By end of August, all six listed new-style tea beverage companies had released their interim results.
Mixue continued to lead by a wide margin with revenue of 15.216 billion yuan, but as its new CEO Zhang Yuan predicted at the end of March, gross margin fell for the first time under comprehensive slowdown measures, ultimately staying near the 30% threshold he estimated. Guming found new growth in the coffee market, overtaking Chagee with 7.47 billion yuan in revenue to take the No. 2 spot in the industry. Auntea and ChaPanda continued to grow in lower-tier markets, while Nayuki remained mired in losses.
After its 2025 earnings were released, Chagee founder Zhang Junjie apologized to the market at a briefing, admitting the team underestimated the impact of the delivery war on its offline store base, and announced plans to appropriately slow the frenetic pace of domestic expansion.
Missing the delivery war put the brakes on Chagee's rapid expansion. But does the end of the subsidy battle mean everyone can return to the same starting line?
Forced to slow down, Chagee entering 2026 began confronting its transformation challenge: shifting from rapid territory expansion via franchising to a wave of direct operation. On one hand, it took back some loss-making stores; on the other, it changed its cooperation model with franchisees from selling goods to taking a 17% cut of GMV. On the product side, Chagee moved from a 'back-to-basics' hero-product strategy to 'frenzied new product launches.'
Consumers' direct impression is that Chagee is experiencing its fastest-paced new product season. The brand launched 17 new products in Q2, a record for a single quarter. But in the same quarter, Chagee also lost nearly 3 million active members.
After six months of major adjustments, Chagee's Q2 interim results remain contradictory: on one hand, the headline numbers are striking, with GAAP net profit surging to 464.8 million yuan from 77.2 million a year earlier. But on the other, the decline in Greater China per-store GMV has yet to be halted. Additionally, due to franchise network adjustments and changes to the cooperation model, Chagee's net revenue from franchise stores plunged to 2.474 billion yuan from 3.02 billion.
As the industry shifts from competing on scale to competing on per-store quality, do Chagee's drastic moves mean the brand has found a new rhythm of its own?
If you only look at the most eye-catching figures in the financial report, Chagee's Q2 operating income grew 387.6% year over year, and GAAP net profit jumped from 77.2 million to 464.8 million.
But that surge needs to be viewed against the special circumstances of the year-ago period. In Q2 2025, Chagee had just completed its IPO, incurring large stock-based compensation and professional service fees. It generated nearly 630 million in profit, but after paying up to 550 million in IPO-related incentive and other expenses, reported profit was just over 70 million. In Q2 this year, non-GAAP net profit fell below 490 million, but without the 550 million expense burden, reported net profit surged year over year.
Screenshot from Chagee's official website; same below.
When placed in the 2026 context, core operating metrics show varying degrees of warning signs.
The Q2 report shows Chagee's total store count still grew 8.5%, but Greater China GMV fell to 7.1563 billion yuan from 7.8679 billion yuan a year earlier. Average monthly GMV per store declined to 338,000 yuan from 356,000 yuan in Q1 this year.
An objective fact is that prime locations are finite and the number of domestic milk tea consumers has largely stabilized. Store count is rising, but the overall pie is shrinking, so each store gets a smaller slice. The economies of scale from rapid store expansion in recent years have gradually turned into diseconomies of scale.
Management is not unaware. After releasing 2025 results, Chagee explicitly said it would not simply pursue rapid growth in 2026, but would return to a high-quality operating cycle, prioritizing same-store sales recovery. However, based on the half-year report, the decline in same-store performance has not yet been halted.
Management disclosed at the meeting that "same-store sales in July fell by a low single-digit percentage," describing it as "a meaningful improvement from the first half," while hoping for a return to positive year-over-year growth in August.
The decline in per-store profitability is not just a challenge for Chagee; it reflects a sector-wide chill across the new-style tea beverage market in 2026.
Nayuki's directly operated stores saw declines in average daily sales per store, order volume and average ticket size. Mixue didn't disclose store-level data, but based on Dingjiao One's calculation of shipment revenue to franchisees divided by ending store count, each store contributed about 273,000 yuan on average in the first half of 2025, falling to about 231,000 yuan in the first half of 2026 — a roughly 15% decline in per-store contribution.
Source: Nayuki Q2 earnings report.
Guming is the exception. Both per-store GMV and cup counts posted positive growth. The company attributed the gains to better store quality and incremental sales from new product lines such as coffee, which partly offset the negative impact of the delivery war.
Source: Guming Q2 earnings report.
By contrast, Chagee's per-store decline is narrowing, but it remains clearly far from a turnaround.
Consumers feel the urgency most in Chagee's product strategy. The brand, which once relied on its blockbuster drink Boya Juexian to sweep the market, is now launching new products at an unprecedented pace.
Chagee has been sprinting not just in Q2 — which management said set records on the earnings call — but throughout the first nine months of 2026: from a matcha series in January to Da Hong Pao in February; Longjing Genmaicha and tea specials in April; five-province regional exclusives and Geelato Italian-style gelato tea in May; and from June to August, new Geelato flavors, kombucha, lemon milk, sparkling tea specials and an iced-brew version of an older product followed in quick succession.
Brands may hope that a high-density product launch cadence will revive market momentum, but the question remains whether frequent new-product releases truly translate into better same-store performance and revenue.
