Yatsen (NYSE:YSG) reported second-quarter 2026 revenue growth of 5.1% as continued strength in its skincare portfolio offset a sharp decline in color cosmetics sales, while higher inventory provisions and increased marketing spending widened the company’s losses.
Total net revenue rose to RMB1.14 billion from RMB1.09 billion a year earlier. Founder, Chairman and CEO Jinfeng Huang said the result reflected continued progress in the company’s strategic transformation despite a challenging competitive environment for China’s beauty industry.
Skincare Becomes the Dominant Revenue Driver
Revenue from Yatsen’s skincare brands increased 40.4% year over year during the quarter and accounted for 71.5% of total net revenue. That performance was partly offset by a 35.8% decline in revenue from color cosmetics brands, which management attributed to deliberate brand portfolio optimization and SKU rationalization.
Huang said the shift in the revenue mix toward skincare represents a move toward “higher quality, more sustainable growth.” The company continued to invest in research and development, with R&D expense representing 3.3% of total revenue in the quarter, broadly consistent with the prior-year period.
During the quarter, Yatsen expanded product offerings across its skincare portfolio. Galénic launched an Active Eye Cream under its Couture Révélation Cellulaire line; DR.WU introduced three essence masks targeting oil control, hydration and soothing care; and Eve Lom expanded its second-generation Vital Dew range with a hydration cream and skin infusion serum.
Management also cited brand-building activities, including a DR.WU livestreaming event with cctv.com that attracted a cumulative audience of 178 million viewers. Galénic held a summer campaign pop-up event on Wuzhizhou Island in Sanya, while Eve Lom participated in the British Beauty Festival.
Margins and Losses Widen
Gross profit declined 0.8% year over year to RMB843.8 million, while gross margin fell to 73.9% from 78.3%. Huang and CFO Donghao Yang said the decline was primarily related to higher inventory provisions in the color cosmetics business amid portfolio optimization and SKU reductions.
Huang said that excluding the impact of the one-time inventory provisions, underlying gross margin would have been roughly stable from a year earlier.
Total operating expenses increased 7.7% to RMB975.7 million, or 85.4% of revenue, compared with 83.4% a year earlier. Selling and marketing expense climbed to RMB807.6 million, representing 70.7% of revenue, from RMB722.4 million, or 66.5% of revenue, in the prior-year period.
Yang said the increase reflected investments to build consumer awareness and long-term brand equity for the company’s core skincare brands, along with higher traffic acquisition costs on Douyin as Yatsen pursued growth opportunities on the platform.
Fulfillment expenses declined to RMB56.1 million from RMB63.3 million, which Yang attributed to improved logistics efficiency. General and administrative expenses fell to RMB74.8 million from RMB84.1 million, primarily due to lower share-based compensation expenses.
- Operating loss: RMB131.9 million, compared with RMB55.5 million a year earlier.
- Non-GAAP operating loss: RMB112.1 million, compared with RMB20.4 million a year earlier.
- Net loss: RMB90.8 million, compared with RMB19.5 million a year earlier.
- Non-GAAP net loss: RMB99.4 million, compared with non-GAAP net income of RMB11.5 million a year earlier.
Net cash used in operating activities was RMB78 million, compared with RMB77.7 million of cash generated from operations in the prior-year quarter. As of June 30, Yatsen had RMB1.06 billion in cash, restricted cash and short-term investments, compared with RMB1.05 billion at the end of 2025.
Channel Diversification and Marketing Efficiency
During the question-and-answer session, newly appointed Co-Chief Financial Officer Li Wang said expanding distribution channels will be important to the next stage of growth for Yatsen’s skincare brands.
Wang said the company plans to supplement its core Tmall and Douyin channels with online business-to-business platforms including JD, Vipshop and TBD, as well as offline distribution, duty-free and professional channels. She said such channels generally have lower traffic costs and can support a healthier profitability profile.
DR.WU has already demonstrated that a higher business-to-business sales mix can support both growth and profitability, Wang said, adding that Yatsen intends to selectively apply that model to other skincare brands. The company is also pursuing differentiated formats, including Galénic boutique stores in premium department stores and shopping malls, and DR.WU distribution through over-the-counter drugstore channels.
To address rising online traffic costs, Wang said Yatsen is directing more resources toward higher-growth and higher-return skincare brands, expanding professional and business-to-business channels, and improving content creation, customer relationship management retention and budget allocation. The company is also using AI agents as part of efforts to strengthen financial discipline and marketing efficiency.
“The goal is not to cut investment blindly,” Wang said. “Our goal is to support strong skincare growth with better efficiency and stronger profitability over time.”
Third-Quarter Outlook and Finance Leadership Update
For the third quarter of 2026, Yatsen expects total net revenue of between RMB898.6 million and RMB998.4 million, representing a year-over-year decline of approximately 0% to 10%.
Huang also announced that Wang Li was appointed Co-Chief Financial Officer effective immediately. Wang has more than 15 years of experience in the consumer and beauty industries and most recently served as CFO of Proya Cosmetics, according to Huang. She will work alongside Yang to support cost-structure optimization, resource allocation and the company’s pursuit of sustainable profitable growth.
About Yatsen (NYSE:YSG)
Yatsen Holding Limited (NYSE: YSG) is a Shanghai-based beauty and personal care company founded in 2016. The firm operates as a digital-first cosmetics provider, designing, developing and marketing its own brands to a primarily Chinese consumer base. Since its inception, Yatsen has focused on leveraging data analytics and social media engagement to drive product innovation and brand awareness.
The company’s core portfolio includes Perfect Diary, a color-cosmetics brand offering lipsticks, eyeshadows, foundations and related accessories; Little Ondine, which specializes in nail lacquers and nail care products; Winona, a sensitive-skin skincare line; and Abby’s Choice, which features targeted skincare treatments.
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