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Date

Thursday, February 19, 2026 at 8 a.m. ET

Call participants

  • Chief Executive Officer and Cochairman — Niraj Shah
  • Cofounder and Cochairman — Steve Conine
  • Chief Financial Officer and Chief Administrative Officer — Kate Gulliver
  • Head of Investor Relations — Ryan Barney

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Takeaways

  • Revenue Growth -- Net revenue increased 6.9% year over year on a reported basis and 7.8% excluding Germany exit impact, with U.S. up over 7% and international up nearly 4%.
  • Adjusted Gross Margin -- Adjusted gross margin reached 30.3% of net revenue, described as steady within the 30%-31% target range, but expected to dip slightly below 30% later in 2026.
  • Contribution Margin -- Contribution margin was 15.3% for the quarter, 250 basis points higher than 2024 due to improved ad spend efficiency.
  • Adjusted EBITDA -- Adjusted EBITDA totaled $224,000,000 with a 6.7% margin, more than double the amount achieved in 2024.
  • Full-Year Adjusted EBITDA -- For the full year, adjusted EBITDA grew over 60% to $743,000,000, with margin up more than 200 basis points.
  • Free Cash Flow -- Free cash flow was $145,000,000 for the quarter, representing more than 40% year-over-year growth.
  • Liquidity -- Cash on the balance sheet was $1,500,000,000, and total liquidity reached $1,900,000,000 including the revolving credit facility.
  • Net Leverage -- Net leverage dropped below 2.5x, compared to approximately 4x at year-end 2024 and over 6x at the close of 2023.
  • Wayfair Rewards Membership -- The paid loyalty program surpassed 1,000,000 members, with more than 15% of Wayfair U.S. revenue driven by members, and recent cohorts comprising over 50% nonactive customers.
  • Retail Store Expansion -- New large-format stores are scheduled to open in Atlanta and Denver (~150,000 sq. ft.), and a smaller store in Columbus (~70,000 sq. ft.) in proximity to existing fulfillment centers.
  • Guidance for Q1 2026 -- Management guided to mid single-digit revenue growth, gross margin in the 30%-31% range (low end expected), contribution margin around 15%, SOT G&A of $360,000,000-$370,000,000 (likely at the low end), and adjusted EBITDA margin of 4.5%-5.5%.
  • Equity Management -- Over $100,000,000 of principal on 2027 convertible notes repurchased, with combined 2027 and 2028 buybacks offsetting over 5,000,000 shares of potential dilution.
  • AI and Technology Integration -- CEO Shah stated, "AI is really an unusual opportunity in that you can improve quality, improve speed, and reduce cost all at the same time," outlining current internal efficiency use cases and external partnership strategies.
  • Physical Retail Impact -- The Chicago store drove a 30% outperformance in frequency categories versus similar DMAs, and contributed to over 10% compound annual revenue growth in Illinois since opening.
  • Customer Spend and Engagement -- Average annual customer spend with Wayfair (W 5.14%) is approximately $600 across two shopping occasions, in contrast with the typical $3,000 spent on home annually; the company targets higher share of wallet via retail and loyalty initiatives.

Summary

Management allocated resources toward initiatives designed to accelerate revenue and EBITDA growth independently of macroeconomic tailwinds, highlighting both retail expansion and technology enhancements as core pillars for ongoing share gains. Leadership communicated a focus on compounding top-line gains through integrated programs including the Wayfair Rewards loyalty expansion, with over half of recent new memberships sourced from previously inactive customers. Balance sheet strength was emphasized through a material reduction in net leverage, targeted debt repurchases that offset share dilution, and a meaningful decline in burn rate. The company guided to sustained profit margin momentum for the next quarter, with an explicit expectation for continued margin expansion driven by structural efficiency and fixed-cost leverage. Technology initiatives, particularly AI-driven process automation and supplier enablement, were highlighted as ongoing productivity levers.

  • Shah described upcoming launches of Wayfair Delivery Plus and Perigold Rewards as further drivers to deepen category penetration and customer loyalty.
  • Expansion in physical retail showed continued success in acquiring new customers, with the mix of new shoppers at stores exceeding 50%.
  • Management noted participation as an "early partner" with AI technology leaders to enable optimal visibility of Wayfair’s catalog and commerce capabilities in emerging agentic environments.
  • The company signaled its ability to grow adjusted EBITDA margin above 10% on a sustained basis, regardless of the timing of a broader home-category recovery.

Industry glossary

  • DMA: Designated Market Area — a geographic market defined for measuring media viewership or sales trends.
  • CastleGate: Wayfair's proprietary supplier-fulfillment program and logistics network supporting inventory and fast delivery.
  • Agentic Surface: AI-driven interfaces or platforms (such as LLM agents) capable of executing commerce transactions or facilitating user engagement with brands directly.
  • SOT G&A: Selling, Operations, Technology, and General & Administrative expenses — a specific operating expense category used in Wayfair’s financial reporting.
  • Contribution Margin: Variable profit after direct costs including fulfillment and advertising, serving as Wayfair’s key measure of cost efficiency.

Full Conference Call Transcript

Ryan Barney: Today, we will review our fourth quarter 2025 results. With me are Niraj Shah, cofounder, chief executive officer, and cochairman; Steve Conine, cofounder and cochairman; and Kate Gulliver, chief financial officer and chief administrative officer. We will all be available for Q&A following today's prepared remarks. I would like to remind you that our call today will consist of forward-looking statements, including, but not limited to, those regarding our future prospects, business strategies, industry trends, and our financial including guidance for the 2026. All forward-looking statements made on today's call are based on information available to us as of today's date.

We cannot guarantee that any forward-looking statements will be accurate, although we believe that we have been reasonable in our expectations and assumptions. Our 10-K for 2025 and our subsequent SEC filings identify certain factors that could cause the company's actual results to differ materially from those projected in any forward-looking statements made today. Except as required by law, we undertake no obligation to publicly update or revise any of these statements whether as a result of any new information, future events, or otherwise. Also, please note that during this call, we will discuss certain non-GAAP financial measures, as we review the company's performance, including contribution profit, contribution margin, adjusted EBITDA, adjusted EBITDA margin, and free cash flow.

These non-GAAP financial measures should not be considered replacement for should be read together with GAAP results. Please refer to the investor relations section of our website to obtain a copy of our earnings release and investor presentation which contain descriptions of our non-GAAP financial measures and reconciliations of non-GAAP measures to the nearest comparable GAAP measures. This call is being recorded and a webcast will be available for replay on our IR website. I would like to now turn the call over to Niraj. Thanks, Ryan.

