Luckin Coffee ended 2025 with another quarter of rapid revenue growth and continued store expansion. The December period also highlighted the tradeoff in its growth model. Delivery-led volume and rapid footprint expansion lifted sales, while higher delivery costs and a weaker subsidy environment compressed margins.
Total net revenues rose 32.9% year-on-year (YoY) to RMB 12.8 billion (USD 1.8 billion) in the fourth quarter, and GMV (gross merchandise value) increased 32.8% to RMB 14.8 billion (USD 2.1 billion).
Growth was broad-based across channels. Revenue from self-operated stores increased 32.0% to RMB 9.6 billion (USD 1.3 billion), while revenue from partnership stores rose 39.2% to RMB 2.9 billion (USD USD 406 million), lifting the partnership contribution to 22.3% of total net revenues.
Luckin’s expansion momentum continued. The company ended the year with 31,048 stores, after 1,834 net new openings in the fourth quarter and 8,708 net new stores for the full year 2025. It also reported 98.4 million average monthly transacting customers in Q4, up 26.5% YoY.
Margin compression was the quarter’s central tension
Despite the strong topline, profitability weakened in Q4. GAAP operating income fell 18.5% YoY to around RMB 800 million (USD 112 million), and operating margin declined to 6.4% from 10.5% a year earlier. On a non-GAAP basis, operating margin declined to 7.5% from 11.5%, and non-GAAP net margin fell to 5.5% from 9.8%.
The shift was clear in the cost lines. Luckin’s biggest swing came from delivery. Delivery expenses rose 94.5% YoY to RMB 1.6 billion (USD 224 million), lifting the delivery expense ratio to 13% of net revenues from 9% in the same quarter of the previous year. The company attributed the increase primarily to higher delivery volumes through third-party platforms.
That sensitivity is not company-specific. China’s branded coffee market remains highly promotional, shaped in part by rivals such as Cotti Coffee, which have kept effective pricing aggressive. In this environment, the level of third-party delivery subsidies can quickly affect conversion and determine who absorbs fulfillment costs, either consumers through higher fees or merchants through lower margins. Luckin’s Q4 cost lines suggest more of that burden fell on the merchant side.
There is also broader cost pressure in the background, including higher coffee bean prices, tariffs, and labor-related expenses. Luckin’s disclosure, however, suggests that Q4 pressure was driven more by delivery economics, as its materials cost ratio remained flat. Cost of materials rose 33.2% YoY to RMB 5.1 billion (USD 714 million) but held steady at 40% of net revenues. Store rental and other operating costs increased 32.8% YoY to RMB 3.2 billion (USD 448 million), in line with the company’s larger footprint and higher operating scale.
The margin pressure was visible in unit economics. Luckin reported self-operated store-level operating profit of RMB 1.4 billion (USD 196 million), described as largely flat YoY, but the self-operated store-level operating margin fell to 15% from 19.8%. In simple terms, Luckin sold substantially more but retained less profit per RMB of sales during the quarter.
One constructive signal was that same-store sales for self-operated stores turned positive. Same-store sales grew 1.2%, improving from a 3.4% decline a year earlier.
In practical terms, that suggests the existing store base stabilized. But the low single-digit rate also implies that most of Luckin’s Q4 growth still came from new store openings, more transacting customers, and channel mix, rather than stronger growth from stores that were already open.
Strong full-year results help explain the Q4 picture
For the full year, the business appeared healthier than the Q4 margin alone suggests. For financial year 2025, net revenues increased 43% YoY to RMB 49.3 billion (USD 6.9 billion), and GAAP operating income rose 42.1% YoY to RMB 5.1 billion (USD 714 million), with an operating margin of 10.3%, roughly steady from 2024.
Self-operated same-store sales growth for the year was 7.5%, reversing a steep decline in 2024. Average monthly transacting customers rose 31.1% YoY to 94.2 million.
Those full-year figures suggest Q4 was not a broad demand breakdown. It appears more like a seasonal quarter in which delivery economics and subsidy dynamics had a greater impact.
Luckin reported net cash from operating activities of RMB 600 million (USD 84 million) in Q4, down from RMB 1.6 billion a year earlier.
At the same time, its liquidity buffer expanded. Cash and cash equivalents, restricted cash, term deposits, and short-term investments totaled RMB 9 billion (USD 1.3 billion) at December 31, 2025, up from RMB 5.9 billion (USD 826 million) a year earlier.
What to watch next
Investors may spend the coming quarters seeking clarity on whether Q4’s margin compression was largely seasonal and subsidy-related, or whether it reflects a more persistent shift in costs and competition.
Three indicators stand out: whether Luckin’s delivery expense as a percentage of revenue declines from the Q4 level, whether store-level margins at self-operated stores stabilize, and whether same-store sales growth moves beyond the low single digits, which would signal that the expanded store base is generating stronger repeat demand rather than relying primarily on new openings.