Chagee reported a dramatic improvement in GAAP profitability during the second quarter of 2026 as operating expenses declined, company-owned teahouse revenue tripled and international expansion pushed overseas gross merchandise value up more than 100%.
Net revenue increased 2.5% year-over-year to RMB3.41 billion, or approximately $503.3 million, from RMB3.33 billion.
Operating income increased much faster, jumping 387.6% to RMB524.7 million, or $77.3 million, from RMB107.6 million.
GAAP net income reached RMB464.8 million, or $68.5 million, compared with only RMB77.2 million a year earlier.
That means Chagee’s reported net income increased by more than sixfold even though revenue rose only modestly.
The improvement was driven largely by a substantial reduction in operating expenses.
Total operating expenses fell 10.4% to RMB2.89 billion, or $425.9 million.
Sales and marketing expenses declined 21.7% to RMB301.5 million as Chagee reduced payroll costs, streamlined its branding and marketing organization and improved advertising efficiency.
Sales and marketing expense fell to 8.8% of revenue from 11.6%.
General and administrative expenses dropped even more sharply, falling 64.6% to RMB334.5 million, or $49.3 million.
The year-over-year comparison benefited from significantly lower share-based compensation and the absence of some professional-service costs associated with Chagee’s initial public offering in the prior-year quarter.
G&A expense consequently fell to 9.8% of revenue from 28.3%.
That expense normalization helped GAAP net income margin increase to 13.6% from 2.3%, an expansion of approximately 1,130 basis points.
However, the adjusted comparison was less favorable.
Non-GAAP net income, which excludes share-based compensation, declined to RMB488.7 million, or $72 million, from RMB629.8 million, and adjusted net margin fell to 14.3% from 18.9%.
That distinction is important because a substantial portion of the GAAP earnings acceleration reflects the unusually high share-based compensation expense recorded in the prior-year period.
Still, Chagee is also showing meaningful positive operating trends outside Greater China.
Overseas GMV reached RMB504 million during Q2, increasing 114.3% year-over-year from RMB235.2 million.
The company had 7,639 teahouses at June 30, up 8.5% from a year earlier.
Company-owned stores are becoming a materially larger component of the business.
Revenue from company-owned teahouses jumped to RMB940.6 million, or approximately $138.6 million, from RMB311.2 million a year earlier, representing growth of more than 200%.
Company-owned stores contributed 27.5% of total revenue, compared with a much smaller contribution a year earlier.
The increase reflected both a change in store composition within Greater China and the expansion of the overseas network.
The number of company-owned teahouses increased to 883 from 239 a year earlier, including 259 overseas company-owned stores versus 75 in the prior-year quarter.
Meanwhile, franchised locations totaled 6,756.
The positive earnings story is therefore twofold.
Chagee is producing substantially higher GAAP profitability following the normalization of expenses, while simultaneously building a larger international and company-operated business.
Greater China remains challenging, with GMV declining year-over-year and same-store GMV under pressure, but overseas GMV growth of 114% provides a potentially important offset as the global store network expands.
