Zepp's 'Hybrid Training' Pivot Fuels Growth, but Memory Costs and a Slower Q2 Guide Test the Story
Q1 revenue soars 33.8% with margin expansion even as the company absorbs memory-cost and currency headwinds; the focus shifts to whether the strategic shift to 'hybrid training' can sustain pricing power.
ZEPP · Earnings Call · 2026-09-01
The structural turn
Zepp Health delivered a Q1 that looks like validation of a long-gestating repositioning. Revenue climbed 33.8% year over year to $51.5 million, and gross margin expanded to 37.7% — even as the company worked through higher memory-component costs and unfavorable currency swings. Management frames this not as a cyclical bounce but as proof of a deeper shift: “Delivering this level of growth in a seasonally quieter quarter further enforces our conviction that the market opportunity we are capturing is structural rather than cyclical.” — Wang Huang, Executive · 2026-09-01That conviction rests on the company's push into what it calls hybrid training. Over the past year, Zepp has repositioned its Amazfit brand around athletes who blend endurance, strength, and recovery. The new 3-year exclusive HYROX partnership is the most tangible expression of that ambition. As CEO Wang Huang put it:
We believe 1 of the most important opportunities is the moment when a user moves from casual tracking to more serious training.
That “moment” is now the company’s addressable market, with HYROX participation growing at marathon-like scale.The early evidence supports the strategy. The T-Rex Ultra 2, at $549, is the highest-priced watch Amazfit has ever sold, and it's selling alongside entry-level Active models. ASP rose more than 20% year over year, and management notes that premium T-Rex models accounted for nearly half of T-Rex family unit sales in March and April. This is exactly the brand positioning required to offset the constant cost pressure from the memory chip cycle.
The cost to get there
The margin picture is not without strain. CFO Leon Cheng Deng acknowledged that the company absorbed higher memory costs and faced an FX drag. “Despite these headwinds, we still delivered year over year gross margin expansion, while gross profit increased 35.3% to US$19.4 million.” — Leon Cheng Deng, Executive · 2026-09-01 But the memory problem is not going away. The industry-wide transition to DDR5 and high-bandwidth memory is squeezing supply, and costs will remain a “real headwind,” as Deng said. The company has secured supply through diversified sourcing and engineering tweaks, but it is also facing a competitive market that is beginning to raise selling prices. In a prior call, Deng noted: “we noticed that our competitors are also raising price and not to mention Garmin, right? But we -- compared with a lot of our competitors, our pricing at this point of time is still relatively low.” — Leon Cheng Deng, CEO · 2026-06-08 That gives Zepp room to pass through costs, but it also limits the pricing power the company hopes to wield.Perhaps more concerning is the Q2 revenue guidance of $63–68 million, which implies growth of only 6–14%. After a 34% quarter, that deceleration is stark. Management attributes it to normal shipment timing and product launch phasing, with 1–2 product launches slipping into Q3. The market must decide whether this is genuine lumpiness or an early sign that the hybrid-training rocket is cooling.
What's actually new
The strategic pivot itself is not entirely new — Zepp has been pushing into sports and performance since 2023. But the current call deepens the commitment with an exclusive HYROX partnership and a clearer product architecture: Balance, Cheetah, and T-Rex lines now map directly to strength, running, and outdoor endurance. The keyword trajectory reflects this: “hybrid training” jumped from nothing to a top theme in 20262. And the company has been consistent about its cost discipline — but the shift toward more premium products is the real engine.On the balance sheet, the company ended the quarter with $103.2 million in cash and total debt stable, having retired $46.7 million of debt since 2023. It also repurchased $17 million under its $20 million program, signaling conviction.Part of that discipline is a reminder from the past: in 2025, the company had to manage tariff volatility and supply constraints. In the prior call, Deng explained, “we have actually communicated our dual sourcing strategy, whereby we supply majority of the products in the U.S.A. from Vietnam” — Leon Cheng Deng, Executive · 2025-11-05 — a hedge that is still critical while trade policy remains uncertain.memory cost inflation is the gravitational force pulling on the story. It is not unique to Zepp; the entire industry is feeling it. But Zepp's ability to offset it via product mix and pricing power will decide whether the growth is sustainable. The Q1 numbers suggest they have room to run, but the guide for Q2 is a reminder that execution risk remains.