Niraj Shah: Good morning, everyone. We are pleased to talk with you this morning to discuss our fourth quarter results. Q4 capped off a tremendous year for Wayfair Inc. With revenue growing 7.8% year over year, excluding the impact of Germany. This growth was evenly split between order growth and AOV expansion, both of which grew more than 3%. We had our third consecutive quarter of new customer growth, on top of healthy growth in repeat orders, all in the face of a category that contracted in the low single digits for the final quarter of the year.

2025 was a year where we returned to growth and accelerated throughout the year through a number of organic business strategies that can compound for years to come. Numerically, this was characterized by two important themes. Our share taking and top line growth overwhelming the drag of the macro, and the substantial flow through of that growth to the bottom line. We expect our top line growth and flow through to adjusted EBITDA to be the bedrock of our story for years to come. The opportunity in front of us is considerable. We are playing in a category that is nearly half $1,000,000,000,000 in the US, Canada, and the UK.

The space is highly fragmented, filled with either large retailers that do not focus on home goods or pure play competitors that cannot match our scale and the benefits we bring to both our customers and our suppliers. Our company was built around the idea that we could leverage technology to build a large business in an underserved retail category by being innovative in how we serve customers and by continually making our customer experience better. Through our history, this simple, though hard to execute strategy worked, and as a result, we saw it lead to rapid organic growth and an ever larger business through the wonders of compounding.

Niraj Shah: Earlier today, we published our annual shareholder letter, where Steve and I explore the three core levers of our growth in 2026 and beyond. One, improving our core recipe of selection, price, availability, and speed of delivery. Two, inventing and scaling new business initiatives, which can meaningfully contribute. And three, leveraging technology to improve how we operate, how our suppliers build their business on our platform, how customers engage with us. We are focusing on activating the true power of our technology organization and the AI-driven enhancements we plan to bring to the shopping experience customers have at Wayfair Inc. We talked about that at length on our third quarter call with our CTO, Fiona Tan.

I would encourage anyone that did not have the chance to go back and listen to that. Technology underpins everything we do and is the key enabler as we scale some of our newest growth drivers. I would like to spend time talking about two of these today: our physical retail portfolio and our loyalty program, Wayfair Rewards.

Niraj Shah: 2026 will mark a major milestone in our evolution with the launch of our next set of Wayfair stores. You have heard us talk at length about the major points of success we have had in our store just outside of Chicago for nearly two years now. More than half the customers that have come through the store have been entirely new to file, and we have seen continued post-store visit lift on sales in the surrounding area. That journey will continue with the launch of our next store in Atlanta, early this year, followed by our stores in Columbus and Denver.

These will carry over many of the core design themes that have resonated so well with customers in Chicago. Atlanta and Denver will be in the 150,000 square foot range, while Columbus will be a smaller format, roughly 70,000 square feet. Each store will showcase the true breadth of our catalog in a variety of special ways and you will find some of the favorites from Chicago, like the Dream Center and shower wall, appearing in our Atlanta store as well.

Niraj Shah: This is a hallmark example of our ability to drive cost-effective execution at scale. We already have years of investment across the most significant areas a retailer needs to be: our brand, our fulfillment and delivery capabilities, our supplier relationships, and our curated offerings. The incremental cost here is simply the cost of the stores themselves. These stores are all located in relatively close proximity to one of our fulfillment centers. When customers purchase large parcel items, those products can show up on their doorstep in a matter of days rather than weeks. And, of course, there is a vast selection of cash and carry items in the stores themselves.

Many investors have asked about the working capital needs to fill the stores. That is another area where our unique platform model shines. The products in the stores are largely owned by our suppliers exactly like items stored in CastleGate. In many ways, the store functions as a new form of consumer marketing, with the product offering and inventory provided by our suppliers, who have been very keen to put their items on our shelves.

Niraj Shah: From the beginning, one of our objectives with physical retail has been growing share of wallet among our shoppers across all categories, and also notably when it comes to frequency items. Today, customers are on average spending roughly $600 per year on Wayfair Inc., across two shopping occasions, out of the roughly $3,000 they spend on their homes in total each year. Part of the story is one of awareness. Walking through a physical store gives every shopper a broad view of the breadth of our categories and the depth of our assortment, often inspiring purchases they did not know they could get through Wayfair Inc. We are seeing this work in real time.

In the Chicago DMA, we have seen a nearly 30% spread. The performance of our frequency categories, items such as bedding, decor, kitchen, and tabletop is a few examples, compared to similar DMAs.

Niraj Shah: In tandem, our physical retail efforts, one of our other big initiatives is to drive share of wallet expansion via our loyalty program. And soon shoppers will actually be able to sign up as they are checking out from any of our stores. We have heard many investor questions about the loyalty program as we hit the one year mark, and so I want to spend a few minutes running through some of the highlights of what we have achieved and what is coming next. We launched Wayfair Rewards in 2024 with the goal of deepening customer loyalty. The program offers terrific value for shoppers with free shipping, access to members-only sales and events, and 5% in rewards.

Priced at $29 per year, our membership is intentionally designed to be effectively breakeven for that average customer spending $600 per year on Wayfair Inc. The response we have seen from shoppers over the first year of the program has been terrific, with over a million members today. As we expected, many of our existing customers see clear value in the program and early sign-ups were weighted towards recurring Wayfair shoppers. As the program matured, we were really pleased to see a nice diversification in the mix of subscribers, as we increasingly drew in nonactive customers. In fact, our recent cohorts have shown more than half of new paid members are nonactive customers.

Niraj Shah: What has been most exciting are the spending patterns we are seeing among rewards members. As we exited 2025, we are seeing members driving more than 15% of Wayfair US revenue. The average reward shopper is purchasing on Wayfair across more than three shopping occasions over the first year of the program and spending multiples more than nonmembers. We are seeing higher engagement across a wider mix of our categories. Compared to nonmembers, reward shoppers have a conversion rate on furniture and decor that is nearly three times higher and a conversion rate on housewares that is more than three and a half times higher. All of this comes alongside noteworthy benefits on the P&L.

For several quarters, you have heard us talk about our focus on contribution margin as the best metric to measure our variable cost efficiency rather than just gross margin. Our improvements in contribution margin in conjunction with steady fixed costs lead to healthy growth in adjusted EBITDA, which is our core goal. Wayfair Rewards is a perfect example of this in action. As you can surmise, the program bears incremental gross profit costs as we offer 5% rewards dollars and free shipping on smaller orders, resulting in a headwind to gross margin.

However, the gross margin impact is more than offset by our ability to lever advertising spend as these shoppers return to buy from us at much higher rates and ultimately drive share capture through increasing order volume. The net impact is this: We improved contribution margin and lever against our fixed costs to drive appreciation in adjusted EBITDA dollars.

