Over the past year, the market narrative for Chagee had become fixated on singular interpretations such as "growth deceleration," "franchisee pressure," and "declining per-store sales," with "peak theory" gaining significant traction. The release of its 2026 first-quarter financial results on May 29th provided the most direct counterpoint to this near-year-long debate. The latest report shows that for the first quarter of 2026, Chagee's total GMV reached RMB 7.918 billion, an 8.1% increase quarter-over-quarter. Total revenue was RMB 3.546 billion, marking a 4.5% year-over-year growth. Adjusted net profit stood at RMB 507 million, corresponding to an operating profit margin that improved to 17.1%. The company has now achieved profitability for 13 consecutive quarters, indicating a clear rebound in its key operating metrics. Concurrently, the overseas business sustained its high-growth momentum, with GMV from international markets reaching RMB 426 million during the period, a surge of 139% year-over-year. Furthermore, the simultaneous opening of three stores in South Korea on April 30th signals the accelerated realization of its second growth curve. From accelerating product launches in Q1 to the breakout success of the innovative Geelato category in Q2, Chagee is advancing towards a deeper strategic layout of "single brand, multiple categories, multiple scenarios." While many remain fixated on whether year-over-year per-store data has turned positive, others are witnessing a different picture: a young consumer brand that has been sprinting for nearly five years is, at an industry inflection point, proactively hitting the brakes on scale expansion to internally recalibrate its operational structure and organizational capabilities, undergoing the necessary "active calibration period" on its path from a "local brand" to a "global consumer brand."
Stabilizing the Domestic Core and Improving Operational Quality
During the 2025 annual earnings call, Chagee's management candidly reflected that the organizational inertia formed during the period of rapid territorial expansion was insufficient to support the new phase of refined management and deep operations. At that time, facing external skepticism about "slowing growth," management chose to "do the difficult but right thing"—sacrificing short-term explosive growth for a more stable, long-term foundation. This strategic resolve was fully validated in the 2026 Q1 results. The report indicates that the recovery in the domestic market is not a simple data rebound but the result of a deep restructuring of the operational logic. During the reporting period, Chagee's GMV in China reached RMB 7.491 billion, a 7.8% increase quarter-over-quarter, with same-store GMV growth improving for two consecutive quarters, showing a nearly 10-percentage-point improvement this quarter. This improvement is not merely a seasonal bounce. Since the second half of 2025, Chagee has proactively optimized its organizational structure and updated its business model, most notably shifting its franchise model from traditional raw material supply and commission to a GMV-sharing model, deeply aligning brand and franchisee interests. The quarter-over-quarter improvement in same-store GMV in Q1 is a signal that this new mechanism is taking effect—only when franchisees are genuinely profitable can the brand sustain its earnings. This trend aligns with management's assessment during the previous fiscal year's earnings call, where executives noted that recent domestic same-store sales data had already shown a trend of sequential improvement and provided a full-year expectation of "stabilization in the first half and recovery in the second half." The Q1 data appears to validate this outlook. Simultaneously, Chagee has significantly accelerated its product innovation pace, successfully transitioning from a "single brand, blockbuster product" strategy to a "single brand, multiple categories, multiple scenarios" approach. Since 2026, the company has launched several new product series, including matcha and Da Hong Pao. The "Awakening Spring Mountain" series returned in early April, and a strategic partnership was formed with the Zhejiang Agricultural Technology Extension Center. By May, the company had launched a total of 13 tea-based specialty beverages, covering various tea bases like yellow tea, Bingdao Pu'er, yerba mate, and kombucha. More significantly, the Geelato series launched in May 2026, a new category combining original leaf tea with Italian gelato techniques, debuted in nine stores across five cities: Shanghai, Shenzhen, Beijing, Chengdu, and Wuhan. During the Labor Day holiday, Geelato was piloted at the Shanghai Wukang Road store, driving a significant quarter-over-quarter increase in that store's performance. Amid the industry-wide price war quagmire of 2025, Chagee demonstrated strategic resolve by "not blindly following the crowd." Although management admitted to underestimating the impact of delivery subsidies on offline sales, leading to short-term revenue pressure, its commitment to a high-value positioning ultimately validated the resilience of its business model. As competitors began to reflect on the detrimental effects of low-price competition, this resolve translated into the impressive results in the 2026 Q1 report—13 consecutive quarters of profitability, a significant rebound in adjusted operating profit margin to 17.1%, and a robust cash reserve exceeding RMB 7 billion, providing ample financial strength to navigate market cycles.
