Executive Summary / Key Takeaways

• ATRenew Inc. (NYSE:RERE) is solidifying its leadership in China's rapidly expanding pre-owned consumer electronics market, driven by a "scenario plus supply chain" strategy and significant national trade-in subsidies. The company's unique business model, which adds money to users' accounts through recycling, positions it as a pioneer in sustainable consumption.
• The company delivered robust financial performance in Q2 2025, with total revenue surging 32.2% year-over-year to RMB 4.99 billion, exceeding guidance. This growth was underpinned by strong 1P product revenue and expanding 3P service offerings, alongside an improving non-GAAP operating profit margin of 2.4%.
• ATRenew leverages advanced AI technology for automated quality inspection, enhancing accuracy, reducing costs, and improving user experience. This technological edge, coupled with a rapidly expanding physical store network and door-to-door service team, forms a critical competitive moat.
• Strategic partnerships with industry giants like JD.com and Apple , combined with an aggressive multi-category recycling expansion and a commitment to increasing 1P2C retail sales, are key drivers for future growth and market share capture in an underpenetrated market.
• Management's confidence is reflected in a positive Q3 2025 revenue outlook (RMB 5.05 billion to RMB 5.15 billion) and a new 3-year shareholder return program, committing to return at least 60% of annual non-GAAP net profit, signaling a focus on long-term value creation.

The Dawn of a Circular Economy: ATRenew's Strategic Foundation

ATRenew Inc., established in 2011, has emerged as a pivotal force in China's burgeoning circular economy, specializing in the transaction and services of pre-owned consumer electronics. The company's core mission revolves around giving a second life to idle goods, a philosophy that resonates deeply with evolving consumer preferences for value and sustainability. This commitment is particularly relevant in China, where the recycling penetration rate for pre-owned consumer electronics remains in single digits, significantly trailing developed economies that often exceed 30%. This substantial gap underscores a massive, untapped market opportunity for ATRenew.

The company's overarching strategy, termed "scenario plus supply chain," is designed to capture this potential by integrating comprehensive recycling, inspection, refurbishment, and distribution capabilities. This approach is intrinsically linked to its foundational strength: a dual-track offline presence spanning both shopping malls and communities, supported by a robust online ecosystem. This positioning enables ATRenew to create a closed-loop system that seamlessly integrates commercial monetization and user acquisitions across both low-frequency high-value and high-frequency low-value transactions. Unlike traditional retail models that extract value from consumer accounts, ATRenew's unique business model adds money to users' accounts through recycling, fostering a distinctive and disruptive value proposition.

In the competitive landscape, ATRenew operates in a market that, while growing, remains fragmented with numerous third-party recycling and repair shops lacking brand recognition. The company differentiates itself from broader e-commerce giants like JD.com , Alibaba Group , and Pinduoduo through its specialized focus on pre-owned electronics, emphasizing quality assurance and tailored recycling services. While JD.com benefits from its extensive logistics and wide product assortment, and Alibaba leverages vast user traffic and AI-driven recommendations, ATRenew's niche expertise in refurbishment and its physical store network provide a tangible advantage in building customer trust and securing first-hand supplies. Pinduoduo 's price-driven model targets value-conscious consumers, but ATRenew's emphasis on reliable, quality-assured refurbished products offers a distinct value proposition, particularly as consumer spending slows and demand for cost-effective options rises.

Technological Edge: Driving Efficiency and User Experience

A cornerstone of ATRenew's competitive advantage lies in its technological differentiation, particularly the strategic deployment of Artificial Intelligence (AI) across its operations. The company has extensively integrated AI applications within its automated quality inspection centers in Donghua and Hangzhou. Here, AI image recognition is utilized to automatically assess the appearance of devices and inspect critical components like main boards. This core technology offers tangible and quantifiable benefits, significantly improving inspection accuracy, reducing operational costs, and minimizing manual inspection errors.

ATRenew is not resting on its laurels; it is actively engaged in R&D initiatives to further leverage AI. The company is exploring the deployment of open-source large language models to enhance efficiency in areas such as compliance checks for store operations, digital operation training at its centers, back-office coding requirements, and internal knowledge databases. The stated goal of these initiatives is to achieve further cost reduction and efficiency improvements across more recycling scenarios and business processes, ultimately delivering greater value to customers. Management also anticipates that the wider deployment of AI on mobile and PC terminals will lead to a renewal cycle for AI hardware, presenting a significant long-term business opportunity for ATRenew, given its focus on personal and household electronic products.

