More than half of revenue comes from skincare—Is Yatsen planning to shed the Perfect Diary label?

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Yatsen is moving further away from the label of "Perfect Diary's parent company."

On May 26, Yatsen disclosed its Q1 2026 results: total net revenue for the quarter reached 1.02 billion RMB, up 22.5% year-on-year; gross margin increased to 80.2%, remaining at a high level.

Skincare brand revenue reached 574 million RMB, up 58.5% year-on-year, with its share of total revenue rising to 56.2%.

Combined net revenue from the three major skincare brands—Galénic (France), DR.WU, and EVE LOM—grew 61.4% year-on-year, becoming the main drivers of skincare business growth.

For a long time, the market's understanding of Yatsen almost always circled around Perfect Diary.

This Chinese beauty company, founded in 2016, leveraged Perfect Diary's rapid online and content platform growth, took advantage of the rise of Xiaohongshu, live-streaming e-commerce, KOL marketing, and the wave of Chinese domestic beauty brands, completing the leap from a new brand to a listed company in a short time.

However, Perfect Diary's rapid growth also firmly bound Yatsen to the narrative of a "traffic-driven makeup brand."

When online dividends faded and customer acquisition costs rose, Perfect Diary went into an adjustment cycle after its peak growth, and Yatsen began to face continued skepticism about its growth quality and profitability.

At present, the growth drivers—Galénic, DR.WU, and EVE LOM—are almost all brand assets acquired by the company around its IPO, corresponding to segments like high-end skincare, functional skincare, and premium cleansing.

After the acquisitions, Yatsen systematically localized these three brands.

On one hand, the company continued Galénic’s dermatology formulations, DR.WU’s medical-grade functional skincare positioning, and EVE LOM’s high-end cleansing mindset, restructuring the product matrix;

On the other hand, leveraging local channels and content platforms like Tmall, Douyin, and Xiaohongshu to strengthen user education, and through its own R&D and China market insights, pushed overseas brands to better meet domestic demand for functional skincare.

In full-year 2025, Yatsen’s skincare revenue grew 63.5% to 2.28 billion RMB, surpassing makeup to become the company's largest revenue source.

But skincare revenue growth has not yet fully converted into profits.

In 2025, Yatsen achieved its first annual Non-GAAP profit since listing, with full-year Non-GAAP net profit of 8.4 million RMB.

However, in Q1 2026, due to increased expenses, the company again recorded a Non-GAAP net loss of 57.3 million RMB.

In the first quarter, Yatsen’s sales and marketing expenses reached 737 million RMB, up 33.1% year-on-year, accounting for 72.2% of total revenue.

The company explained that the increase was mainly due to greater investment in core brand consumer awareness, long-term brand asset building, and rising traffic acquisition costs from the Douyin platform.

Past experience with Perfect Diary has proven that traffic can quickly boost a brand, but as traffic dividends fade, it can magnify expense pressures. Compared to makeup, skincare businesses have more opportunity to build repeat purchase and brand trust.

In Q1, Yatsen’s R&D investment increased 74% year-on-year, with its share of total revenue rising to 3.9%.

Looking at recent convertible bond arrangements, Yatsen’s next phase may continue to focus on R&D, supply chain, overseas expansion, and external reinforcement.

Recently, Yatsen completed the first issuance of its $120 million convertible bond, with subscribers including Huang Jinfeng, Xincheng Capital, and Hillhouse Capital. According to company disclosure, the net proceeds will be used for product R&D, global supply chain integration, overseas market expansion, strategic acquisitions, and general corporate purposes.

For Yatsen, the story of structural transformation has basically been laid out. But how to translate growth from the revenue side to the profit side is still the next question it needs to answer.

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