Chagee Holdings Limited (NASDAQ: CHA), a leading premium tea drinks brand, saw its stock plummet 5.45% in pre-market trading on Friday following the release of its second-quarter 2025 financial results. The sharp decline comes as the company's revenue fell short of analyst expectations, overshadowing a significant earnings beat.

For the second quarter ended June 30, 2025, Chagee reported total net revenues of RMB 3.33 billion ($465.1 million), representing a 10.2% increase from the same period last year. However, this figure missed the FactSet analyst estimate of RMB 3.67 billion. The company's non-GAAP diluted earnings per share came in at RMB 3.30 ($0.46), surpassing the analyst consensus estimate of $0.09 by a wide margin, but still down from RMB 3.55 in the same quarter of 2024.

Despite the impressive earnings beat, investors appear to be focusing on the revenue miss and some concerning trends in the company's operations. Chagee's same-store GMV (gross merchandise value) growth turned negative, declining by 23.0% year-over-year in Greater China. This significant drop, coupled with a decrease in average monthly GMV per teahouse in Greater China to RMB 404,352 from RMB 537,954 a year ago, suggests potential challenges in the company's core market. Additionally, while Chagee continued to expand its teahouse network, reaching 7,038 locations (a 40.9% year-over-year increase), the slowing GMV growth raises questions about the effectiveness of this rapid expansion strategy in driving sustainable revenue growth.