Chagee Holdings (NasdaqGS:CHA) Margin Compression Fuels Bearish Narrative After Q3 2025 Results

Chagee Holdings (NasdaqGS:CHA) has posted its Q3 2025 numbers with revenue of C¥3.2b, basic EPS of C¥2.07 and net income of C¥394.2m, giving investors a fresh read on both scale and profitability. Over recent quarters the company has seen revenue move from C¥3.0b in Q2 2024 to C¥3.5b in Q3 2024, then hold around C¥3.3b to C¥3.4b across Q4 2024 and Q1 2025 before landing at C¥3.2b in Q3 2025, while quarterly EPS has ranged from C¥5.88 in Q2 2024 to C¥6.58 in Q1 2025 and C¥2.07 in the latest quarter. With trailing 12 month revenue of C¥13.3b, EPS of C¥5.52 and net margin at 5.8% versus 17.6% a year earlier, the focus this quarter is on how investors weigh top line scale against compressed profitability.

See our full analysis for Chagee Holdings.

With the numbers on the table, the next step is to see how this earnings profile lines up against the widely followed growth and margin narratives around Chagee Holdings.

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TTM margin drops from 17.6% to 5.8%

• Over the last 12 months, Chagee earned C¥768.9m of net income on C¥13.3b of revenue, which works out to a 5.8% net margin compared with 17.6% a year earlier, even though trailing revenue grew 19.3% over that same period.
• What jumps out for the bearish narrative is that this margin compression sits alongside a larger teahouse base, rising to 7,338 locations by Q3 2025, which critics argue could mean heavier operating costs and weaker same store economics.
  • Bears point to non GAAP G&A moving from 9.1% to 13.4% of revenue and pressure on same store GMV as evidence that costs and competitive intensity are eating into profitability despite gross margin of 53.8%.
  • At the same time, the latest quarterly net income of C¥394.2m compares with much higher trailing 12 month earnings a year earlier of C¥1.96b, which bearish investors see as consistent with their view that earnings power has come under pressure.

Stay on top of how margin trends affect each side of the debate before deciding how much risk you want to take on 🐻 Chagee Holdings Bear Case

P/E of 15.5x with 27.6% EPS growth forecast

• Chagee trades on a trailing P/E of 15.5x, slightly above the peer average of 14.8x but below the US Hospitality group at 20.3x, while the dataset indicates earnings are forecast to grow about 27.6% per year and revenue about 10.6% per year.
• Supporters of the bullish view argue that combining this P/E with a 19.3% trailing revenue lift and the growth forecasts makes the current valuation look undemanding, especially when set against a DCF fair value of US$28.40 and a share price of US$9.33.
  • What really supports the bullish angle is that the DCF fair value is well above both the current price and an allowed analyst target reference of US$18.62, which suggests a wide gap between modelled value and where the stock trades.
  • The bullish narrative also leans on expectations that net margin could rise from the current 5.8% level, so if those forecasts play out alongside the existing 7,338 store network, bulls see room for earnings to grow into or beyond the current P/E.

If you want to see how growth, margins, and valuation tie together in the optimistic case, check out the full bull story 🐂 Chagee Holdings Bull Case

Store count climbs to 7,338 teahouses

• Chagee’s reported store base expanded from 5,828 teahouses in Q3 2024 to 7,338 in Q3 2025, while quarterly revenue over that span moved in a band between C¥3.0b and C¥3.5b, landing at C¥3.2b in the latest period.
• Analysts’ balanced narrative treats this combination of a larger network and mid C¥3b quarterly revenue as a mixed signal, because rapid roll out across Southeast Asia and Greater China is meant to support revenue, yet the trailing margin slide to 5.8% suggests that not all of the new stores are translating into proportionate earnings.
  • On one hand, the consensus view highlights that international expansion into markets like Malaysia, Thailand, Indonesia, the Philippines and Vietnam is intended to shift the mix toward higher growth regions, which fits with the 19.3% trailing revenue growth.
  • On the other, the same narrative flags that non GAAP G&A at 13.4% of revenue and reliance on franchise income at 87.6% could limit how much of that larger footprint ultimately shows up in net income if per store productivity does not improve.

Next Steps

To see how these results tie into long-term growth, risks, and valuation, check out the full range of community narratives for Chagee Holdings on Simply Wall St. Add the company to your watchlist or portfolio so you'll be alerted when the story evolves.

With bullish and bearish voices both making strong points, it helps to see the full picture for yourself and decide where you stand. To weigh up both the upside and the concerns in one place, review the company’s 3 key rewards and 1 important warning sign

See What Else Is Out There

Chagee’s compressed net margin from 17.6% to 5.8% alongside heavier non GAAP G&A and mixed store economics highlights meaningful pressure on profitability and risk.

If you are uneasy about that kind of squeeze on earnings quality, shift your focus toward companies screened for resilience and financial strength using the 64 resilient stocks with low risk scores

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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