The supply-chain pressure from high-frequency launches has yet to be fully assessed, but the pattern of 'more launches, fewer customers' is already visible in earnings.
At its March earnings call, Chagee said the 'Return to Yunnan' product line launched in December 2025 reactivated 51% of dormant members and drove a 16.2% sequential increase in overall GMV. But an easily overlooked detail is that the 2025 annual report also revised the definitions of dormant and active members, expanding the measurement scope from its mini-program to third-party platforms such as Taobao Flash Purchase and Meituan, where a single order within a given period counts as active.
Source: Chagee 2025 annual report.
Under the new definition, active members stood at 44.7 million at the end of 2025, rising to 50 million in Q1. But despite a barrage of new products in Q2, Chagee's active member count fell back to 47.1 million, a loss of nearly 3 million in a single quarter, suggesting diminishing marginal returns from product launches.
Even as Chagee overhauls its product lineup, its relationship with franchisees is also being restructured.
This year, Chagee reformed its franchisee fee structure, charging a uniform brand-service fee equal to 17% of store GMV, cutting ingredient costs by 20-40%, and eliminating various fixed fees. With headquarters revenue now directly tied to store GMV, the model shares risk and is designed to protect the majority of franchise stores that can still operate, avoiding a wave of mass closures.
This model is described as a transformation from 'supplier' to 'partner.' Looking at Q2 results alone, revenue from the franchise business fell sharply, dropping 18% from 3.02 billion yuan to 2.474 billion yuan. During the same period, Chagee's franchise store count remained broadly stable, while Greater China GMV declined only 8%.
The difference between the two is essentially the concession Chagee makes to franchisees.
According to DoNews, Chagee has rolled out two solutions for underperforming stores: 'optimization' lets franchisees relocate to lower-rent locations, while 'store acquisition' has the company buy out the store and convert it from franchise to company-operated. LatePost also reported: "Last spring, franchisees all wanted to sell their stores to Chagee, but Chagee was only willing to take stores losing less than 20%."
The shift to company-operated stores is selective, and whether deeply loss-making outlets can recover under the partnership model remains uncertain.
Meanwhile, operating costs for company-operated stores jumped to 566.8 million yuan from 184.1 million yuan, with the number of directly operated stores at home and abroad nearly quadrupling from a year earlier, lifting costs for frontline managers, staff, rent, equipment and other items.
The combination of falling franchise income and rising store costs suggests Chagee is determined to move away from its asset-light franchise model, which earned supply-chain margins, and gradually build a heavier base of company-owned stores. At this crossroads, Chagee clearly prefers to follow Heytea in strengthening brand control through direct operations, rather than fall into Nayuki's asset-heavy quagmire.
But this is bound to be a harder path. Chagee must contend with industry-wide declines in per-store sales while absorbing the costs of transitioning to a heavier asset structure.
For Chagee, the biggest hope clearly lies overseas.
Overseas GMV reached 504 million yuan in Q2, up 114.3% year on year, with overseas store count expanding to 399. Since Q2 2025, overseas GMV has risen sequentially for four consecutive quarters.
In April, Chagee entered the South Korean market, while a clip of Jang Won-young tasting Chagee in Guangzhou earlier this year went viral online again, drawing queues at its newly opened stores in South Korea.
Investors are closely watching these impressive figures, hoping the company can replicate its formula of turning viral content into offline sales in more countries. But objectively, Chagee's overseas revenue of just over 500 million yuan accounts for less than 10% of its total revenue of more than 7 billion yuan. It serves more as a sentiment boost for investor confidence and is far from enough to offset the decline in its domestic business in the near term.
The drastic personnel and capital shifts in the Q2 report show Chagee has made major organizational changes: at the headquarters level, it is cutting costs, with pure salary expenses for administration and R&D teams reduced by 48 million yuan, brand and marketing teams by 31.1 million yuan, and other organizational adjustments by 30.2 million yuan.
At the end of the earnings call, CFO Huang Hongfei revealed that the board and management are considering a capital return plan, including regular dividends. Combined with the previously executed $30 million share buyback, the company appears to be signaling to investors that even if the recovery in store performance is slow, ample cash flow can still protect shareholder interests through dividends and buybacks.
The pledge appeared to calm market sentiment. On the day of the earnings release, the stock rose 4.35%, maintaining its market value of $2.06 billion.
Halfway through 2026, a series of moves by Chagee show that the era of relying on blockbuster products and an asset-light franchise model to achieve miracles through sheer force has come to a definitive end.
Among peers, Guming used its new coffee category to achieve positive same-store growth and a 44% profit increase, while Auntea Jenny's 42% revenue growth proved there is still room in lower-tier markets. On the path Chagee has chosen, product development has found a rhythm but the impact of new launches is unproven, resources for franchisees and stores are being reallocated, overseas scale remains small, and key financial metrics have yet to show real results — though they are not the sole measure of performance.
During the Q&A session, Zhang Junjie explicitly characterized 2026 as a year of adjustment and stabilization. He stressed: "Our core goal this year is not rapid scale expansion, but to lay a stronger foundation for sustainable growth in the next phase."
For now, Chagee's cash flow and rapid overseas growth still buy it time for this transformation, but the hard part of reform is clearly far from over. Until a real turning point arrives, the company will have to keep enduring the pain in pursuit of stability.