For investors, this technological roadmap is crucial. AI integration strengthens ATRenew's competitive moat by driving operational efficiency and cost leadership, which can translate into better margins and more competitive pricing for consumers. The enhanced accuracy and transparency in quality inspection, facilitated by AI, directly contribute to a best-in-class user experience, fostering greater trust in the AHS Recycle brand and supporting its compliant refurbishment capabilities. This technological leadership is a key enabler for ATRenew's strategic goal of becoming China's top recycling brand and achieving its long-term growth objectives.

Operational Excellence and Network Expansion Fueling Growth

ATRenew's operational strategy is characterized by aggressive network expansion and enhanced fulfillment capabilities, which have been instrumental in its recent performance. By the end of Q2 2025, the company operated 2,092 AHS stores nationwide, including 987 self-operated stores in Tier 1 and Tier 2 cities and 1,105 jointly operated stores in lower-tier cities. This extensive footprint allows users convenient access to in-store services. Complementing its physical presence, the self-operated door-to-door service team expanded to 1,160 personnel by the end of Q2 2025. These in-store and door-to-door teams collectively handle nearly 90% of orders in Tier 1 and Tier 2 cities and approximately 80% in Tier 3 and Tier 4 cities, significantly enhancing user experience through face-to-face services, instant order confirmation, and payments.

The company's C2B recycling business maintained robust double-digit growth in Q2 2025, benefiting from national subsidies and June 18th e-commerce promotional campaigns. Expanded partnerships with high-quality consumer electronics brands, including Honor, DJI, and JDE, are crucial for jointly developing recycling and trade-in supply chain capabilities. Notably, JD.com 's trade-in scenarios demonstrated distinctive year-over-year growth, directly linked to ATRenew's front-end fulfillment capabilities. The company is also expanding its compliant refurbishment capacity, with refurbished products contributing 13.5% of 1P revenue in Q2 2025. The on-demand refurbishment model, which now includes laptops and smartwatches, generated over RMB 100 million in GMV during the quarter, expanding the availability of retail-ready products across various channels.

The 3P service revenue also sustained growth, increasing by 15.4% year-over-year in Q2 2025. The B2B marketplace, PJT, strengthened its industry openness, with its warehousing inspection penetration rate for B2B platform operations rising from 62% in Q1 2024 to 73% in Q2 2025. Paipai's consignment GMV surged 128% year-over-year in Q2 2025, driven by a model designed to provide enhanced operational convenience for small- and medium-sized secondhand merchants. Furthermore, the multi-category recycling business, an asset-light platform leveraging existing AHS stores, saw its GMV and related service revenue increase by nearly 110% year-on-year in Q2 2025, contributing over RMB 63 million in revenue. This segment, which includes luxury goods, gold, and jewelry, is a key driver for higher service frequency and incremental profit for existing stores.

Financial Performance: A Story of Accelerating Growth and Profitability

ATRenew has demonstrated a compelling trajectory of accelerating revenue growth and improving profitability, underscoring the effectiveness of its strategic initiatives. For the second quarter of 2025, total revenue reached RMB 4.99 billion, marking a significant 32.2% year-over-year increase and surpassing the high end of the company's guidance. This robust performance was primarily driven by a 34% year-over-year surge in 1P product revenue to RMB 4.56 billion, complemented by a 15.4% year-over-year increase in 3P service revenue to RMB 430 million. The company's non-GAAP operating profit margin stood at 2.4% in Q2 2025, meeting its full-year target despite substantial investments in brand building and network expansion. This margin stabilized quarter-over-quarter, reflecting operational discipline and the benefits of scale.

The 1P business, which involves direct recycling and resale, saw its gross profit margin improve to 13.2% in Q2 2025, up from 12.1% in the same period last year. This improvement is attributed to high-efficiency C2B recycling scenarios, compliant refurbishment capabilities, and a diversified retail channel mix, which increased the proportion of higher-margin retail sales. Notably, 1P2C retail revenue surged 63.7% year-over-year in Q2 2025, accounting for 34.4% of product revenue, up from 28.2% in Q2 2024. This trend highlights ATRenew's success in creating value for a broader retail user base. The impact from the high base of Apple 's trade-in program in 2024 has eased, leading to significantly improved gross margins in that segment through better pricing strategies, with the Apple trade-in business maintaining profitability since March 2024.

Looking at the broader financial picture, ATRenew's full-year 2024 results showcased total net revenues of RMB 16.33 billion, a 25.9% year-over-year growth, significantly outpacing the overall pre-owned electronics industry. Non-GAAP operating income for 2024 grew by an impressive 62.8% to RMB 410 million, with the company achieving its first GAAP operating income for the year. This demonstrates a successful transition towards sustainable profitability. The company's liquidity remains strong, with cash and cash equivalents, restricted cash, short-term investments, and funds receivable totaling RMB 2.35 billion as of June 30, 2025, providing ample financial reserves for continued business development and shareholder returns.