Niraj Shah: While the moving pieces are slightly different, outcome is similar for physical retail. Stores actually drive a higher gross margin but bear incremental OpEx costs from the associates. However, when combined with the uplift we see on revenue, the net impact is attractive growth in adjusted EBITDA. 2026 holds even more for us to unlock for Wayfair Rewards. We are excited about new ways we can acquire members through highlighting the rich benefit set they receive. At the same time, we are going to deepen our engagement with our existing members to keep them coming back to Wayfair for even more of their home shopping.

You will see us broaden the aperture of Wayfair Rewards beyond just the core wayfair.com offering. We have only just begun marketing the program on our specialty retail brands, and we will launch in Wayfair Canada and Wayfair UK in the months ahead. And finally, later this year, we are going to debut a specialized rewards offering designed specifically for the luxury customer with Perigold. There is even more we are working on behind the scenes to drive value for rewards members. We are expecting to add even more members in 2026 than we did in 2025, as rewards provides one of the many pistons powering our engine of growth this year.

You are going to hear that metaphor as a recurring theme across 2026. While the category may still have ways to go before it finds sustained organic growth, we are firmly in the driver's seat as we propel Wayfair Inc. forward, set up to take share at a pace we have not seen in many years and drive top line expansion regardless of the macro while continuing to deliver even more flow through to the bottom line. We could not be more excited for what lies ahead. And with that, let me turn it over to Kate to walk through our financials.

Kate Gulliver: Thanks, Niraj, and good morning, everyone. Let us dive into our financial results for the fourth quarter before we move to guidance for Q1.

Kate Gulliver: Starting with the top line, net revenue grew by 6.9% year over year on a reported basis and 7.8% year over year excluding the impact from our exit from Germany. This is our last quarter where there will be a meaningful distinction there. We saw solid performance in both of our geographies, with the US business up over 7% year over year, the international business grew nearly 4%. Let me continue to walk down the P&L. As I do, please note that the remaining financials include and amortization but exclude equity-based compensation, related taxes, and other adjustments. I will use the same basis when discussing our outlook as well.

Adjusted gross margin for the fourth quarter came in at 30.3% of net revenue. For more than two years now, we have held gross margin steadily at the low end of our 30 to 31% range as we balance the structural benefits we are getting from programs like supplier advertising and CastleGate against areas where we see an incremental opportunity to invest in the customer experience. While we will get to formal guidance shortly, this will be the same playthrough you will see in the first quarter.

But as we look deeper into the year, we expect there will be opportunities for us to dip gross margins slightly below 30% as we look to capture share at a faster rate and generate more gross profit dollars in a slightly lower margin. I want to be very clear here: The magnitude of this will be measured in the tens of basis points, not hundreds. Some of this investment is driven by programs like Wayfair Rewards as Niraj just discussed.

Kate Gulliver: Scaling the number of rewards members comes at the expense of gross margin but drives improvement on advertising expense, allowing us to hold to our contribution margin target of 15% and most importantly, adjusted EBITDA dollars. Ultimately, that is our core focus, and you should expect to see us grow the top line while delivering healthy year over year adjusted EBITDA and free cash flow growth in 2026. Now looking specifically at Q4, the combination of 30.3% of gross margin, with 3.7% of net revenue going to customer service and merchant fees and 11.4% of revenue going to advertising, left us with a contribution margin of 15.3% for the quarter.

This was 250 basis points better than we delivered in 2024, as we lapped a period of investment into newer advertising channels. SOT G&A for the fourth quarter came in at $358,000,000, which in combination with contribution margin expansion led to the significant profitability flow through for the final quarter of the year. In total, generated $224,000,000 of adjusted EBITDA in Q4, for a 6.7% margin. This was more than double the number of adjusted EBITDA dollars we delivered in 2024. For the full year 2025, we grew adjusted EBITDA dollars by more than 60% to $743,000,000 and improved adjusted EBITDA margin by over 200 basis points.

A remarkable achievement that is the culmination of many years of work in cost rationalization, on top of a noteworthy year of share capture and top line momentum. As Niraj said earlier, this is just the beginning of much more to come.

Kate Gulliver: We ended the quarter with $1,500,000,000 of cash on the balance sheet and $1,900,000,000 of total liquidity when including availability under our revolving credit facility. Cash from operations was $202,000,000 offset by capital expenditures of $57,000,000 leaving free cash flow of $145,000,000 for the fourth quarter, more than 40% year over year improvement. We issued our third high yield bond during the quarter, retired the remainder of our 2025 notes, and repurchased just over $100,000,000 of principal on our 2027 convertible notes. As with our 2028 convertible note repurchases during the summer, these bonds essentially trade as an equity substitute given the trading price of the stock.

So another way to look at this is that we offset more than 5,000,000 shares of potential dilution through the two sets of convertible note repurchases in the back half of the year. Our net leverage is now under 2.5x, down from approximately 4x exiting 2024 and over 6x at the 2023. We also saw our burn rate come down meaningfully in 2025, from a peak of 11% in 2022 to just 4% this past year. I mentioned this last quarter, but it is worth repeating once more. Operating with a dual mandate of reducing leverage while also managing dilution. And we will continue to balance these opportunistically in the future.

Kate Gulliver: Let us now turn to guidance for the first quarter. Beginning with the top line, we would guide to mid single digit growth year over year for Q1. We are seeing another quarter of robust share capture translate into healthy growth even in the face of a category that is starting off the year comping negatively. Turning to gross margins, as I mentioned a moment ago, we will guide you to the 30 to 31% range, likely at the low end as we find further value and take rate customer experience investments in the form of order capture.

You should expect customer service and merchant fees to be just below 4% of net revenue and advertising to be in the range of 11 to 12% of net revenue. The net of this should produce a contribution margin of roughly 15% for the first quarter for a healthy improvement year over year. SOT G&A is expected to stay in the range of $360,000,000 to $370,000,000, likely at the lower end of this range. As we have discussed, the power of our model is our ability to scale top line and contribution profit growth without needing to make further investment in headcount.

Our team is well equipped today to facilitate considerable growth in the years ahead, which puts us in a remarkable place to see noteworthy leverage as revenue growth compounds. Flowing all of that down, we would expect adjusted EBITDA to be in the range of 4.5% to 5.5% of net revenue, again, demonstrating robust year over year improvement. While we do not guide on free cash flow, I do want to remind investors that the first quarter is a cash outflow period for us given the working capital dynamics of our business even when revenue shows strong year over year growth.

Kate Gulliver: Now let me touch on a few housekeeping items. We expect equity-based compensation and related taxes of roughly $70,000,000 to $90,000,000. You should expect further rationalization here over 2026 even accounting for the $20,000,000 impact from the performance award which is reflected in this quarter's figure. Depreciation and amortization should be approximately $67,000,000 to $73,000,000, net interest expense of approximately $37,000,000, weighted average shares outstanding of approximately 132,000,000, and CapEx in a $55,000,000 to $65,000,000 range. 2026 is poised to be a tremendous year for Wayfair Inc. We are leveraging our tech transformation, loyalty ecosystem, and logistics scale to consolidate share in a highly fragmented market.

