On August 20, ATRenew (NYSE:RERE) reported second-quarter results that beat the high end of its own guidance, with revenue climbing 32.4% year over year to RMB 6.6 billion. Net income jumped 78.6% to RMB 129.1 million, and the company kept buying back shares even as it pushed into new markets overseas. For a business built on other people’s used phones, that pairing of faster growth and faster profit is the number worth sitting with.
Owning The Supply Chain Pays Off
The engine behind that growth is ATRenew’s 1P model, where the company buys, refurbishes, and resells devices itself rather than just running a marketplace. Net product revenue rose 35.9% to RMB 6.2 billion, and the company moved 11.6 million consumer products during the quarter, up from 10.3 million a year earlier. Owning more of that chain is also making each device more profitable. Gross margin on the 1P business rose to 15.7% from 13.2% a year ago, and 1P-to-C retail revenue, the curated resale of phones and computers, grew 92.4% and now makes up 48.8% of product revenue, up from 34.4% last year. Revenue from refurbished products alone grew 87.8%.
All of that flowed to the bottom line: non-GAAP operating income rose 70.1% to RMB 206.3 million, with margin expanding 69 basis points to 3.1%. Newer categories are following the same pattern. Luxury recycling revenue grew 77.3% after the company upgraded select stores into specialized formats, and its B2B marketplace, PJT, grew its registered merchant base to 2.2 million while lifting inspection penetration to 84.4%, up 11.5 percentage points from a year ago. Overseas, the company crossed HKD 120 million in monthly export sales in June and is now building out its FoneSquare and ReRe brands toward hubs in Hong Kong, Dubai, and Miami.
Cracks Beneath The Growth Story
Not every part of the business is pulling in the same direction. Net service revenue fell 4.2% to RMB 414.6 million, a decline the company tied to discretionary discounts handed to merchants during its extended June 18 promotional push. Gold recycling revenue fell even harder, down 35%, as gold prices swung lower and the company chose to pass higher payouts to users rather than protect its own take. Costs are climbing too. Fulfillment expenses rose 31.1% to RMB 540 million as the company staffed up its to-door recycling teams during peak demand.
Physical footprint is also shrinking at the edges, with the company trimming its AHS store count to 2,117 locations by closing underperforming sites. And management flagged a timing risk heading into the back half of the year, noting that expectations around Apple’s next iPhone lineup could push device volume into the fourth quarter and early next year rather than this one. Guidance itself points to a slower pace ahead. ATRenew expects third-quarter revenue of RMB 6.3 billion to RMB 6.4 billion, growth of 23.1% to 25.1%, a clear step down from the 32.4% posted this quarter.
A Cheap Stock, Quiet Bears
20 hedge funds held ATRenew heading into the most recent quarter, down from 21 the quarter before, a modest pullback rather than a retreat. Short interest sits at just 1.3% of float, which suggests little organized betting against the stock. Meanwhile, shares trade at 9.85 times forward earnings as of August 27, a multiple that looks more skeptical than celebratory for a company that just grew net income 78.6%.
What Happens After The Surge
ATRenew has shown that its 1P strategy can convert trade-in volume into real margin, not just faster revenue. But management’s own guidance concedes the pace will cool, and gold and service revenue already swung the other way this quarter. What happens next depends on whether refurbished retail and the new FoneSquare export business keep compounding once the easiest comparisons are gone.
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