Accelerating High-Quality Global Expansion and Unlocking New Growth Ceilings
If the domestic market adjustments are about "strengthening internal capabilities," then the rapid progress in overseas markets represents the splendid execution of Chagee's "going global" strategy. The international market has become the company's "second growth engine." Following multiple quarters of over 75% year-over-year growth, overseas GMV growth in 2026 Q1 further accelerated to 139%. Its geographical expansion has been equally robust. By the end of March 2026, Chagee had entered markets including Singapore, Malaysia, Thailand, Indonesia, the Philippines, Vietnam, and the United States, with a total of 374 overseas stores. On April 30, 2026, three stores opened simultaneously in South Korea, followed by two more in May, officially expanding its overseas footprint to eight countries. In Thailand, stores have expanded from Bangkok to Chiang Mai, and in Indonesia, to Bali. On May 8th, the first store in Macau, China, officially opened, with daily member growth during the trial operation period peaking at 318% sequentially. These figures signal a clear message: Chagee's overseas operations have transitioned from a "testing the waters" phase to a "scale validation" phase. Unlike many brands that expand overseas relying solely on low prices or replicating domestic models, Chagee's globalization strategy exhibits strong "localization" intelligence. In Southeast Asian markets, compliance is a primary barrier. In countries with majority Muslim populations like Indonesia and Malaysia, Chagee ensured cultural fit and legal security by establishing joint ventures with local giants and obtaining Halal certification. This posture of fully respecting local religion and culture has won the respect and trust of local consumers. On the product front, Chagee adheres to an "80% core menu + 20% local adaptation" strategy. In South Korea, the market with the world's highest per capita coffee consumption, Chagee emphasizes its "Extracted Tea" series, using espresso techniques to brew tea, targeting the breakfast scene and competing directly with coffee giants. In the Philippines, it opened pet-friendly stores to cater to the local pet-loving culture. In Malaysia, it offers more low-sugar, healthy fruit tea options. This flexible localization strategy allows Chagee to integrate into local community lifestyles rather than remaining merely a foreign symbol. Notably, Chagee has not blindly pursued franchise expansion overseas. Instead, it insists on direct operation or joint-venture control for the first three to five years in new markets. This "quality over quantity" resolve not only ensures absolute control over brand experience and operational standards but also elevates the overseas business beyond mere scale extension, making it an important vehicle for exporting Eastern tea culture. In the long run, this effectively avoids brand image dilution and lays a solid foundation for establishing a profitable single-store model and enabling subsequent global replication.
Reshaping Internal Capabilities Through "Active Calibration": The Inevitable Path to Cycle Navigation
Over the past year, the market's pessimistic judgment of Chagee largely stemmed from a simplistic mindset—measuring its current performance against the past benchmark of "doubling growth annually." When same-store data fluctuated, the external narrative habitually interpreted it as "the beginning of brand decline." This interpretation overlooked a key fact: Chagee proactively applied the brakes on scale expansion. Starting in the second half of 2025, the company strategically slowed its new product launch pace, optimized its organizational structure, and shifted its business model. This "phased adjustment" was not a passive retreat but an "active calibration" to solidify its supply chain, franchise system, and organizational efficiency. Any global consumer brand experiences growing pains when transitioning from a high-growth "youth" phase to a "maturity" phase. Reviewing the growth histories of international giants like Starbucks and McDonald's, they all reached a point where they shifted from a "land grab" pursuit of store count to "intensive cultivation" focused on per-store profitability and brand substance. Chagee's current focus on "settling down to strengthen internal capabilities" is a manifestation of following this objective business law. The "2026 New Tea Beverage Industry White Paper" indicates that China's new tea beverage sector has completely moved past its野蛮 growth period and officially entered a new phase of scaled, deep cultivation. The industry's growth logic has shifted from "scale expansion" to "deepening the existing base," meaning companies must abandon blind worship of short-term scale and return to business fundamentals. Only those willing to sacrifice some short-term growth rate in exchange for long-term health can build truly impregnable moats in the current era of stock competition. The Q1 report suggests this "decelerate first, then accelerate" strategy is working. The sequentially improving data proves that temporary pain has yielded a healthier operational foundation. Institutional assessments are also adjusting accordingly, with several institutions upgrading their ratings for Chagee. J.P. Morgan noted that "the worst of same-store sales declines is over." The resonance of internal and external data indicates that Chagee is steadily emerging from its trough, and the resilience of its operational foundation is being repriced.
Conclusion
Chagee's 2026 Q1 financial report is essentially a progress report from a young consumer brand after undergoing an "active calibration period." From this report, the market can clearly see the shift in its strategic focus: the domestic core is stabilizing through refined operations, while the overseas business has become the second engine for performance growth. The dual-engine-driven structure of "domestic stability + overseas breakthrough" is taking shape. This aligns with management's long-term vision of 'building a tea beverage brand originating from China and belonging to the world.' Short-term fluctuations in same-store data will eventually smooth out. What truly enables a company to withstand cyclical risks is the brand value, organizational capability, and user trust it accumulates over time. In this sense, Chagee's Q1 report is not the endpoint of a "reversal" story but the starting point of a "marathon" story.
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