GigaCloud Technology Inc. Q2 FY2026 earnings call

Core Marketplace Performance & Market Share Gains

• Trailing 12-month GMV grew 21% year-over-year to $1.7 billion as of Q2 end 2026
• Active third-party sellers increased 26% to 1,465; active buyers grew 17% to 12,823, strengthening platform network effects
• Domestic U.S. GMV grew 9% year-over-year, significantly outperforming the broader declining U.S. furniture industry, driven by gains in market share
• The supplier-fulfilled retailing model and dynamic pricing tools enable quick adaptation to changing market conditions across business cycles

International (Europe) Expansion Progress

• Europe is a key strategic growth and diversification priority, with quarterly GMV growing 66% year-over-year
• The company is replicating its proven U.S. flywheel strategy: 1P product supply attracts initial buyers, which drives 3P seller participation
• European 3P sellers grew more than 400% year-over-year, and 3P now accounts for over 15% of European marketplace GMV, indicating accelerating momentum

M&A Integration Progress

• The New Classic acquisition integration is progressing on schedule, following the proven playbook used for the earlier Noble House acquisition
• New Classic's year-over-year sales decline improved from 20% in Q1 to 8% in Q2, reflecting operational stabilization
• Early integration work has focused on aligning teams, systems, and processes; small-scale new product introductions have already begun, with broader rollouts planned over coming quarters
• New Classic adds strong branding, established customer relationships, and brick-and-mortar distribution that complements GigaCloud's existing digital capabilities

Financial & Capital Allocation Update

• The company remains debt-free with $379 million in total liquidity as of Q2 end
• The company accelerated opportunistic share repurchases during Q2's share price decline, retiring $30 million in shares; an additional $18 million in buybacks were completed after quarter end
• The board approved a new $120 million, 3-year share buyback plan, replacing the expiring existing plan with remaining capacity
• Near-term M&A priority is full integration of New Classic; additional acquisitions will be pursued once integration is further along

GigaCloud reports total Q2 2026 revenue of $412 million, a 28% year-over-year increase, with 23% organic growth and 5% inorganic growth from the New Classic acquisition. Service revenue grew 25% year-over-year to $121 million, contributing 29.4% of total revenue; service gross margin improved 3.2% sequentially to 11.7%. Product revenue grew 29% year-over-year to $291 million, contributing 70.6% of total revenue; product gross margin held steady at 31.4% quarter-over-quarter. U.S. product revenue grew 17% year-over-year despite broader industry softness, with New Classic contributing $16.3 million in Q2 revenue (an 8% year-over-year decline, an improvement from 20% decline in Q1). European product revenue grew 54% year-over-year to $109 million, making Europe a large, high-growth regional contributor. Combined total company gross margin was 25.6%, a 1.7% sequential increase. Net income hit a quarterly record of $42 million (10.3% of revenue), up 22% year-over-year, with diluted GAAP EPS of $1.16, up 28% year-over-year.

• Third quarter 2026 revenue is guided to a range of $375 to $400 million, which includes the expected inorganic revenue contribution from New Classic. Management expects continued operational stabilization and performance improvement at New Classic as integration progresses. Service margin cost visibility is strong due to locked-in long-term ocean freight contracts, but volatility in spot market pricing prevents definitive forecasts of further margin expansion for the remainder of 2026. Product and service operations act as a natural hedge against ocean freight cost fluctuations: higher spot rates benefit service margins, while any product cost increases are passed through to product pricing to preserve margins. European 3P growth is expected to continue accelerating as the regional marketplace flywheel gains momentum, with logistics margin gaps relative to the U.S. expected to close gradually as scale increases.

• Ongoing softness and uncertainty in the U.S. cross-border furniture industry creates pressure on top-line growth and operating performance • Ocean freight spot rates are volatile due to global geopolitical and economic conditions, creating uncertainty around future service and product margin trajectories • Integration of acquired businesses like New Classic carries execution risk, and initial ownership disruptions can negatively impact short-term sales performance • European logistics infrastructure is still scaling, and lower current density relative to the U.S. keeps regional service margins lower than domestic margins in the near term • Any future M&A carries integration risk that could strain internal resources if not properly timed and executed

Q: How has GigaCloud been impacted by potential tariff refunds, and what is the expected long-term financial effect?

A: GigaCloud has applied for tariff refunds and received a portion of the requested amounts to date. The total amounts received so far are not material to overall results. Management expects tariff refunds will not have a meaningful long-term impact on GigaCloud as a whole, because the company will not be able to retain all of the potential economic benefits after passing through adjustments to affected customers.

Q: How does GigaCloud view Amazon's new supply chain as a service offering, and how does GigaCloud differentiate itself?

A: GigaCloud continuously monitors competitive logistics developments, but its value proposition extends far beyond basic transportation. GigaCloud combines its B2B large-parcel marketplace with fully integrated logistics solutions purpose-built for B2B large parcel commerce, and it operates as a completely channel-agnostic neutral platform that supports fulfillment across multiple sales channels. This unique combination differentiates GigaCloud's offering from Amazon's broader logistics network.

Q: What is the timeline and current stage of New Classic integration, and when can larger scale new product launches be expected?

A: The first two quarters of integration have focused on combining teams, aligning processes, and integrating core systems, rather than running New Classic as a standalone business. Small-scale new product introductions have already begun, but significant large-scale launches will take additional quarters. Following the timeline of the previous Noble House acquisition, it typically takes 3-4 quarters to complete initial integration and see meaningful pickup from new product offerings, due to the lead time required for product development, ordering, shipping, and sales.

Q: What types of acquisition targets will GigaCloud pursue after New Classic integration, and what is the strategy around European acquisitions?

A: After New Classic integration is complete, GigaCloud will prioritize three categories of targets: 1) traditional product distributors/wholesalers with established brick-and-mortar retail relationships that expand GigaCloud's market reach; 2) technology companies that add new capabilities to better serve GigaCloud's customer base (such as the 2023 Wonder acquisition); 3) European logistics targets to support accelerating regional growth by scaling needed infrastructure faster than organic development. European logistics acquisitions would be considered on a case-by-case basis, weighing benefits against integration costs and resource demands.