Since the Labubu craze began, investors have wondered if the meteoric rise of Pop Mart, the maker of the ugly-cute dolls, was just a fad.

Pop Mart's first-half earnings will do little to convince the skeptics. Top-line growth slowed sharply and Chief Executive Wang Ning has warned that the company will likely miss its annual target.

Speaking on an earnings call on Thursday, Wang said the toy company encountered more difficulties than expected in the first six months, and probably won't deliver the 20% revenue growth it had hoped for this year.

Revenue climbed 24% during the first half to 17.17 billion yuan, equivalent to $2.55 billion, decelerating from the threefold increase seen a year earlier and missing expectations for a 37% rise, according to a Visible Alpha poll.

Net profit rose 10% to 5.04 billion yuan, also undershooting consensus views.

The results mark an acute downturn after a run of explosive growth that sparked a furious rally in Pop Mart's stock, catapulting its market capitalization past $56 billion at one point.

For two years, the Beijing-based company was on a roll, winning the hearts--and wallets--of global consumers with the gremlin-like Labubu dolls. But as the hype waned, so too has market enthusiasm.

Pop Mart's Hong Kong-listed shares are down nearly 20% so far this year. During 2025 and 2024, they doubled and more than quadrupled in value, respectively.

Wang attributed the weaker-than-expected performance during the first half to tepid consumer demand and difficulties stemming from geopolitical tensions.

Revenue from overseas dropped 11% on the year, weighing on the company's gross profit margin. International sales generally offer higher margins than those in Pop Mart's home market.

The Monsters collection--which includes the jagged-tooth Labubus--remained the biggest revenue contributor, accounting for about a quarter of overall sales in the first half, down from roughly one-third a year earlier.

Analysts remain split on the durability of Pop Mart's business model.

Deutsche Bank's Sammi Xu noted that demand for the latest generation of Labubus sporting long, styleable hair, has been much tamer than for previous iterations, while social media buzz has fizzled.

If that continues, Pop Mart might need a new product format or another celebrity-endorsed character to reignite consumer interest and the scarcity mindset that underpinned its earlier successes, the analyst said.

The company is betting it can do just that with a new character, Twinkle Twinkle.

Management said that the anthropomorphic, star-shaped character has been a hit with Asian customers, and has huge potential.

Twinkle Twinkle was Pop Mart's fastest-growing intellectual property in the first half, with sales surging over fivefold, contributing around 15% of group revenue.

The company also announced a share buyback of 2 billion yuan to 5 billion yuan, which Wang said was a show of confidence in its outlook.

While Pop Mart might scale down its revenue growth ambitions, the chief executive said the business is now much healthier and focused on prioritizing long-term development over sales growth.

Whether Pop Mart can repeat the record-setting success of Labubu remains to be seen, but some analysts think the company could ultimately become a Disney-esque business.

"We believe Pop Mart has strong potential to become an IP powerhouse," Morningstar's Jeff Zhang said in a recent note.

Concerns over slowing revenue growth and declining resale prices for Labubus have dragged on Pop Mart's valuation, but Zhang reckons investors are reading the wrong signal.

"Resale prices do not reflect the underlying strength of Pop Mart's business," he said. "Instead, we look at repeat-purchase and membership data that track real fans, which supports the verdict that Pop Mart can extend its characters' popularity."