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Yatsen, the Chinese cosmetics group behind Perfect Diary and more, just reported a 36.8% revenue jump in Q2 2025 - with a booming skincare business shrinking its losses and boosting margins.
What does this mean?
Yatsen's big bet on skincare is paying off, with those brands now making up more than half its revenue after growing almost 79% year-over-year. Sales during China's June 18 shopping festival gave the results a lift, helping Q2 revenue hit RMB 1.09 billion. Gross profit climbed to RMB 850.4 million and a more profitable product mix pushed gross margin to 78.3%. The company's net loss narrowed sharply, dropping 77% to RMB 19.5 million, and it posted a positive non-GAAP net income of RMB 11.5 million. With Q3 revenue projected to grow another 15-30% from last year, investors are taking notice - even though Yatsen's shares are trading well above Wall Street's average price target.
Yatsen and its rivals are riding a wave of positive sentiment, with analyst ratings all leaning bullish. Still, Yatsen shares recently closed about 40% above analysts' median one-year price target. The price-to-earnings ratio has cooled from 44 to 29 over three months, suggesting investors are watching to see if steady profits can keep supporting a premium valuation. The real test will come in future quarters as Yatsen aims to turn higher margins into consistent, sustainable growth.
The bigger picture: China's beauty sector goes upscale.
China's cosmetics market is shifting toward higher-margin skincare, with premium products and digital sales events driving the charge. Brands that quickly spot and seize these trends are outperforming, using festival promotions like June 18 to fuel healthy growth. For Yatsen and the industry, fusing product innovation with smart marketing looks set to become the rule, not the exception.