Pop culture collectibles manufacturer Funko (NASDAQ:FNKO) missed Wall Street’s revenue expectations in Q3 CY2025, with sales falling 14.3% year on year to $250.9 million. Its non-GAAP profit of $0.06 per share was significantly above analysts’ consensus estimates.
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Funko (FNKO) Q3 CY2025 Highlights:
- Revenue: $250.9 million vs analyst estimates of $262 million (14.3% year-on-year decline, 4.2% miss)
- Adjusted EPS: $0.06 vs analyst estimates of -$0.09 (significant beat)
- Adjusted EBITDA: $24.43 million vs analyst estimates of $15 million (9.7% margin, 62.9% beat)
- Operating Margin: 2.6%, down from 4% in the same quarter last year
- Market Capitalization: $206.6 million
StockStory’s Take
Funko’s third quarter saw a positive market reaction despite revenue falling short of Wall Street expectations, as management’s cost control and product strategy drove adjusted profitability above consensus. CEO Josh Simon highlighted the impact of SKU rationalizations, a reduction in clearance sales, and ongoing price increases that offset tariff pressures. Management underscored the resilience of Funko’s diverse fan base and pointed to recent multiyear licensing renewals with major entertainment studios as instrumental in maintaining brand relevance. Simon noted, “Our gross margin trend has largely improved... we have a stronger retail footprint.”
Looking forward, Funko is emphasizing its Make Culture POP! strategy to reignite growth by focusing on faster trend identification, expanding into new pop culture categories, and enhancing digital and in-store experiences. Management expects the launch of Pop! Yourself in Europe and sales of KPop Demon Hunters merchandise to boost upcoming quarter results. CFO Yves Le Pendeven cautioned about continued uncertainty in the U.S. retail environment but expressed confidence in international momentum and the effectiveness of recent price increases. Simon stated, “We intend to leverage our legacy and relationship with our community of fans to take advantage of the huge opportunity in the increasingly global world of entertainment and pop culture fandom.”
Key Insights from Management’s Remarks
Management cited improved licensing partnerships, product innovation, and operational discipline as key drivers of quarterly performance, while acknowledging the lingering effects of tariffs and cautious U.S. retail demand.
- Brand partnerships renewed: Funko secured multiyear licensing agreements with major studios such as Warner Bros, NBC Universal, and Disney, strengthening its portfolio of over 900 active intellectual property licenses. Management views these renewals as critical for maintaining access to top pop culture franchises and supporting future product launches.
- SKU rationalization and pricing: The company intentionally reduced its SKU count and limited clearance sales, aiming to improve inventory quality and profitability. Price increases implemented in July fully offset the impact of new tariffs, with unit sales trends holding up within expectations despite higher prices.
- International growth opportunities: Management highlighted strong point-of-sale trends in Europe, with double-digit growth in the region, while the U.S. market remained more subdued. Recent production shifts from China to Vietnam caused minor delays but are expected to improve supply chain flexibility for future quarters.
- Product innovation gains traction: New formats such as Bitty Pop! mini vinyl figures, recently featured in Walmart’s holiday campaign, and expanded blind box offerings were called out as areas of early success. The company plans to leverage its speed-to-market advantage to capture opportunities tied to emerging pop culture trends.
- Direct-to-consumer and retail expansion: Funko is simplifying its e-commerce experience and rolling out Pop! Yourself customization kiosks, with plans for AI-powered builders and vending machine pilots to broaden consumer engagement. Management sees these as differentiators in a competitive collectibles market.
Drivers of Future Performance
Funko’s outlook centers on growing international sales, new product introductions, and leveraging recent licensing renewals to drive revenue and profitability.
- International expansion focus: Management sees Asia and Latin America as key growth markets, noting plans to deepen retail partnerships and expand local product assortments. The team believes these regions are underpenetrated and present significant opportunities for brand growth.
- New product launches: Upcoming releases—including Pop! Yourself in Europe, KPop Demon Hunters, and premium blind box collections—are expected to drive consumer engagement and incremental sales, particularly around major entertainment content launches.
- Tariff and retail headwinds: The company remains cautious regarding the U.S. retail environment, citing ongoing impacts from tariffs and more reserved buying behavior among smaller specialty retailers. Management flagged the importance of maintaining pricing discipline and inventory health as key risk mitigants.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will be monitoring (1) the sales trajectory of new launches like Pop! Yourself in Europe and KPop Demon Hunters, (2) Funko’s ability to grow international retail partnerships—especially in Asia and Latin America, and (3) the company’s progress in expanding its digital and direct-to-consumer channels through innovations like AI-powered customization. Execution in these areas will be critical to validating Funko’s turnaround strategy.
Funko currently trades at $3.40, up from $3.02 just before the earnings. At this price, is it a buy or sell? The answer lies in our full research report (it’s free for active Edge members).
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