Home Water Systems following the phase-down of national trade-in subsidies proves the domestic market was artificially inflated and lacks organic demand.
Selling and marketing expenses surged 29.8% to RMB 148.6M while revenues fell 25.9%. Buying overseas market share is currently destroying profitability, dropping H2 operating income from RMB 83.8M to just RMB 9.7M.
⚖️ Verdict: 🔴
Bearish. The company is caught in a painful structural transition. Management's narrative focuses on AI and global expansion, but the hard data shows a domestic market dependent on government subsidies and an overseas strategy that is aggressively burning operating profit.
Key Themes
Subsidy Phase-Down Cripples Core Segment
The vulnerability of Viomi's domestic base was exposed in H2. Revenues from Home Water Systems fell 32.1% YoY to RMB 628.2M. Management explicitly blamed the decline on the end of national subsidies for water purifiers, indicating a reversing trend in domestic consumer demand that cannot currently stand on its own feet.
Marketing Spend Decouples from Sales
A severe negative operating leverage dynamic has emerged. Selling and marketing expenses grew 29.8% (to RMB 148.6M) in 25H2, explicitly to fund channel expansion and brand promotion overseas. Because total sales simultaneously plummeted 25.9%, S&M as a percentage of revenue spiked dramatically, crushing operating margins. This is a concerning break in trend that requires monitoring.
North American E-Commerce Traction
The primary growth driver offsetting domestic weakness is the North American Amazon channel. The segment achieved triple-digit sequential growth in H2, driven by the M1 mineral water purifier. Ranking 4th in the under-sink RO tankless segment during Black Friday provides proof-of-concept for Viomi's international competitiveness.
Water Purifier Gigafactory Export Ramp
Viomi is leaning into manufacturing scale to support its 'Global Water' strategy. The overseas premium production line is fully operational, with mass production of new agile products (instant heating/cooling/ice making) slated for Q2 2026. This vertical integration is crucial for maintaining the 23.5% gross margin while entering competitive Western markets.
Xiaomi Dependency Becoming a Drag
Consumables revenue decelerated, falling 17.9% YoY to RMB 112.2M, and Kitchen Appliances fell 4.5%. Both declines were explicitly attributed to 'decreased sales/orders to Xiaomi.' As Viomi pivots to its own brand overseas, the managed decline of its legacy Xiaomi partnership continues to create revenue headwinds.
Other KPIs
Stable to slightly improving compared to 22.6% in 24H2. Management attributed this improvement to the elimination of one-off costs from the IoT@Home business divestment. The fact that gross margins held up despite a 25.9% revenue drop indicates decent pricing power and manufacturing efficiency, pushing the blame for the net income collapse entirely onto operating expenses.
Despite the earnings collapse, the balance sheet remains a fortress. Cash, restricted cash, and short-term deposits total roughly RMB 1.22B (down slightly from RMB 1.28B at the end of 2024). This provides ample runway for the costly global expansion strategy and comfortably covers the newly announced US$0.022 per share special dividend.
A rare bright spot in the cost structure, G&A decreased by an impressive 41.2% YoY. This was driven by lower employee compensation and reduced allowance for credit losses, showing that management is aggressively trimming back-office fat to help fund the front-office overseas marketing push.
Guidance
Management did not provide hard quantitative revenue or earnings guidance for 2026. The qualitative focus is 'Global Water'—deepening presence in North America and Southeast Asia, integrating AI across water purification, and leveraging the Gigafactory. The lack of numerical guidance suggests low visibility into when domestic demand will bottom out post-subsidy.
Key Questions
S&M Return on Investment
Selling and marketing expenses jumped nearly 30% in H2 to fund overseas channel expansion. At what point in FY26 do you expect these upfront investments to normalize as a percentage of revenue and yield operating leverage?
Domestic Demand Floor
With Home Water Systems down 32% following the subsidy phase-down, do you believe we have found the organic floor for domestic demand, or should we model further contraction in H1 2026?
Xiaomi Partnership Trajectory
Consumables and kitchen appliance revenues both suffered from lower Xiaomi orders. As you pivot aggressively toward own-brand international sales, what is the steady-state expectation for the Xiaomi relationship moving forward?