Aterian (ATER) reported Q2 2025 results on August 13, revealing a 30.5% year-over-year decrease in net revenue to $19.5 million and a swing to a $2.2 million adjusted EBITDA loss from a $200,000 gain in the prior year period. Management announced progress on cost cutting, supply chain diversification, and a strategic pivot to higher-margin consumables, while reaffirming second-half 2025 guidance for $36 million to $38 million in net revenue and breakeven to a $1 million adjusted EBITDA loss for the six months ending December 31, 2025 (non-GAAP).

Tariffs disrupt Aterian’s core Amazon business

There was a sharp decline in sales velocity on Amazon, Aterian’s largest channel, as aggressive pricing adjustments to accommodate increased tariff-driven costs were met with price inaction from Amazon 1P (products first-party sourced by Amazon), eroding relative competitiveness. Despite the decline, the company’s products maintained best seller rankings in several categories, highlighting that overall category demand fell rather than a loss of share.

"A key operational dynamic of the Amazon Marketplace is that its algorithm rewards price stability. In Q2, we proactively adjusted our pricing to offset significant cost pressure. While these actions were essential to preserve our margins, they triggered a pronounced decline in our sales velocity through May and June. This algorithmic response, while understood, was particularly acute this quarter and was the primary headwind to our revenue. To this, our primary competition, specifically in our dehumidifier space and steam ops space, is Amazon 1P, meaning Amazon buys brands from brands directly and sells it as an online retailer. And in those segments, we saw Amazon did not raise prices significantly, if at all. As such, this made our product the higher-priced offering for the most part during May and June."
-- Arturo Rodriguez, Chief Executive Officer

The interplay between algorithm-driven pricing discipline and slow competitor response exposes Aterian to sustained market pressure, signaling that margin defense via price hikes can amplify volume risk with immediate impact on revenue and platform visibility.

Cost reduction and supply chain pivot yield early gains for Aterian

Management achieved $5.5 million in annualized fixed cost savings to date, primarily through headcount reductions, and began shifting dehumidifier manufacturing from China to Indonesia, decreasing Chinese-sourced production from 100% in 2024 to approximately 65% in 2025. The ongoing cost-out targets are paired with deploying artificial intelligence (AI) in customer service, with further AI-driven efficiency initiatives slated for announcement in September.

"As part of our immediate response to tariffs, we announced the fixed cost reduction initiative targeting $5 million to $6 million in annualized savings. To date, we believe we have secured approximately $5.5 million of those savings, of which $3.8 million is primarily coming from headcount reductions we implemented in May. And the remaining $1.7 million we expect to see from vendor savings taking effect throughout the rest of 2025. We expect to see the full vendor savings impact starting sometime in 2026. We continue to search for the remaining savings, which we believe can be secured over the coming six months. In parallel, our team is actively leveraging AI to enhance productivity. Our focus for AI today is on creating operating leverage and scale for future growth rather than immediate headcount reduction. For example, we successfully implemented AI in our customer service operations, which has improved service quality metrics even with a smaller team. We expect to make a separate announcement in September around our AI improvements in customer servicing leveraging AI."
-- Arturo Rodriguez, Chief Executive Officer

The ability to execute rapid cost reductions while maintaining operational resilience and integrating AI-driven efficiencies positions Aterian to operate with increased financial flexibility and scalability, particularly necessary under a volatile demand and regulatory environment.

Aterian accelerates shift toward consumables for margin resilience

Facing tariff exposure and volatile hardware demand, Aterian prioritized U.S.-sourced consumables—including the Q3 launch of Squatty Potty flushable wipes in the U.K. and U.S.—while confirming wider expansion in health and beauty verticals via its Healing Solutions brand. Management expects the U.S. origin of these goods to not only boost contribution margins above ex-China hardgoods.

"We believe our push into consumables is still a great strategic objective. Many of the items we're exploring can be sourced in the U.S. and carry better contribution margins than our current hard electronic goods. Further, the U.S. sourced nature of these goods will limit our exposure to continued risks around tariffs. In particular, we are seeing opportunities for consumables in the health and beauty space, and we expect to announce launches around the Healing Solutions brand in that space in October 2025. With that, we are very proud to announce the launch of the Squatty Potty flushable wipes."
-- Arturo Rodriguez, Chief Executive Officer

This strategic realignment diversifies the company’s revenue base into categories offering structural profitability advantages and lower exposure to geopolitical and supply chain shocks, advancing the investment case for long-term gross margin expansion.

Looking Ahead

Management guides for net revenue of $36 million to $38 million and adjusted EBITDA (non-GAAP) of breakeven to a $1 million loss in the second half of 2025, a marked improvement over first-half net revenue of $34.8 million and a $4.7 million adjusted EBITDA loss. Based on current liquidity and cost-saving measures, management does not expect to raise additional equity capital this year, as cash preservation remains a priority. October will see the announcement of additional U.S.-sourced health and beauty launches, and full benefit of cost savings is projected to phase in by 2026.