Bumble Inc. (BMBL) saw its stock fall despite reporting first-quarter earnings that showed a significant margin expansion, as investors focused on a revenue decline and the timeline for its product-led turnaround.
"Velocity is going to go up in such a way with this new tech stack," CEO Whitney Wolfe Herd said, highlighting the company's focus on overcoming "extraordinary tech debt" to accelerate innovation.
For the first quarter, Bumble's total revenue was $212 million, a decrease from $247 million in the same period last year. The company's own app, Bumble, generated $173 million of that revenue. However, adjusted EBITDA increased to $83 million, representing a 39% margin, up from $64 million and a 26% margin a year ago. The company guided for second-quarter total revenue between $205 million and $213 million.
The market's reaction underscores the challenges Bumble faces in its transformation. While the company has successfully managed costs, the drop in revenue remains a key concern for investors, who are now looking to the planned fourth-quarter launch of a revamped app experience as the next major catalyst.
Bumble's management emphasized that the company is in a transitional phase, moving from a "quality reset" of its user base to an "activation" phase driven by technology. The centerpiece of this strategy is a new cloud-native, AI-enabled platform designed to speed up product development and personalization.
Wolfe Herd explained that the current legacy system is "extremely clunky, cumbersome, and difficult to navigate," with changes to the recommendation engine taking months. The new stack is expected to reduce this to days or weeks.
The company is also testing an AI layer called "Bee" in its onboarding process, with encouraging results. Wolfe Herd clarified that AI is intended to "facilitate, not substitute, real-world interaction," aiming to solve the friction between online chats and in-person dates.
Despite the revenue decline, Bumble demonstrated strong financial discipline. Selling and marketing expenses were slashed to $20 million, or 12% of revenue, down from $60 million, or 24% of revenue, in the prior-year period. Gross margin improved by 300 basis points, aided by the adoption of alternative billing methods that reduce aggregator fees.
The company generated $74 million in free cash flow and ended the quarter with $246 million in cash and cash equivalents. For the second quarter, Bumble expects adjusted EBITDA between $65 million and $70 million, with a margin of about 32% at the midpoint.
The stock's negative reaction highlights investor impatience with the pace of the turnaround. The successful launch of the new platform and user experience in the fourth quarter is now a critical test for the company to prove its strategy can reignite revenue growth. Investors will be closely watching for signs of user adoption and monetization improvements in early 2027.
This article is for informational purposes only and does not constitute investment advice.
