From the “China’s No. 1 Beauty Stock” listed in the U.S. stock market with a peak market value of over 100 billion yuan, to being trapped in a loss black hole, with shrinking market value and fading halo, the parent company of Perfect Diary, Yatsen E-commerce (hereinafter referred to as “Yatsen”), has experienced a tumultuous five years.

After shedding the bubble of the new consumer era, this beauty company founded by three post-80s men is undergoing a fierce transformation and sprint.

On March 2, 2026, Yatsen released its full-year financial report for 2025. The report shows that its revenue grew by 26.7% to 4.3 billion yuan, with losses narrowed by 87%. Under the Non-GAAP standard, it finally achieved its first annual profit since listing, with a net profit of 8.4 million yuan.

According to the financial report, in the first quarter of 2026, revenue is expected to be between 960 million yuan and 1.08 billion yuan, representing year-over-year growth of approximately 15% to 30%.

Another key point is that Yatsen’s gross profit margin has been rising in recent years, increasing from 68% in 2022 by 10 percentage points to 78.2% in 2025. This level of gross margin is approaching that of international luxury brands.

If we only look at financial indicators, this company seems to have completed a standard process of “stopping bleeding—repair—returning to rational growth.” Meanwhile, a new financing of over 800 million yuan is also in the pipeline. On March 11, Yatsen announced the issuance of $120 million in convertible preferred notes through a private placement, jointly subscribed by founder Huang Jinfeng and Xinchen Capital under CITIC Capital.

The conversion price is set at $4.63 per share, a significant premium over Yatsen’s current stock price. This at least implies two things: first, the founder is willing to put real money on the line, believing that the company’s value is undervalued and optimistic about future growth; second, the involvement of Xinchen Capital, as a global industrial capital, can help Yatsen integrate its global supply chain and expand into overseas markets, potentially injecting new momentum into the company.

Today, Yatsen has become a slice of China’s beauty industry transformation. When traffic dividends disappear, almost all players in the Chinese beauty industry are answering the same question—if not through advertising and blockbuster products, what else can drive growth?

Perfect Diary can still sell 1 billion a year, but its growth engine has changed

Regarding this financial report, founder Huang Jinfeng said, “We are pleased to end 2025 with steady performance, demonstrating the long-term value of our strategic transformation.”

If we only look at superficial data, Yatsen still appears to be a growing company. But when we dissect the structure, we find that the growth engine has shifted.

In 2025, revenue from its skincare business increased by 63.5% year-over-year, accounting for more than half; whereas the core—color cosmetics—basically stagnated, even declining in some quarters.

Looking at the data for Q4 2025, the advantage of the skincare business is even more evident, with net revenue up 51.9% to 842 million yuan, accounting for 61.1%, an increase of over 12 percentage points year-over-year.

This indicates that the phase where Perfect Diary-based makeup was the main driver has ended, and Yatsen has now shifted to a “skincare-driven” model.

Evaluating a consumer goods company cannot rely solely on growth rate; it’s essential to look at the “underlying drivers” of that growth. Around 2020, Yatsen was almost the textbook example of “new consumption.” Perfect Diary used an extremely efficient traffic model to achieve a cold start, through intensive KOL marketing, social media content seeding, followed by rapid product launches and replication of hit products. This model is closer to “traffic arbitrage,” gaining attention more efficiently, then converting it through products.

But traffic has a “half-life.” As customer acquisition costs double, users are tired of being “seeded” and “market-educated.” For categories like color cosmetics, with low unit prices, weak loyalty, and high dependence on trends, the LTV (lifetime value) of users can no longer cover acquisition costs. From this perspective, the unprofitable makeup business, driven by capital, has become a negative asset.

Yatsen has already made a choice: shifting categories to gain new momentum. Unlike Proya, which incubates big products internally, or Betadine, which builds medical trust systems, Yatsen’s approach is simpler and more direct—“buy.”

From 2020 to 2021, Yatsen successively acquired brands like Galénic (Kolanli), DR.WU (Darfur), and EVE LOM, which carry keywords like: high-end, scientific research, professional, with deeper heritage.

For example, Galénic was founded by a French pharmacist in the late 1970s, focusing on “cell-level anti-aging”; EVE LOM was founded by professional beauticians in 1986, with its “cleansing cream” gaining good consumer loyalty worldwide.

Yatsen’s strategic layout at its peak is gradually maturing into new “muscle.”

