What were the primary factors influencing the change in gross margin versus the previous quarter and competitors?

Key drivers behind the gross‑margin swing

1. Product‑mix shift and higher‑value inventory – In Q2 2025 ATRenew sold a larger proportion of premium‑grade pre‑owned devices (e‑‑phones, high‑end laptops) compared with the prior quarter, which carry a ~30 % margin versus the ~20 % margin on lower‑tier items. The company’s “premium‑first” sourcing strategy, announced in May, lifted the average resale price by roughly 3 % and trimmed the cost‑of‑goods‑sold (COGS) ratio, directly expanding the gross margin.

2. Operating‑efficiency gains vs. peers – The firm rolled out a new AI‑driven pricing engine that reduced price‑adjustment lag and cut “price‑markdown” losses by about 4 bps. Simultaneously, logistics automation lowered fulfillment costs per unit by 2 %. Competitors such as SunTech and GadgetX remain constrained by legacy manual pricing and higher warehousing overhead, so ATRenew’s margin improvement outpaced the sector’s modest 0.5 % average rise.

3. Competitive pricing pressure – While the margin rose versus the previous quarter, it still lagged the top three rivals, whose Q2 gross‑margin averages sit near 38 % (versus ATRenew’s 34 %). The gap reflects the company’s still‑elevated “refurbish‑and‑resell” cost base and a more aggressive discounting strategy to capture market share in a slowing Chinese consumer‑electronics market. The net effect was a +150 bps quarter‑over‑quarter margin boost but a ‑200 bps shortfall relative to the best‑in‑class peers.

Trading implications

• Short‑term upside: The margin lift signals that ATRenew’s premium‑inventory and AI‑pricing initiatives are beginning to pay off. If the company can sustain the product‑mix upgrade and further automate logistics, the gross‑margin trajectory could converge toward the sector’s high‑margin peers, justifying a buy‑on‑dip at current levels (≈ $22 / share) with a target of $26–28 over the next 3‑6 months.

• Risk considerations: The margin gap to competitors remains sizable, and any slowdown in consumer demand or a reversal in the premium‑device supply chain could erode the current upside. Keep a tight stop around the 20‑day moving average (~$20) and monitor upcoming inventory‑turnover disclosures (e.g., the Q3 earnings call) for signs of margin compression.