Brilliant Earth’s Third-Quarter Financials Spark Investor Debate Amidst Sales Growth and Margin Pressures
San Francisco, CA – Brilliant Earth, a prominent e-tailer of ethically sourced fine jewelry, announced a robust 10% year-over-year increase in sales for the third quarter, reaching $110.3 million. However, this impressive top-line growth was shadowed by a reported net loss of $0.7 million for the period ending September 30, 2025, sparking a nuanced discussion among investors about the company’s trajectory in a challenging market. Despite the loss, the company delivered $3.6 million in adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization), marking its 17th consecutive quarter of positive adjusted EBITDA.
The market’s reaction to the announcement was mixed. While the revenue figures surpassed analyst expectations, the company’s stock experienced a decline in pre-market trading, reflecting investor concerns over compressing gross margins and the overarching economic headwinds facing the jewelry industry.
A Deeper Dive into the Financials
Brilliant Earth’s third-quarter performance presents a complex picture of a company navigating both significant growth opportunities and persistent economic challenges. The 10.4% increase in net sales is a clear indicator of the brand’s growing appeal and market share. Gross profit for the quarter stood at a solid $63.5 million.
A key driver of this sales growth was a substantial 16.8% increase in total orders, which rose to 49,910. This surge in customer transactions underscores the effectiveness of Brilliant Earth’s customer acquisition and retention strategies. However, this positive trend was counterbalanced by a persistent decline in the average order value (AOV), which fell by 5.5% to $2,209. This marks the 16th consecutive quarter of year-over-year decline in AOV for the company.
The AOV Conundrum: A Shift in Product Mix and Market Dynamics
The steady decrease in average order value has been a focal point for industry analysts. Management attributes this trend to a strategic shift in their product mix, with a growing emphasis on non-bridal jewelry and lower-priced wedding bands. This diversification strategy is aimed at broadening their customer base and capturing a larger share of the overall fine jewelry market.
Industry experts, however, suggest that the falling prices of lab-grown diamonds, a significant component of Brilliant Earth’s offerings, are also a contributing factor to the declining AOV. While the company has not explicitly acknowledged this, the correlation is difficult to ignore as lab-grown diamonds become more accessible and competitively priced.
Despite the AOV decline, Brilliant Earth’s executives pointed to a sequential improvement in AOV from the second quarter, attributing it to a rebound in engagement ring sales and a higher average selling price for those rings.
Navigating Economic Headwinds: Tariffs and Precious Metal Prices
During the earnings call, CEO Beth Gerstein highlighted the “industry-wide headwinds” that impacted the company’s performance in the third quarter. These challenges include a significant 40% year-over-year increase in the prices of gold and platinum, key components in their products. Additionally, the jewelry industry is grappling with a 50% tariff on imports from India, which took effect in August 2025.
These external pressures have put a squeeze on the company’s gross margin, which fell to 57.6% from 60.8% in the same period last year. In response, Gerstein stated that the company has implemented “selective” price increases, particularly on exclusive pieces, to mitigate the impact of these rising costs.
A Bright Spot: The Flourishing Fine Jewelry Segment
A standout element of Brilliant Earth’s third-quarter report was the exceptional growth in its fine jewelry category. The company reported a remarkable 45% year-over-year increase in “bookings growth” in this segment. This surge indicates that the company’s strategy to expand beyond its traditional focus on engagement and bridal jewelry is yielding significant results. This diversification not only provides a new revenue stream but also helps to insulate the company from fluctuations in the bridal market.
The Curious Case of “Bookings”
In a move that caught the attention of some analysts, Brilliant Earth’s executives repeatedly used the term “bookings” to refer to sales during the earnings call. This terminology, more commonly associated with the technology and software-as-a-service (SaaS) industries, was seen by some as an attempt by the San Francisco-based company to align itself with the tech business culture. While not a standard term in the jewelry retail sector, “bookings” generally represent gross sales and can be an indicator of future net sales.
Looking Ahead: A Positive Outlook with a Dose of Caution
Despite the mixed results and the challenging economic environment, Brilliant Earth’s leadership expressed optimism for the future. The company raised its full-year 2025 net sales guidance, now expecting growth in the range of 3% to 4.5%. This upward revision is based on the strong third-quarter performance and a positive start to the fourth quarter.
However, the company also acknowledged that the headwinds from high precious metal prices and tariffs are likely to continue into the fourth quarter and the beginning of 2026. This suggests that while top-line growth is expected to continue, margin pressures will remain a key focus for the company and its investors.
In conclusion, Brilliant Earth’s third-quarter results paint a picture of a resilient and adaptable company that is successfully navigating a complex and evolving market. The strong sales growth and the remarkable performance of the fine jewelry segment are testaments to the company’s strategic initiatives. However, the persistent decline in AOV and the external pressures on margins highlight the ongoing challenges that the company must continue to address. The coming quarters will be crucial in determining whether Brilliant Earth can sustain its growth trajectory while improving profitability in the face of these headwinds.