We are in full control of our destiny, and we are well set up to drive healthy top line growth independent of the macro. And we are turning that growth into more profit dollars than ever before. Our team is energized by the opportunity ahead of us and eager to turn our ambition into reality. We are excited to have you along on this journey with us. Thank you. And with that, Niraj, Steve, and I will take your questions.

Operator: We will now begin the question and answer session. Please limit to one question and one follow-up. If you would like to ask a question, please press star 1 on your telephone keypad. To withdraw your question, please press star 1 again. Please pick up your handset when asking a question. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Eric Sheridan with Goldman Sachs. Your line is open. Please go ahead.

Eric Sheridan: Thanks so much for taking the question. Wanted to ask sort of a multiparter around AI. When you look at the current landscape, can you talk a little bit deeper about some of your initiatives both internally that could be aimed at reducing friction in the business and or driving operating efficiency from AI and how you are increasingly thinking about partnering with external parties, to bring your brand and your marketplace into external environments like LLM agents as a potential pathway to market. Thanks so much. Yeah. Thanks, Eric, for the question, and for being on the call.

Actually, so one thing I will just reference that because I am sure you and folks have not had a chance yet to see it. But today, obviously released earnings and the refreshed investor deck but we released our annual shareholder letter. And in the letter from Steve and I, we actually talk a lot about how we look out to the future, the opportunity we see for the business, the economic opportunity, but specifically what drives it. And one of the three things that we talk about significantly in it is how technology plays a big role and there is a meaningfully not very lengthy, but a page or so about AI.

And it basically tries to address exactly what you are asking. So I will give, kind of a summary answer right now, but I think you will probably find that and others may find that of interest.

Niraj Shah: And what we talk about there is basically exactly as you posit it. There is significant internal benefits and the internal benefits have a lot to do with how AI is really an unusual opportunity in that you can improve quality, improve speed, and reduce cost all at the same time. Whereas usually, the truth is when you have a technology that comes along that is transformative, usually there is an opportunity for quality and or speed. But it comes at a cost.

Niraj Shah: But the ROI is there. And here what is tremendous about it is that you could actually do all three same time. So on the internal operations, know, you obviously start with everyone using you know, an enterprise LLM, you know, chat product. In our case, everyone had Gemini connected to all our data source to help them do their work more productively to get answers to questions. But where that is fairly quickly led to is how agentic workflows can allow you to automate meaningful pieces of work and do them again as I mentioned faster at higher quality a lower cost.

And the speed of the development of the technology has been tremendous to where we have you know, we started let me take a step back a year ago with some high level areas, you know, a top down effort, like, how can we really help our customer service agents do a great job. Some of the more simple inquiries. How can we just automate, the answers to those and we are doing that, and we are getting, like, you know, higher customer stats scores on those and then our agents are benefiting from the where we have the assist co assist product for them on the more complicated ones.

We did that in like a half dozen areas, you know, how we made the product catalog, information, how we find inaccuracies in the catalog, etcetera.

Niraj Shah: Where we then went to is now at the individual or the group level how do you take workflows and help automate a work in there, getting rid of some of the work that is monotonous repetitive, and do it in a way that is quick, faster, high more accurate. Freeing up people's time to work on things that are higher value. And if you think about the efficiency opportunities as you reshape how you how you allocate, resource in the future, there is upside there. So there is a whole section of activity there.

And then when you think about external parties there is kind of two big groups of external parties that I will just touch on really quickly. One is how we help our suppliers succeed on our and that is about giving them tools and taking all the process work of things they need to do with us and eliminating a lot of the work that is time consuming and has the same sort of dynamic as you would think about with internal activities and allow them to then do more to grow their business on our platform.

And part of it also then is giving them analytics and insights that allow them to understand what is happening on the platform in a way that then allows them to know what to do. So there is a set of activities there. But then I think where you were going on the external parties has a lot to do with the kind of the agentic surfaces that are out there. The, the kind of the core AI, leaders that are out there.

And I think I would draw an analogy to how in the early days going back to whether it was Google or Meta, later Pinterest, how we have always been a partner working with those folks on both making sure that we show up very well there, and that is in organic placements and how we give them product information feed data that allows them to represent us in a way that helps them with the consumer experiences they want to create. But then also as they have paid out advertising products and the like, how are we a early partner helping them develop those?

Or in the case of commerce transactions, which Google did with Express and Shopping and Pinterest and buyable pins, how are we gonna really partner there helping them with that? Well, that analogy if you go to today, while, you know, using Gemini or Chat are different than using these other products, I think there is an analogous series of activities where start talking about how do we make sure we optimize how we show up there and represent ourselves well and make sure that product information is all there including very nuanced details.

But then it goes to they want to develop advertising units while you partner with them on that in a way that, you know, allows us to again leverage all the data and the technology we have to make sure that we are beneficiary as well. And then, frankly, with customers engaging there, that they foresee a world where on some set of transaction consumers may want to execute the transaction on their agentic surface. And that might be an agent executing a transaction if it is a commodity or buying paper towels, it might just be replenishment or maybe the agent's deciding where how to solve that for and so they wanna develop commerce protocol.

So we have been a partner in I think multiple of them have named us as one of their handful of partners that they are developing those with. So I think you are seeing us be very early there. And then in our world, we think that gonna happen because it is not a commodity good where you are not gonna be you know, hey. I need some more of this. It is more of that. And whoever can get it to me by Friday at the lowest price is great. It is gonna be something where there is a lot of exploration customers doing the category.

There is a whole, view as to how that traffic gets handed off mid funnel to places like, Wayfair. And some of that, again, is organic traffic and some of that could be paid traffic and in the form of ad units. So kind of relatively holistic view we have. So I think you are going to see us continue to be referenced as an early partner in all these places. I think it is very early in how this will all shape out but I think we are, you know, the same way being technology driven Steve and I's background both as engineer has been a mainstay of how we have been able to, grow the business.

You are going to see that continue to be true here.

Kate Gulliver: Thanks, Eric.

Operator: Your next question comes from the line of Simeon Gutman with Morgan Stanley. Your line is now open. Please go ahead.

Eric Sheridan: Hey. Good morning, Darish. Good morning, Kate. I wanted to ask about margins longer term. And if I get a follow-up, I want to ask about holdout test. On the margins, so you had a really good incremental margin think, Q4 a big number, like north of 50. Q1 looks pretty strong as well in the twenties. Can you update us on how you see incremental margins evolving especially if the top line recovery continues over the next few quarters, and then we have talked about things you have done or that AI can help do on SOT GNA on your cost base.

So is it a level of revenue growth, or is it a matter of time until you get to your long term EBITDA margin targets?

