Online home goods retailer Wayfair (NYSE: W) beat Wall Street’s revenue expectations in Q1 CY2025, but sales were flat year on year at $2.73 billion. Its non-GAAP profit of $0.10 per share was significantly above analysts’ consensus estimates.
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Wayfair (W) Q1 CY2025 Highlights:
- Revenue: $2.73 billion vs analyst estimates of $2.71 billion (flat year on year, 0.7% beat)
- Adjusted EPS: $0.10 vs analyst estimates of -$0.20 (significant beat)
- Adjusted EBITDA: $106 million vs analyst estimates of $79.21 million (3.9% margin, 33.8% beat)
- Operating Margin: -4.5%, up from -8.6% in the same quarter last year
- Free Cash Flow was -$139 million, down from $102 million in the previous quarter
- Active Customers: 21.1 million, down 1.2 million year on year
- Market Capitalization: $3.83 billion
"Despite persistent category volatility which marked a fourth consecutive year beginning with contraction, we were able to once again outperform our peers and take healthy market share while driving meaningful improvements in profitability. Year-over-year growth excluding the impact of Germany came in nicely positive - driven by the US business up 1.6% against a category that we estimate declined over the same time frame. Tariffs are clearly top of mind for everyone - while there's a lot of uncertainty in the broader economy, we have direct line of sight and strong conviction on what we need to do for both our customers and our suppliers," said Niraj Shah, CEO, co-founder and co-chairman, Wayfair.
Company Overview
Founded in 2002 by Niraj Shah, Wayfair (NYSE: W) is a leading online retailer of mass-market home goods in the US, UK, Canada, and Germany.
Sales Growth
A company’s long-term sales performance can indicate its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Over the last three years, Wayfair’s demand was weak and its revenue declined by 3.6% per year. This wasn’t a great result and suggests it’s a low quality business.
This quarter, Wayfair’s $2.73 billion of revenue was flat year on year but beat Wall Street’s estimates by 0.7%.
Looking ahead, sell-side analysts expect revenue to remain flat over the next 12 months. Although this projection indicates its newer products and services will spur better top-line performance, it is still below average for the sector.
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Active Customers
Buyer Growth
As an online retailer, Wayfair generates revenue growth by expanding its number of users and the average order size in dollars.
Wayfair struggled with new customer acquisition over the last two years as its active customers have declined by 2.1% annually to 21.1 million in the latest quarter. This performance isn't ideal because internet usage is secular, meaning there are typically unaddressed market opportunities. If Wayfair wants to accelerate growth, it likely needs to enhance the appeal of its current offerings or innovate with new products. 
In Q1, Wayfair’s active customers once again decreased by 1.2 million, a 5.4% drop since last year. The quarterly print was lower than its two-year result, suggesting its new initiatives aren’t moving the needle for buyers yet.
Revenue Per Buyer
Average revenue per buyer (ARPB) is a critical metric to track because it measures how much customers spend per order.
Wayfair’s ARPB has been roughly flat over the last two years. This raises questions about its platform’s health when paired with its declining active customers. If Wayfair wants to increase its buyers, it must either develop new features or provide some existing ones for free. 
This quarter, Wayfair’s ARPB clocked in at $562. It grew by 4.7% year on year, faster than its active customers.
Key Takeaways from Wayfair’s Q1 Results
We were impressed by how significantly Wayfair blew past analysts’ EPS and EBITDA expectations this quarter. On the other hand, its number of buyers declined and fell short of Wall Street’s estimates. Overall, this was a mixed quarter, the stock traded up 8.9% to $32.88 due to the profitability numbers.
Is Wayfair an attractive investment opportunity right now? We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.
