REAL Q2 Deep Dive: Supply Initiatives and AI Drive Growth, Margin Expansion Continues

August 11, 2025 at 09:38 AM EDT

REAL Cover Image

Secondhand luxury marketplace The RealReal (NASDAQ: REAL) reported revenue ahead of Wall Street’s expectations in Q2 CY2025, with sales up 14% year on year to $165.2 million. On top of that, next quarter’s revenue guidance ($168.5 million at the midpoint) was surprisingly good and 5.1% above what analysts were expecting. Its non-GAAP loss of $0.06 per share was $0.02 above analysts’ consensus estimates.

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The RealReal (REAL) Q2 CY2025 Highlights:

Revenue: $165.2 million vs analyst estimates of $159.5 million (14% year-on-year growth, 3.6% beat)
Adjusted EPS: -$0.06 vs analyst estimates of -$0.08 ($0.02 beat)
Adjusted EBITDA: $6.84 million vs analyst estimates of $3.46 million (4.1% margin, 97.5% beat)
The company lifted its revenue guidance for the full year to $670.5 million at the midpoint from $652.5 million, a 2.8% increase
EBITDA guidance for the full year is $30.5 million at the midpoint, above analyst estimates of $27.41 million
Operating Margin: -6%, up from -13% in the same quarter last year
Active Buyers : 1 million, up 620,000 year on year
Market Capitalization: $737.5 million

StockStory’s Take

The RealReal’s second quarter was marked by positive momentum, with the market reacting strongly to revenue and profitability outperformance. Management attributed these results to successful execution of its growth playbook, which included enhanced marketing investment, a revamped sales team compensation structure, and a series of in-person events that generated high-value supply. CEO Rati Levesque highlighted the company’s ability to attract new consignors and leverage data-driven strategies, stating, “Our new consignor growth is a leading indicator for supply.” The company’s focus on operational efficiency, including the rollout of AI-powered tools in authentication and listing processes, also contributed to improved margins and reduced costs.

Looking ahead, The RealReal’s updated guidance is underpinned by continued expansion of its supply channels, further adoption of AI-driven automation, and new partnerships with luxury vendors and international consignors. Management believes these efforts will sustain revenue growth and margin improvement, with CFO Ajay Gopal emphasizing, “We expect operating expenses to continue to be a source of leverage moving forward.” The company plans to scale its Athena AI platform across more product categories and increase investments in marketing and retail initiatives to maintain supply momentum.

Key Insights from Management’s Remarks

Management identified accelerated new consignor acquisition, operational efficiencies from automation, and successful marketing initiatives as the primary drivers of its strong second quarter and improved outlook.

New consignor momentum: The company achieved its highest-ever new consignor growth, driven by targeted marketing reinvestment, referral programs, and in-person pop-up events. Management noted that a quarter of new consignors now originate from retail locations, with recent store openings like Houston showing material increases in both sellers and supply.
AI-powered operational efficiency: The Athena AI platform now processes 20% of inbound items, with a target to reach 30%–40% by year-end. Management expects Athena to significantly reduce per-unit processing costs and speed authentication, with CFO Ajay Gopal citing “multiple dollars of cost” removed per item as the rollout expands.
Drop ship and supply innovation: The RealReal expanded its drop ship initiative from watches and handbags to fine jewelry, and plans to partner with luxury aggregators and international vendors in the second half of the year. These efforts are expected to unlock incremental high-value supply.
Sales team effectiveness: A shift in sales compensation to emphasize retail value over unit counts, combined with referral and Reconsign programs, has produced higher-quality appointments and more efficient supply acquisition. Management emphasized improvements in appointment quality and supply conversion rates as a result.
Category and pricing trends: The company benefited from higher average order values, partly due to increased prices in the primary luxury market and tariffs, which made resale more attractive. Jewelry, in particular, was described as “really hot right now,” showing both pricing power and demand resilience.

Drivers of Future Performance

Management expects sustained growth to be driven by scaling supply initiatives, AI automation, and deeper engagement with luxury partners and international markets.

AI and automation expansion: The company plans to broaden Athena’s reach to cover up to 40% of items by year-end, targeting further reductions in processing costs and more efficient authentication. Management believes ongoing investment in automation will continue to provide operational leverage and support margin improvement.
Supply channel diversification: The RealReal aims to grow its drop ship partnerships and extend its reach into international markets, bringing in new categories and higher-value inventory. Management sees these initiatives as key to supporting the projected double-digit revenue growth and maintaining a robust pipeline of consignors.
Macroeconomic and market factors: Management highlighted that pricing trends in the primary luxury market and tariffs could continue to favor resale, as consumers seek value and view their closets as assets. However, there is some risk that shifts in luxury demand or changes in consumer behavior could impact supply and transaction volume.

Catalysts in Upcoming Quarters

Looking ahead, the StockStory team will be tracking (1) the pace of Athena AI’s rollout and resulting reductions in processing costs, (2) the ability of new supply channels—especially drop ship and international partnerships—to sustain high consignor and buyer growth, and (3) the impact of ongoing marketing and retail investments on supply acquisition. Execution on expanding operating leverage and maintaining gross margin stability will also be critical benchmarks.

The RealReal currently trades at $6.48, up from $5.53 just before the earnings. Is there an opportunity in the stock?See for yourself in our full research report (it’s free).

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