Niraj Shah: Yes. So let me start with some thoughts and then turn it over to Kate. I think the way to think about it, so just to take your question and kind of flip it around a little bit. What I would start with is, so what you have seen is as we got through the tech re-platforming and we got through a bunch of the things we need to do to get our organization back to being very lean, focused, efficient, executing very well. That is all work with you already on 22, 23, 24. The category in those years comping down, you know, negative double digits. We were kind of flattish through most of that period.

We entered 25 sort of flattish. You know, and, like, call it 0% revenue growth. By the end of the year, you see it sort of like in a mid to high single digit revenue growth. It kinda ticked up each quarter. And that is why the category continued to comp down. I think the overall TAM was probably down low single digits if you index it to the categories we are stronger in. Well, that is really due to probably down mid to high single digits. But you see us pull away. Us taking share because you saw profits grow even faster during the time period than revenue grew. And so we are taking share.

We are taking share profitably. Well, how we are doing it through these core initiatives we had like I talked about stores for example and rewards on the call earlier. Well, there is there is over half dozen of those. So if you kind of look at what we foresee going forward is that these initiatives, a lot of these initiatives are set up to basically kind of continue to scale and compound these wins because a lot of these will get you new customers. They will get you new customers and drive a loyalty from them.

They will allow these initiatives will help customers understand the breadth of the categories we are in and they will start buying more in categories that we under index in. So there is all these things and that share of customer share of wallet grows profits, you know, faster than gross revenue. So the way to think about what we are expecting to have happen is we are expecting to see the rate at which we outpace the market continue to expand. And through our own initiatives not through the market recovery.

And then we are expecting to see profits grow even faster than that through the combination of leveraging fixed cost and through the economics of these initiatives themselves, through the combination of those two things. And so that is that is like the business strategy and the activities that are happening that are driving what you are known which are, like, the quantitative analysis of the results. And that is kind of what we foresee happening. So then you say, so then what would that create continue to create this outpacing where you see the profits grow faster than the revenue from your standpoint of incremental margins, you say the incremental margins look quite strong, right?

Because margins are quite accretive. Let me let me turn it over to Kate for anything. I actually did not irritate on the key points.

Kate Gulliver: Right, which is that we expect to be able to continue to grow and accelerate EBITDA dollars faster than the top line. And so you are going to continue to see very nice flow through there. And, you know, just as point of fact on that, midpoint of our guidance range in Q1 is over EBITDA margins over 100 bps higher than the Q1 2025 EBITDA margin, right? So I think that shows the strength of the flow through in the model. And as Niraj pointed out, that has been driven by a number of measures internally. You see our SACA, our SOT G&A, that operating expense down again this quarter.

I think that is many quarters I cannot even count how many at this point because it is a few years in a row of that SOT G&A coming in. So that is providing really nice leverage there. And then, you know, that contribution margin around that 15% again. So you see this ongoing pattern of driving to that EBITDA growth. And that is really the North Star that we are driving towards. When you think about these initiatives internally, Niraj mentioned Wayfair Rewards on the call and talked through that.

The way that we look at them is how can we improve the customer experience with it but make sure that even if the components of margin move around a bit, that we are again flowing that through at that adjusted EBITDA growth rate. The second part of your question was that time line to 10% plus adjusted EBITDA. So I do want to be clear, we talked about we believe we can actually get over 10% adjusted EBITDA and we are pretty excited about the potential to do that. I think we have shown that even in down market, we have been able to grow adjusted EBITDA margin significantly throughout the year.

And as we look forward, certainly top line momentum obviously helps you on that leverage. And we think a number of our own self help initiatives can continue to drive those share gains you know, somebody respective of the macro.

Eric Sheridan: Right. The holdout test that you are trying, is it does that shape how you are spending advertising in '26 or not yet?

Niraj Shah: Yeah. I think the way to think about the holdout test are that is not a one time activity. That is like a ongoing, set of activities. So the holdout tests do not, sort of start and stop but what, you know, there is periods where we are running more of them than other periods.

But I think what we have been able to do is run get back into a cadence of running a relatively high amount of tests that have left us really hone how we do a lot of the marketing attribution and make sure that the anywhere where we are spending advertising costs, get to really good precision on where we are getting a return and, therefore, spend our money wisely. And you have seen some of that in the form of the ad cost leverage.

Where we are certainly scaling in a lot of new channels but we have also been able to become more honed and surgical in where we are spending money and so we have been able to drive up our return in a way that been pretty happy with. Let me yes. I mean, I think you may

Kate Gulliver: referring specifically to the Q3 testing of last year, that was a little bit bigger than maybe typical on any given quarter. To your point, so there is a little bit of quarterly change in that. To your point on what we have learned, I think, for example, we have seen pockets of influencer spend and, you know, other elements there that we actually believe we can spend into and yield the kind of returns that we are, you know, expecting and requiring ourselves to get on those lines.

Eric Sheridan: Okay. Thanks. Good luck.

Operator: Your next question comes from the line of Steven Forbes with Guggenheim Securities LLC. Your line is open. Please go ahead.

Eric Sheridan: Good morning, Niraj Kate. Neeraj, maybe just revisiting maybe just revisiting your comments on physical retail expansion as we look forward to this next class of stores. I wanted you I was hoping you maybe revisit Wilmette and talk about how those DMA surrounding the store have performed. You know, sort of two years in here. Is the is the outperformance gap versus the company average still as strong as it originally was? In any way sort of like, frame up for us how you are thinking about how those DMAs, surrounding those new stores should perform in 2026.

Niraj Shah: Yeah. Steve, that is a great question. So the store in Wilmette opened up quite strongly when we first opened in May '24. We could see the lift in that trade area in the state of Illinois very quickly. Now that it is been open over a year or been open, you know, over a year and a half at this point, we have been able to say, is that it that we have seen that continue nicely. In fact, in the refreshed investor presentation, we put a slide in and put some updated numbers.

And we talked about how the store you know, one thing that is exciting about the store is that it is attracting new customers and you are seeing that, you know, our business overall, you are seeing that we are we have order growth in new customers and in repeat orders. So repeat orders, which are 80% of our orders, growing. New orders, 20% of growth. So the store is one small piece of how we are doing that but the stores help us attract new customers. But to your point, we also put the CAGR in there and we see that the Illinois over national growth CAGR you see that it is at over 10% CAGR since the opening.

And what is happening is that customers obviously could be boiled away from experiencing our online offering, be very happy with that. Then having a store is only gonna take those loyal customers and have them have more use cases and methods to interact with us and grow with us. So it is gonna enable us to get more shared wallet from them. And then you have may have new customers who are maybe have heard of Wayfair but have never really engaged with us. And maybe they are sort of online for the home category is not a comfortable thing for them to think about or maybe they were habitual in going to other places.

