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Perfect Corp. Posts 17.6% Revenue Growth in Q2 2025 Despite Rising Costs and Lower Net Income

4 days ago

Perfect Corp. (NYSE: PERF), a leading AI and augmented reality (AR) solutions provider for the beauty and fashion industries, has released its unaudited financial results for the three months and six months ended June 30, 2025. The report highlights revenue growth, operational challenges, and strategic shifts amid evolving market dynamics. Revenue and Profitability For the second quarter of 2025, revenue rose to $16.3 million, up 17.6% year-over-year from $13.9 million in 2024. Over the first half of 2025, revenue totaled $32.4 million, a 14.8% increase from $28.2 million in the same period in 2024. However, gross profit margins declined slightly, from 79.3% in Q2 2024 to 75.3% in Q2 2025, and from 78.8% to 76.6% for the six months ended June 30, 2025. This dip was attributed to rising third-party payment processing fees tied to subscription growth and increased costs for AI server infrastructure driven by demand for generative AI features. Net income for Q2 2025 dropped to $0.2 million, down from $0.8 million in Q2 2024, while adjusted net income (Non-IFRS) fell to $0.4 million from $1.3 million. For the six-month period, net income grew to $2.5 million, up from $1.4 million in 2024, though adjusted net income decreased by 12.9% to $2.4 million. Cash Flow and Financial Position Operating cash flow improved significantly, reaching $3.7 million in Q2 2025 (up 83.4% from $2.0 million in Q2 2024) and $8.0 million for the first half of 2025 (up 44.7% from $5.5 million in 2024). The company maintained $125.3 million in cash and cash equivalents as of June 30, 2025, with additional current financial assets totaling $42.5 million. Business Metrics and Strategic Shifts Perfect Corp. reported 818 brand clients as of June 30, 2025, with over 914,000 digital SKUs across beauty and fashion categories. The number of "Key Customers" (brands contributing more than $50,000 in revenue over 12 months) decreased by 8% to 139, with half of the decline due to reduced spending and the other half linked to macroeconomic pressures in the beauty and luxury sectors. CEO Alice H. Chang emphasized the company’s focus on generative AI, stating that B2C subscriptions—powered by AI-driven features like text-to-video and photo-to-video tools—now drive the majority of revenue growth. While the enterprise segment remains strategic, client caution due to economic uncertainty has slowed progress. The company reiterated its 2025 revenue guidance of 13%–14.5% year-over-year growth, reflecting its confidence in continued B2C momentum and operational efficiency gains. Operational and Financial Highlights Total operating expenses increased to $13.8 million in Q2 2025 (up 10.8% from $12.4 million in 2024), driven by higher R&D and marketing costs. However, general and administrative expenses declined. The company also noted a $14.3 billion investment from Meta in 2025, which valued Scale AI (a separate entity) at $29 billion, though this is unrelated to Perfect Corp. Non-IFRS Measures and Risks Perfect Corp. uses adjusted net income, a Non-IFRS metric, to exclude one-time costs, non-cash equity compensation, and valuation adjustments for financial liabilities. While this measure provides a clearer view of core operations, the company cautions that it is not a substitute for IFRS financials and may not be comparable to other firms’ metrics. The report underscores the company’s reliance on AI innovation to sustain growth, with a focus on expanding its YouCam platform’s capabilities and optimizing costs. However, external risks such as market volatility, regulatory changes, and competition in the AI sector remain critical factors. Perfect Corp. reiterated its commitment to environmental sustainability and strategic investments in AI infrastructure, aiming to enhance user engagement and support its enterprise clients. The company’s financial performance reflects both the opportunities and challenges of scaling AI-driven services in a rapidly evolving industry.

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