The RealReal's Strong Q4 2025 Results Mask Underlying Profitability Concerns

What happened

The RealReal announced fourth-quarter and full-year 2025 results, surpassing $2 billion in GMV and exceeding its financial guidance, with GMV up 22% and revenue up 18% year-over-year. Accelerated active buyer growth highlights improved marketplace activity, yet these top-line gains do not fully address the durability issues flagged in the DeepValue report. The report notes that while execution is improving, with a consignment-first mix and higher take-rates, profitability remains non-durable due to ongoing GAAP losses and reliance on one-time gains like debt extinguishment. Critical risks such as authentication errors, legal challenges, and intense competition persist, threatening the trust-based moat central to the business model. Thus, management's strategic pivot shows progress, but sustained cash generation and margin stability are still unproven.

Implication

The exceeding of guidance and GMV growth supports the turnaround narrative and may boost short-term investor confidence in The RealReal's execution. However, the reliance on one-time items in recent earnings suggests core operations still struggle with consistent profitability, as highlighted in the DeepValue report. Key watch items, such as unit economics and consecutive quarters of positive cash flow, must be monitored to confirm that margin expansion is sustainable. Authentication and legal risks remain material, and any adverse developments could erode the trust moat essential for the marketplace. Therefore, while the stock might experience positive momentum, a cautious HOLD approach is warranted until more concrete signs of financial health emerge.

Thesis delta

The positive Q4 2025 results reinforce the improvement in execution noted in the DeepValue report, such as GMV growth and guidance exceedance, but do not substantially alter the thesis that profitability is not yet durable. Investors should await confirmation of sustained cash generation and stable take-rates over multiple quarters before considering an upgrade from HOLD to BUY.