Well, some of the store may dent that curve. Maybe they experience Wayfair in a different way. Well, that could lead to not just buying in the store but that could then lead to them buying online as well. And so what you see is that the interplay of the store to the overall impact in the trade area is very nice. Where the store itself is very economically productive and we are really changing the customer's behavior and so there is a big strategy if you think about what we are trying to do is if the average customer was spending $600 with us a year I would have called it a $3,000 or $4,000 annual spend.

How do we high level over time get to it $1,500. How do we get to half of their wallet or you know, some number but meaningfully higher? And the answer is well, one thing that you would look at and you say that is, you really need them to buy across the breadth of categories that Wayfair offers. Because if they only buy in a small subset of categories, well, you are limiting how much they could really buy with you. Does that mean? Well, you would want them to buy small frequency items, you know, candles and pillows from us.

As well as we would want them to do a renovation project with us where we could do the cabinetry, could do the large appliances. We could do the flooring and tile. We could do the plumbing. And so how do you do that? Well, they need to become aware that we are in all these categories. We need to give them an easy way to buy these categories. Some of these categories are easily, purchased in person. Some of these categories require working with a designer. It may require financing. Some of these categories, we just may not have the awareness. How do you grow the awareness?

Someone running into that in the store is one of the highly economic ways to drive awareness. So what is happening is stores is one way to dent that then you think about the Wayfair Rewards loyalty program. Well, if you spend $29, you are getting 5% back in rewards dollars. You are getting access to the members-only customer service. You are getting access to the members-only sales. Well, once you spend the 29, you have sunk the 29. You want to want to maximize your benefit. So, yes, if you spend $600, you are breakeven just from the 5%.

But the truth is if you spend the next 600 with us, you know, in your mind, you just made $30. Well, that $600 is not going be incremental to you. Just, you know, from our standpoint to be better, it could be incremental to us. It could just be you diverting that spend. Particularly when you start realizing what you are getting in the members-only sales and some of the other benefits, realize, probably should have been spending that money with us even before, but now you are getting even more juice out of it and so you should be now.

So there is a bunch of initiatives we have that sort of ladder up to this customer P&L and this is why we really want to focus on like how do we accelerate our revenue growth taking more and more share? And do it while we grow profits even faster. Because the lines in between to our mind do not do not really matter in the same way in the sense that like the rewards program it lowers gross margin but it grows the profit margin. But it does that because the customers come direct and there is no the ad cost is different.

For stores, for example, you know, you may say okay the gross margin looks great but oh it hurts SACA. Well why is there a SACA? Well the way accounting works is you got to actually take the store's labor cost and put it in the SACA which does not make any sense to me but that is what you have to do. So these things do not make any sense but it does not matter because if you can grow revenue an accelerating rate and grow profits even faster, that is really the outcome you want. That is that is the way to think about these initiatives.

Steven Forbes: That is helpful, Darij. And then just a quick follow-up. Multichannel fulfillment, I do not think you mentioned in your prepared remarks. So just curious if can comment on how the benefits of this offering are ramping or accruing to Wayfair in any sort of framework for 2026 on that on that offering in terms of the benefits to be now?

Niraj Shah: Yeah. I think the key thing to think about is, like, we built a logistics infrastructure. So one of the big opportunities we have is that the way the world's playing out is that you know, it is increasingly hard to be a small player and offer the customers the benefits they expect from a retailer today. And why is that? Well, there is three big things that have a tremendous cost in our business. So one is the cost of technology. We have over twenty hundred folks, and we are getting into a world that is so even technology is mattering more and more, not less and less.

The second is, if you look at think about the marketing reach we have with spending over a billion dollars in ad spend and having the brand be as strong as it is, it is very hard to do that if you have a very small budget. And the third is the logistics infrastructure with, you know, you know, dozens and dozens and dozens of buildings and, you know, 20,000,000 or so square feet of buildings and operations, know, you can now offer fast delivery and higher quality, lower damage, and better customer services and experiences, and so if you are a small retailer, you cannot do that.

And if you are a big retailer, there is, you know, really only a handful who can do this. Really then optimize it for something. So we are the only one who optimizes it for home. Because we do not we do not particularly worry about building materials or grocery or a bunch of categories. We are not in those. So we really are only in home, and so everything's optimized for home. And so then you think about the logistics network, because your question was about multichannel. You say, well, how do think about the logistics network? Well, you say, okay.

We have got these suppliers all over the world and they want to put forth the best experience they can for the end customers. They can get share. And how do they do that? Well, we have scale they do not have, so we can help them with ocean freight. We can help them with fulfillment, we can help them with transportation delivery, things that they cannot optimize, we can. Well, it really only makes sense for us to do that for items that we can then, you know, where customers can buy enough volume we can then predict the demand. Suppliers can put in that quantity. They can turn that inventory.

And customers can then benefit from all the benefits that accrue to them and because it will not work sustainably for the supplier if they are speculating goods and goods come in there and they do not sell.

Niraj Shah: And so the big benefit of multichannel is it allows suppliers to put in a broader breadth of products. Which then allow us to figure out which ones are really great winners on our platform. And then suppliers can lean in and put a lot more product. We can then position it into more and more facilities, faster and faster delivery, lower and lower shipping costs, less and less damage. And so think of multichannel as just one of the most recent additions into the logistics suite that enables suppliers to better take advantage of the Wayfair fulfillment operations in a way that allows them to grow their business on our platform they are giving customers more benefits.

And all this along the way helps us. And so I you know, one of the things I talk about in the shareholder letter is a forthcoming delivery offering for consumers called Wayfair Delivery Plus. And what we are really excited about that is that is going to offer customers a set of services in a very easy and convenient way that no one else offers specifically tailored for HomeGoods, that takes away a lot of the hassle that is associated with HomeGoods from a customer standpoint. And let us men just focus on all the benefits they have. Because they want that item, but maybe they want it assembled when it is delivered.

Maybe they want the old one taken away or maybe they want multiple items delivered on the same day because just gonna be convenient for them. Or maybe they are doing a project. Or maybe setting up their summer home for the or they are helping their daughter move into her apartment. There is all these use cases. And so what you are gonna keep seeing is add our services that are software powered and operations powered services.

That sit on top of the infrastructure we built that allow the customers to benefit from what we have built that allow suppliers to more easily participate and economically win in it, multichannel is one example, but frankly, you know, Wayfair Delivery Plus, which I talked about in shareholder letters is another, we are gonna keep seeing us do more and more.

Steven Forbes: Thank you.

Niraj Shah: Thanks, Steve.

Operator: Your next question comes from the line of Zachary Fadem with Wells Fargo. Your line is now open. Please go ahead.

