Allbirds (BIRD) Q2 Revenue Falls 23%

Key Points

• GAAP revenue and earnings per share for Q2 2025 exceeded analyst expectations, but revenue declined significantly from the prior year.

• Gross margin declined sharply in Q2 2025, driven by promotions, inventory adjustments, and a higher mix of distributor sales.

• Management lowered full-year 2025 revenue guidance to $165–$180 million, reflecting slower anticipated sales growth.

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Allbirds (NASDAQ:BIRD), a footwear and apparel brand known for its focus on sustainable materials, reported its results for the second quarter of fiscal 2025 on August 7, 2025. The most notable news was that the company surpassed Wall Street expectations for both GAAP revenue and earnings per share, with GAAP net revenue of $39.7 million and a GAAP loss per share of $1.92. This performance was at the top end of the company’s own guidance. However, revenue fell 23.1% year-over-year on a GAAP basis, and gross margin (GAAP) also shrank to 40.7%. Management lowered its full-year 2025 net revenue outlook to $165–$180 million, pointing to continued business transformation and a slower-than-expected sales recovery. The quarter reflected improved cost control and operational focus, but persistent pressures on sales and margins remain.

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.

Business Overview and Strategic Focus

Allbirds sells shoes and apparel using materials that prioritize environmental sustainability. Its core product lines include lifestyle sneakers and casual footwear. The brand built its reputation by using natural materials such as merino wool, tree fiber, and sugarcane, emphasizing comfort and lower environmental impact.

In recent years, Allbirds has shifted its focus toward cost discipline and more targeted growth. It has reduced underperforming retail locations, prioritized selected e-commerce and distributor relationships abroad, and reinforced its identity around sustainable innovation. Key factors for success include the ability to create differentiated products, maintain brand relevance with eco-conscious consumers, tightly manage inventory, and adapt its retail distribution strategy as consumer habits evolve.

Quarter Highlights: Performance, Shifts, and Challenges

GAAP revenue dropped 23.1% from the year prior, as expected store closures and a move from direct-to-consumer sales in many overseas markets toward third-party distributors took effect. U.S. net revenue declined 21.8% year-over-year, while international revenue (GAAP) fell 26.2%. The transition to a distributor model in more than 40 countries aims to reduce fixed costs but also results in lower gross margins.

Gross margin—a key profitability metric measuring how much revenue remains after production costs—fell to 40.7% from 50.5% last year (GAAP). The company attributed this nearly 10 percentage point decline in gross margin to greater promotional activity, inventory write-downs from moving to distributor sales in Europe, and increased freight and duty costs. Management expects margins to gradually rebound in the second half of the year (Q3 and Q4) as new product launches designed for higher profitability are rolled out.

On the expense side, selling, general, and administrative (SG&A) costs decreased to $24.2 million, or 60.9% of revenue, from $33.6 million, or 65.0% (GAAP). Marketing spending also fell to $8.5 million, with the year-over-year decrease primarily driven by reduced digital advertising spend. The decline in expenses resulted from actions such as reducing personnel and lowering investment in digital advertising during the period.

Adjusted EBITDA loss was $12.6 million, an improvement over the $13.7 million loss in Q2 2024. Net loss margin (GAAP) was 39.1%. Operating cash use and liquidity remain key areas of focus, with the company ending the quarter with $33.1 million in cash and $5.0 million in borrowings on its revolving credit facility.

Allbirds’ product family is composed of wool- and tree-based lifestyle sneakers, expanded recently by the Canvas Piper casual sneaker and new utility footwear, which have shown sales traction. The company is preparing to introduce a broader product lineup, including a Remix subcategory (featuring upcycled materials), fully waterproof footwear, and two new collections called Elevated (professional/dress styles) and Relaxed (for at-home and casual wear). These launches are intended to renew brand engagement and drive future growth, with management pointing to strong social engagement as early signs of improved customer reach.

Looking Ahead: Guidance and Forward Considerations

Management updated its outlook, now expecting FY2025 net revenue to fall in the $165–$180 million range (previously $175–$195 million). Projected adjusted EBITDA losses remain at $65–$55 million for the full year. Revenue for Q3 2025 is forecast in the $33–$38 million range, with the company reinforcing its expectation for a return to growth in Q4. Guidance for FY2025 includes a $20–$25 million negative impact on revenue, mainly from the ongoing shift to international distributors and domestic store closures.

No new forward dividend was declared, and Allbirds does not currently pay a dividend. Management cited continued macroeconomic uncertainty and global tariff issues as risks, though it expects higher margins on new products and sequential improvement in its cost structure as its transformation plan progresses. Investors are expected to watch upcoming product launches, rebound in gross margin, and indicators of sustainable top-line growth closely through the second half of fiscal 2025.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.

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