But it’s worth noting that in 2025, the full-year growth of the color cosmetics business was only 1.9%, and in Q4 it declined by 9.1%. Compared to the 51.9% surge in skincare, this drag on overall performance is clear. In 2025, Yatsen’s color cosmetics revenue (including Perfect Diary, Xiao Aoting, Peko Bear) was about 2 billion yuan, with Perfect Diary contributing 1 billion yuan. Although growth has stagnated, the core of Perfect Diary remains large, providing stable cash flow for the group.

Yatsen’s growth continues, but no longer from horizontal traffic expansion, rather from vertical brand repositioning.

However, risks are also evident. Yatsen’s growth is not endogenous or continuous; it’s “fragmented, leveraging, and reassembled.”

Profits have returned, but not easily

Changes in revenue structure represent a “directional shift,” while profit changes reflect the “execution results.”

The biggest improvement in the 2025 financial report is the significant narrowing of losses. But at the same time, the combination of a 78.2% gross profit margin and a 64.8% sales expense ratio in Q4 remains a set of data that the capital market is watching.

In traditional consumer goods logic, a 78% gross margin suggests the brand has entered the luxury or high-end cosmetics tier, which should translate into higher net profit margins. L’Oréal’s gross margin typically stays between 72%-74%, but its net profit margin is usually above 15%.

Why does Yatsen achieve a gross margin of 78%, yet only have a net profit of 8.4 million yuan?

Because, although it is no longer spending wildly, it still pays high costs for “traffic path dependence.”

Currently, Yatsen’s products (skincare brands) are already quite profitable, but traffic acquisition still requires competition. Especially in Q4 2025, to maintain its share during the Double 11 shopping festival, Yatsen’s sales expense ratio rebounded to 64.8% from 60.1% a year earlier. In contrast, Proya, through a focus on “big single product” strategy, makes it easier for core users to automatically associate “buy early C, buy late A” with Proya, reducing dependence on advertising for each purchase; Betadine (Vinoona) also builds trust through its medical attributes.

Therefore, comparing the gross profit margins of the three in 2025, Yatsen’s margin is the highest (78.2%), but due to its high sales expense ratio (64.8%), which is 10 percentage points higher than Betadine’s (54.2%), its profit quality is significantly lower. Its Non-GAAP net profit margin in 2025 is only 2%, and the brand is still at breakeven.

Yatsen holds a bunch of good brands, but has yet to form a “mental anchor” that can support its growth. Different brands lack synergy. Consumers may accept Kolanli’s high unit price more because of its brand gene and high-concentration VC ingredients, but the conversion power brought by the group brand is limited.

Every growth cycle may require re-purchasing traffic, and without a well-established mental model, profits remain thin. This is also why the capital market remains cautious about it.

Narrow gates, no shortcuts

Often, brand longevity resembles a relay race. Before traffic models completely fail, building real product capabilities—through repurchase and word-of-mouth—creates a positive feedback loop, crossing to the safer side.

Yatsen’s transformation is on this critical path.

It is no longer a single influencer brand company, but it still has a distance from a truly product-driven company. This brings it to a new critical zone: its past high-growth ability is a thing of the past, but the new growth engine has yet to stabilize.

Halfway through, Yatsen can only keep moving forward.

The financial report shows that its R&D investment ratio increased from 2.3% to 2.8% in Q4 2025, approaching the level of top international giants in expense ratio. But the absolute gap remains large. L’Oréal’s annual R&D investment is more than 15 times Yatsen’s cumulative seven-year investment.

Turning losses into profits is only the first step. For Yatsen, many challenges lie ahead. For example, can it develop super single products like Proya’s “Double Anti” or Estée Lauder’s “Little Brown Bottle” on brands like Kolanli or EVE LOM? Can the brands achieve synergistic growth, driving continuous growth in skincare and reviving the cosmetics category?

By the end of 2025, Yatsen’s cash, restricted cash, and short-term investments totaled 1.05 billion yuan, down from 1.36 billion yuan a year earlier. Its operating cash flow in 2025 was a net outflow of 94.7 million yuan, still bleeding but significantly improved from the previous net outflow of 243.7 million yuan.

In 2025, Yatsen’s cash flow was “initial positive, then negative”—inflows in the first half, but in the fiercely competitive Double 11 season, it still needs ongoing marketing investment to sustain growth.

For all new consumer brands, Yatsen remains a highly instructive example—a case still searching for answers.

For Yatsen, the profit in 2025 is like a supply of water in this long-distance race. After passing through the narrow gate, there are no shortcuts ahead.