Niraj Shah: Hey, good morning. Kate, can we walk through the cadence of Q4 in a little bit more detail? And any particular standouts in terms of Way Day versus holiday, etcetera? And then I know you are not disclosing quarter to date anymore, but since you are guiding for a deceleration in Q1, is it fair to say that those Q4 strength continued into Q1 or not?

Kate Gulliver: Yeah. So, you know, as you know, we do not, you know, give color or guidance on monthlies. But I think when we look at Q4, what we really saw overall was ongoing momentum of the initiatives that we started, you know, over a year plus ago. So those are things like Wayfair Rewards, and you spoke to on the call, Wayfair Verified that we have talked to in the past, you know, one that we think is particularly exciting. Changes to the customer experience from the storefront updating and that really is due to the developer capacity that we have freed up from the tech replatforming.

All of those things combine and really compound to deliver a pretty exciting Q4 in our minds.

Kate Gulliver: As we look into Q1, obviously, we are guiding to a mid single digit. I think that shows pretty healthy ongoing share gain in a category that we think is actually down low single digit. So when we look at Q4 and sort of you know, into Q1, particularly with some of the complexities of the weather in the beginning of the quarter, we see our share gains really continuing to grow here. And that is what you are seeing in the guide. And I think that is exciting about our ongoing momentum.

Niraj Shah: And what I would say is, I think Kate hit it there really well. And I think the point is there is there is no momentum is actually the same way we started last year at zero. We ended the year mid to high single digits. And, you know, we basically expect to see this momentum continue. So in other words we are starting the year you know, it is the turn of the year, but nothing is really changed. So if you draw the line from the beginning of last year, we should just keep taking it up to the right over the course of time because the initiatives we have are compounding benefit type initiatives.

And there is a lot of gains we are seeing from them. And so, you know, the market is sort of not really providing the lift, but we do not really expect it to. And so a lot of one of the things I talked about in the shareholder letter is how over time, we can, we think the organic growth rate can be 20% plus and that is just off the back of how we can take share through the compounding nature of the benefits we have and we think we can do that while profits grow faster than revenue.

And the reason is, as I was kind of addressing a couple minutes ago, these initiatives drive quite profitable growth. But they the growth they drive does compound because it is really about how customer behavior changes in terms of customers understand the breadth of categories we are in, becoming more loyal, coming back more often, us also getting in front of new customers drawing them in, and then them going through that same experience curve. One thing, you know, there is a whole series of efforts that get there.

So I talked about rewards and stores on the call today, but you know we could talk about what we are doing in our Wayfair Professional B2B program with the account managers, the recently released project shopping tool, and the like. We could be talking about the Wayfair app and how that continues to take share and some of the planned product enhancements this year. Of the things I will highlight is now that we are really the tech replatforming project was a very large project, multiple year project but now that we are on the backside of that, the amount of technology resource we can put into product led growth is substantial.

And so we sort of have the best of the both worlds right now because we both have a tremendous amount of tech resource coming back available to drive the business forward. I mentioned the app is one thing, but there is a long list of things we are going after, and these things are pretty meaningful. If you just look at the app road map, you would be pretty excited. But also you have a new set of technologies available with what Gen AI allows. So you sort of had an interesting time where you would wish you had tech resources you could put against it.

In our case, we think we have an amazing team, and we actually do have resources put against it. We are in fact if anything, at the best point in the cycle we could be because we are working off, you know, very new platforms that really, allow for, you know, tremendous amounts of developer productivity and actually solves one of the challenges in the Gen AI world, which is that, you know, the more clean and modern your systems are, the faster it is to use some of some of the developer productivity tools that are out there as well. It. That is helpful.

And then following up on Wayfair Rewards, is there a way to quantify what the drag was on the gross margin line in 2025? And should we think about that rolling off in 2026? Or would you expect the impact to persist as you grow new members? And then I suspect the net impact is positive when you offset that with advertising. But if you could walk through that a little more detail, that would be great. Yeah. I mean, look.

So if things go as we plan, actually, drag should become an increasing drag on the gross margin line because the number of members and the amount of revenue of the total revenue that are coming from rewards members actually is growing at a very nice rate. And you would be fantastic that would be fantastic. That would be an amazing outcome. Because the profits that you are getting from those customers are higher. So this is why I think like the gross margin line or the SACA, like, these lines do not really tell you very much.

Because if these initiatives are successful, what you should really see is that the revenue line continues to accelerate the profit line, the EBITDA line, what have you, accelerates even faster. And that is the dynamic you would get whereas you would see, you know, these lines in between move, you know, at a faster divergences. Let me turn it over to Kate. Yeah. Zach, I, you know, I think you are reaching it well, which is

Kate Gulliver: as we described on the call, we think it is an appropriate, you know, reward, an appropriate investment to make in the consumer example, those customers are coming direct. Obviously, that does, you know, impact the gross margin line. But on the other end, right? So you are not spending the money on the ad spend to get them to the site and therefore, it flows through quite efficiently to adjusted EBITDA margin and adjusted EBITDA dollars. And that is ultimately the goal, and you actually and we talked about sort of some of the gross margin dynamics going forward, that contemplates something like Wayfair Rewards continuing to grow.

We think it has enormous potential and we are seeing really strong benefit from the consumers in this program. So certainly, our focus is on how we can continue to expand it. Again, knowing that you get a trade off on the gross margin line to the AT and R line, and that is all ultimately flowing through to adjusted EBITDA growth.

Niraj Shah: Makes sense. Appreciate the time.

Operator: Your next question comes from the line of John Blackledge with TD Cowen. Your line is open. Please go ahead.

Eric Sheridan: Great. Thank you. Two questions. First, just any color on the potential for a rebound in the home category as we get through the year? And then second question on agentic commerce. There is there have been questions around risk to advertising revenue streams for ecommerce marketplaces as the agentic commerce ramps up. Just curious how you guys are thinking about that. Thank you.

Eric Sheridan: Thanks, John.

Niraj Shah: Yeah. Rebounding has you know, it is very hard to predict how it is gonna play out. My general view what we have been seeing which is, you know, that for the housing market to recover, it is a little bit of a slow burn and you are seeing like every quarter that goes by, the percentage of mortgages that get refinanced at the current rates keeps ticking up. But it is a relatively slow process. And that is basically you know, not having a crystal ball. We basically underwrite something like that. So our old plan is not really premised on how the market turns, I think that is very hard thing to predict.

And frankly, there is a very good chance it is just a slow burn and it kinda itself out over a longer period of time. But it is really about it is a pretty dynamic market. There is really not very many folks who can offer customers the experience that they really want today. There is a lot of folks who are still operating off a model that is really not what customers are really, looking as you go forward. And so there is a lot of market share in what is still a quite a big category that can move around.

And so if you go back to thinking about our particular initiatives and how do those how would those impact a customer and allow for market share to move, I think that is the way you could think about our strategy. And so you saw it last year allow us kind of pull away from the market and at an increasing rate and we expect that continue. And so our whole plan that we have discussed and the numbers we talk about are basically what we can make happen sort of without the housing market turning around. And I think it will. You know, it is a cyclical category.

