Warby Parker’s third quarter was marked by robust top-line growth but a notable shortfall relative to Wall Street’s revenue expectations, prompting a sharp selloff in shares. Management identified a mix shift toward lower-priced frames and moderation in contacts growth, particularly among younger consumers, as key factors weighing on performance. Co-CEO David Gilboa explained that “periods of broad strength across consumer cohorts” were followed by “a moderation in average order value or basket size in categories that skew younger.” Despite these pressures, the company delivered improved profitability and ongoing customer growth, with leadership emphasizing the adaptability of its omnichannel model and operational discipline.
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Warby Parker (WRBY) Q3 CY2025 Highlights:
- Revenue: $221.7 million vs analyst estimates of $224.3 million (15.2% year-on-year growth, 1.2% miss)
- Adjusted EPS: $0.12 vs analyst estimates of $0.09 (38.1% beat)
- Adjusted EBITDA: $25.75 million vs analyst estimates of $25.04 million (11.6% margin, 2.8% beat)
- The company dropped its revenue guidance for the full year to $872.5 million at the midpoint from $884 million, a 1.3% decrease
- EBITDA guidance for the full year is $99.5 million at the midpoint, below analyst estimates of $100.8 million
- Operating Margin: 1.6%, up from -3.4% in the same quarter last year
- Active Customers: 2.66 million, up 230,000 year on year
- Locations: 313 at quarter end, up from 269 in the same quarter last year
- Market Capitalization: $2.14 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Warby Parker’s Q3 Earnings Call
- Mark Altschwager (Baird) asked about the mix shift between single-vision and progressive lenses, and whether price increases were causing trade-down. Co-CEO David Gilboa noted moderation in younger customer basket size and resilience among older customers.
- Oliver Chen (TD Securities) inquired about how recent consumer trends might alter the product roadmap and the impact of AI on productivity. Co-CEO Neil Blumenthal emphasized flexibility in product launches and highlighted AI's growing influence across design and customer service.
- Savannah Sommer (Goldman Sachs) questioned early results from Target shop-in-shops. Blumenthal said performance was in line with expectations and stressed Warby Parker’s “test, learn, expand rapidly” approach for new locations.
- Anthony Chukumba (Loop Capital) sought clarity on optometrist retention and compensation. Blumenthal responded that hiring and retention had improved, attributing this to company culture and in-house technology tools for clinical staff.
- Janine Hoffman Stichter (BTIG) asked about the impact of sunsetting the Home Try-on and Scout programs. Gilboa indicated these changes allowed for a more seamless customer experience and operational efficiency, with minimal impact on financials.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will be watching (1) the adoption and customer response to AI-powered glasses and digital tools, (2) the performance of new Target shop-in-shops and continued suburban store expansion, and (3) the ability to sustain margin improvement despite macroeconomic headwinds. Execution on insurance partnerships and customer acquisition strategies will also be important signals for future growth.
Warby Parker currently trades at $17.44, down from $19.05 just before the earnings. Is there an opportunity in the stock?Find out in our full research report (it’s free for active Edge members).
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