Strategic Growth Pillars and Future Outlook

ATRenew's future growth is anchored by three strategic goals, articulated by management as a roadmap for fulfilling long-term commitments. First, the company aims to leverage its unique trade-in programs and comprehensive supply chain capabilities to partner with strategic allies like JD.com and Apple (AAPL). This strategy is designed to deliver best-in-class trade-in user experiences and strengthen ATRenew's position as China's largest and most robust leader in pre-owned consumer electronics transactions and services. The ongoing national subsidies and policies stimulating domestic consumption are expected to provide significant tailwinds for this initiative.

Second, ATRenew is committed to establishing AHS Recycle as China's top recycling brand. This involves utilizing its nationwide network of over 2,000 AHS stores to continuously expand its platform-based recycling businesses across additional high-value product categories, such as luxury goods and gold. This expansion creates new growth opportunities in the secondhand recycling market. The launch of the AHS Recycle Green Wallet on August 1, 2025, further supports this goal by enabling users to purchase products at surprise discounts in recognition of their eco-friendly actions, fostering green consumption through co-branded partnerships.

Third, capitalizing on the surging momentum of consumption, ATRenew plans to leverage its unique business model advantage and distinctive dual-track offline presence to create a closed-loop ecosystem. This ecosystem will seamlessly integrate commercial monetization and user acquisitions across both low-frequency high-value and high-frequency low-value transactions, reinforcing its commitment to becoming a pioneer of sustainable consumption. Management anticipates that scale effects will gradually drive improvements in operating profit margins starting next year, creating longer-term value.

For the third quarter of 2025, ATRenew anticipates total revenues to be between RMB 5.05 billion and RMB 5.15 billion, representing a year-over-year increase of 24.7% to 27.1%. The company expresses strong confidence in meeting its full-year operational objectives for 2025, driven by the belief that the circular economy model holds enduring potential. Management's mid-to-long-term goal is to increase 1PtoC retail revenue to 50% of total product revenues, up from 29% in Q4 2024. Furthermore, the company plans to double its offerings and consignment sales in 2025 by leveraging Paipai’s consignment capabilities. Over the next three years, ATRenew aims to establish a nationwide network of 5,000 stores and a 5,000-member door-to-door service team, ensuring a robust fulfillment network to cater to diverse recycling and trade-in needs.

Risks and Shareholder Value

While ATRenew's growth trajectory is compelling, investors should consider potential risks. The company operates in a competitive market with large e-commerce players like JD.com (JD), Alibaba (BABA), and Pinduoduo (PDD), which possess greater scale and resources. Although ATRenew differentiates itself through specialization and quality, it faces the ongoing challenge of maintaining its competitive edge and market share against these formidable rivals. Furthermore, while national subsidies are a significant tailwind, any changes in government policy or economic slowdowns impacting consumer spending could affect recycling volumes and retail demand. The company's expansion into lower-tier cities, where face-to-face fulfillment ratios are currently below 50%, presents both an opportunity and a challenge, requiring sustained investment in store density and staffing.

Despite these considerations, ATRenew is actively addressing shareholder value. The company repurchased approximately 1.6 million ADSs for USD 4 million in Q2 2025, bringing the total repurchases under its previous program to 12.3 million ADSs for USD 31.1 million. On June 30, 2025, the Board authorized a new share repurchase program of up to USD 50 million over 12 months. This commitment is further reinforced by a new 3-year shareholder return program, pledging to return no less than 60% of annual non-GAAP net profit to shareholders from 2025 through 2027 via dividends, share repurchases, or a combination. These actions, coupled with the company's strong financial reserves, underscore management's confidence in its business outlook and its dedication to enhancing long-term shareholder returns.

Conclusion

ATRenew Inc. stands at the forefront of China's burgeoning circular economy, strategically positioned to capitalize on the immense, underpenetrated market for pre-owned consumer electronics. The company's "scenario plus supply chain" strategy, bolstered by a rapidly expanding physical and door-to-door fulfillment network, is driving robust revenue growth and a clear path to sustained profitability. Its differentiated technological approach, particularly the integration of AI in quality inspection, provides a critical operational advantage, enhancing efficiency and user trust in a fragmented market.

With strong partnerships, an aggressive multi-category expansion, and a clear vision for brand leadership, ATRenew is not merely participating in the secondhand market; it is actively shaping its future. The commitment to shareholder returns, alongside ambitious ESG targets, further solidifies its appeal as an investment in a sustainable and growing sector. As China's consumption patterns evolve and national policies continue to stimulate trade-ins, ATRenew's foundational strengths and strategic execution position it for continued acceleration and long-term value creation.