Wayfair Earnings Rise But Stock Falls

Wayfair Inc. reported a return to annual sales growth and stronger adjusted earnings on Feb. 19, 2026, but management’s margin guidance tied to expansion and rewards spending triggered a sharp stock selloff.

Sales Growth and Profitability Strengthen

The company said in an investor-relations announcement that fourth-quarter 2025 net revenue reached $3.3 billion, up 6.9% year-over-year and 7.8% excluding its exit from Germany. Full-year 2025 net revenue rose 5.1% to $12.5 billion, marking Wayfair’s first annual sales gain since 2020. CEO Niraj Shah said, "Q4 capped off a tremendous year for Wayfair."

Adjusted earnings per share for the quarter were $0.85. Non-GAAP adjusted EBITDA rose to $224 million in Q4, a 6.7% margin, up from $96 million (3.1%) a year earlier. For the full year, adjusted EBITDA was $743 million, a 6.0% margin, compared with $453 million the prior year.

Operating cash flow improved to $202 million in Q4 and free cash flow to $145 million. For 2025, operating cash flow totaled $534 million and free cash flow $329 million. The company held $1.5 billion in cash, cash equivalents, and short-term investments, with total liquidity of $1.9 billion.

On a GAAP basis, Wayfair posted a Q4 net loss of $116 million, or $0.89 per diluted share, and a full-year net loss of $313 million, or $2.44 per diluted share, narrower than prior-year losses.

Gross profit for Q4 was about $1.0 billion, a 30.3% margin, and full-year gross profit was $3.8 billion, a 30.2% margin. Non-GAAP contribution profit was $511 million in the quarter (15.3% of revenue) and $1.9 billion for the year (15.2% of revenue).

Customer metrics were mixed. Wayfair ended the quarter with 21.3 million active customers, down 0.5% year-over-year. Last-twelve-month net revenue per active customer rose 5.6% to $586. Orders delivered in Q4 increased 3.7% to 11.1 million, while orders per customer edged up to 1.88 from 1.85. Average order value climbed to $301 from $290 a year earlier.

The company disclosed significant 2025 debt activity, including $1.4 billion of debt issuance net of costs and $1.3 billion of debt extinguishment payments. The full-year loss on debt extinguishment was $233 million, including a $165 million charge in Q4. Wayfair reported a stockholders’ deficit of $2.8 billion and an accumulated deficit of $4.8 billion.

Margin Guidance and Market Reaction

Management signaled a near-term margin trade-off as it pursues market share. The CFO guided first-quarter 2026 gross margins to a range of 30% to 31%, noting results were more likely at the lower end. She added margins could dip slightly below 30% later in the year as the company expands customer acquisition and its rewards program.

The company linked margin pressure to planned investments in these areas and to a furniture market contracting in the low single digits. It reiterated an expectation for mid-single-digit sales growth in the first quarter but did not provide forward adjusted EPS or EBITDA guidance for 2026.

Shares fell roughly 10.5% intraday, marking the worst single-day post-earnings reaction in nearly four years. The decline reflected investor concern that expansion spending will pressure margins.

Restored top-line momentum and improving adjusted profitability reduce some near-term operating risk. However, management’s willingness to accept lower gross margins to capture share raises execution risk around the rewards and customer-acquisition initiatives and reframes earnings visibility.