It is just a time horizon for when there is a next big kind of up cycle tied to housing is just very hard to predict. So it is not something that we are putting into how we think about the market time horizon and our initiatives. I do not know, Kate. Any thoughts on that?

Kate Gulliver: Yeah. I think you hit it well, which is our focus is on our own measures and how those are gaining share. And you have seen that share spread actually, you know, expand throughout the course '25, and we feel really good about the momentum going into '26. I think you had a second question around supplier adds and the impact of agentic shopping on supplier ads. Yeah. Kate, why do not I just

Niraj Shah: comment on that? You can feel free. I you know, I think goes back to the type of goods. So in other words if you want to think about these agentic surfaces I think the way you would say hey supplier ads could get impacted it would mean that the traffic is not moving downstream to the apps or the sites operated by those commerce players and the transactions are happening upstream on the agentic surface.

And so I think if you are going, you know, you are selling paper towels and dish soap and you know, Chips Ahoy cookies and that could be fulfilled by any number of folks and you particularly care whose corrugated box shows up at your door, whose plastic bag show up at your door. Then yes, that traffic may never make it to the retailer. The transaction may take place upstream. The traffic by not making it to the retailer, then there is no opportunity for the retailer to show the variety of products and the ad units, and that could be a big factor.

If customers are coming direct to the retailer, or if customers are still making it to the retailer through these agentic services because there is more products understanding and exploration involved. Then the advertising, I think, still gets seen. And frankly, the less of a commodity is therefore the more browsing and the more curiosity customer has about the offerings, the more ad units become relevant. And so we tend to think that our product roadmap on ads, which some ways is similar to some others but in some ways is quite different is a very good fit for what customers want to experience at home.

And we think home is inherently more browsable and requires more sort of, it has more of a customer curiosity. Customer desire to understand what is out there than some other categories. I would have linked it more to fashion. And in that up in that scenario, that presents you as the retailer operating a platform an opportunity to let other suppliers know, get their products seen and that is that is effectively what these ad units do. If you think about something like video, well, certain products lend themselves to video telling a much better story than right? And so I think, you know, home is a great one. Fashion would be a great one.

Well if it is like chips or cookies, like, value the video, it could be very high but, know, you could say, well, that could easily get replaced too.

Niraj Shah: Thanks, John. Thank you.

Operator: Your next question comes from the line of Brian Nagel with Oppenheimer. Your line is open. Please go ahead.

Brian Nagel: Good morning. Nice quarter. Congrats.

Kate Gulliver: Thank you.

Brian Nagel: So the I want to ask, I get I think it is probably longer term in nature, but you know, you know, today's results and results related have shown, you know, this nice market share. You know, the Wayfair is definitely consistently now capturing market share. So as you look at all your data, is there anything we, you know, we can call out of that market share? Are you are do you see new customer or new customer cohorts coming to Wayfair? Are you taking, you are taking more share and in different income cohorts? Any anything that anything is this market share dynamic has persisted.

Is there something is there anything new that can kinda speak to, like, the broadening reach of the Wayfair brand?

Niraj Shah: Well, I think that few thoughts there. So one, know, we are definitely seeing that whole K shape economy thing is real. So when you do talk about higher income cohorts, you know, the highest income cohort, place that we offer is our Perigold platform. Luxury platform. And that is growing at a very fast rate. You see you know, you really do not any economic strain there, especially retail brands would be the second highest level after Perigold and, you know, the old modern Birch Lane, Joss & Main, you see nice growth there. And then we go to Wayfair, you see nice growth there.

But then if you cut it by income cohort, you definitely see more strain as you go down the income segments. And our data is not any different than the market data you are gonna see, probably. It is it is but you do see it. And that the case. But then what happens as you go down the cohorts, the truth is there is still customers buying products. Life goes on and they may need something. And so then the question becomes, are you providing do you make it easy for them to figure out which item provides them with the best price value?

You know, are you in a position to offer items that are a better value than maybe a competitor? This goes back to how our logistics operate and the fact that we have so many suppliers on our platform. And so the ones who can really optimize something can offer better value. So, so we do think we are benefiting through that but do not know, Kate, anything?

Kate Gulliver: Yeah, would just add that, Brian, that I do not there is not one particular cohort that is outperforming. I mean, can you just point customer segmentation certainly higher income, higher net worth customers have over the last year or so done better. But our cohort performed pretty consistently. And I think what is unique about the platform, frankly, versus maybe other retailers in the space is we cover the full spectrum. So we cover opening price point all the way up to luxury. We cover decorative accessories to furniture. Right? So we have the full breadth, and, you know, we are seeing share gains really across the full catalog.

And so we look at the share gains as not coming from any one retailer, it is not coming from any one profile type. I do think it is the compounding effect of all of these different initiatives I think that makes them more durable over time. And that is what is really exciting when you get into 2026.

Brian Nagel: That is very helpful. Then my quick follow-up. So again, nice job here on the ongoing delevering of the balance sheet. But Kate, have you indicated you know, just for some kind of parameter, like, you know, a target debt ratio where kinda what you are working towards?

Kate Gulliver: Yeah. What we have said, Ryan, is we really have a dual mandate that we are operating against right now, which is managing that ongoing net leverage down. And continuing to also manage dilution. And I think you have seen us take some really nice steps in that direction. It is really been an evolution of our capital structure over the last few years where we moved from a position where we said, what we want to try to do here is create optionality for us. And we will do that by improving the P&L to open up improving free cash flow to open up new sort of vectors for us. And you saw us improve the P&L considerably.

Free cash flow went up from this year from $83,000,000 in '24 to $329,000,000 in 2025. And that is allowed us to then move into a position where we can be more proactive. From a capital structure perspective, and you have seen us do that. So in Q4 alone, saw us bring net leverage down. You saw us in effect sort of buy back some shares with the work that we did against the '27 notes. And the '28 combined, that is about 5,000,000 of shares that we, you know, we are able to manage there. And you also have seen us throughout '25 manage our dilution effectively, our burn rate come down considerably to around 4%.

So I think you are seeing all of the pieces in place to manage that net leverage and to manage dilution, and that is the ongoing goal.

Brian Nagel: Thank you. I appreciate it.

Kate Gulliver: Thanks so much. Thank you.

Operator: This concludes today's question and answer session. I will now turn the call back to the Wayfair Inc. team for closing remarks.

Niraj Shah: Just want to say thanks to everybody for your interest in Wayfair, and just put in one more plug to encourage you to read the shareholder letter we posted today. And, we look forward to chatting with you next quarter. Thank you.

Operator: This concludes today's call. Thank you for attending. You may now disconnect.