Skip to content
    XNET
    Earnings call· Jun 2026(Q2 FY26)

    Xunlei Q2 FY26 earnings call XNET

    Aug 13, 2026 Source

    Executive summary

    Xunlei Q2 FY26 — Strong Consumer-Centric Growth and Share Repurchase

    Xunlei reported strong top-line growth in Q2 FY26, driven by its consumer-centric strategy, with subscription and overseas live streaming businesses showing significant year-over-year revenue increases. Despite a shift in revenue mix impacting gross margin and leading to an operating loss, the company initiated a $20 million share repurchase program to reinforce market confidence. Management remains focused on balancing growth with profitability, emphasizing core product innovation and international market expansion.

    Highlights

    5

    • Total revenues increased by 38.9% year-over-year to $102.7 million.

    • Subscription revenue grew 22.6% year-over-year to $44.5 million.

    • Overseas audio live streaming revenue surged 54.8% year-over-year to $58.2 million.

    • Hupu business contributed $9.1 million in Q2 revenue, benefiting from peak advertising season and sporting events.

    • Announced a new $20 million share repurchase program, with $5.9 million already spent to buy back 1.07 million shares as of August 12.

    Concerns

    5

    • Gross margin declined to 55.8% from 63% in Q2 FY25 due to revenue mix shift towards lower-margin live streaming.

    • Operating loss of $4.8 million in Q2 FY26, a reversal from operating income of $0.3 million in Q2 FY25.

    • Net other loss of $213.8 million due to fair value volatility of Arashi Vision Inc. investment.

    • Non-GAAP net loss from continuing operations of $2.1 million, down from non-GAAP net income of $7.2 million in Q2 FY25.

    • Cash, cash equivalents, and short-term investments decreased sequentially to $276.9 million from $303.6 million.

    Guidance & targets

    1
    CategoryTargetConfidence
    Share Repurchase Program
    $20 million
    high materiality
    High

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    Subscription Business
    Remains a stable cash flow foundation and reliable growth anchor. Maintained resilient user retention and steady monetization performance. Continued upgrading premium user experiences by rolling out new AI-powered features, optimizing existing functionality, deepening long-term cooperation with leading domestic smartphone partners and scaling ecosystem user acquisition channels.
    		$44.5 million22.6%——
    Overseas Audio Live Streaming Business
    Emerged as the primary growth engine. Continued deploying targeted investments in high-potential emerging markets, including Southeast Asia, the Middle East, Turkey and further expansion into Latin America. Enhanced localized product iteration and operational capabilities, optimizing product matrix across one-on-one social interaction scenarios and multi-person chat rooms.
    		$58.2 million54.8%——
    Hupu Business
    Saw notable quarterly momentum, benefiting from the peak advertising season and major global sporting events. User discussion activity across the platform reached new highs. Newly rolled out AI-powered features meaningfully boosted user engagement and deepened interactive activity.
    		$9.1 million———

    Operational metrics

    15
    Total revenues
    $102.7 millionup 38.9% year-over-year
    Q2 FY26

    Primarily driven by rising revenues from subscription business, overseas audio live streaming business, and improved Hupu's advertising business.

    Cost of revenues as % of total revenues
    43.6%vs 36.6% in Q2 FY25
    Q2 FY26

    Uptick largely aligned with the expansion of live streaming revenue, driven mainly by increased revenue sharing expenses for overseas audio live streaming operations.

    Gross profit
    $57.3 millionup 23.1% year-over-year
    Q2 FY26

    Fueled by both subscription business and Hupu advertising revenue.

    Gross margin
    55.8%compared with 63% in Q2 FY25
    Q2 FY26

    Notable margin decline stems from a structural revenue mix shift, as live streaming carries a lower gross margin than subscription and advertising business.

    R&D expenses
    $21.4 millionvs $16.6 million in Q2 FY25
    Q2 FY26

    Mainly due to higher labor costs.

    Sales and marketing expenses
    $27.9 millionvs $20.7 million in Q2 FY25
    Q2 FY26

    Reflected ramp-up promotional investment across subscription and overseas audio live streaming operations.

    G&A expenses
    $12.7 millionvs $8.5 million in Q2 FY25
    Q2 FY26

    Primarily driven by provision for ongoing legal litigations and higher employee-related costs year-over-year.

    Operating loss
    $4.8 millionreversal from operating income of $0.3 million in Q2 FY25
    Q2 FY26

    Largely due to the sequential and year-over-year rise in selling, marketing and general and administrative expenses.

    Net other loss
    $213.8 millionversus net income of $721.5 million in Q2 FY25
    Q2 FY26

    Mainly driven by fair value volatility on long-term investment in Arashi Vision Inc., accounted for on a mark-to-market basis after its IPO in June 2025.

    Net loss from continuing operations
    $218.5 millioncompared with net income of $726.4 million in Q2 FY25
    Q2 FY26

    Mainly due to the material net other loss, partially offset by positive gross profit growth in core consumer-facing business.

    Non-GAAP net loss from continuing operations
    $2.1 milliondown from non-GAAP net income of $7.2 million in Q2 FY25
    Q2 FY26

    Non-GAAP measure, reflecting adjustments to GAAP net loss.

    Diluted loss per ADS from continuing operations
    $3.43compared with diluted EPS of $11.47 in Q2 FY25
    Q2 FY26

    GAAP measure.

    Non-GAAP diluted loss per ADS from continuing operations
    $0.03versus non-GAAP diluted earnings of $0.12 per ADS in Q2 FY25
    Q2 FY26

    Non-GAAP measure.

    Cash and investments balance
    $276.9 milliondown from $303.6 million as of March 31, 2026
    As of June 30, 2026

    Sequential decrease driven by net operating cash outflows, bank loan repayments, disbursements related to the newly announced share repurchase program, and deferred consideration payments related to Hupu acquisition.

    Share repurchase executed
    $5.9 million
    July 1 - August 12, 2026

    Part of the $20 million share repurchase program, which commenced on July 1.

    Industry KPIs

    4
    MetricValueDetails
    Revenue growth$102.7 millionUSD
    Gross retention renewal rateresilient
    Operating FCF margin rule of 4055.8%%
    Ai product adoption monetizationmeaningfully boosted

    Risks & headwinds

    3
    Intense competition in the overseas entertainment marketOngoing

    Unquantified, described as 'intense'

    Mitigation: Sticking to long-term localized operational and marketing strategies instead of chasing near-term scale expansion, fostering sustainable business growth.

    Fair value volatility of Arashi Vision Inc. investmentQ2 FY26 (impact), ongoing for stake reduction

    Resulted in a net other loss of $213.8 million in Q2 FY26.

    Mitigation: Following regulatory rules for stake reduction, consulting advisors for 1940 Investment Company Act compliance, aiming to adjust holdings to keep investment securities below 45% of total assets.

    Compliance with 1940 Investment Company ActOngoing, gradual adjustment

    Need to adjust holdings so investment securities do not exceed 45% of total assets, excluding government securities and cash items.

    Mitigation: Consulting with relevant advisors, gradually seeking to adjust holdings to comply with the Act and reaffirm focus on core business.

    What to watch in Q3 FY26

    5

    Share repurchase program progress

    Q3 FY26
    Current$5.9 million spent, 1.07 million ADSs repurchased as of August 12
    TargetFurther execution of the remaining $14.1 million of the $20 million program

    Why it matters

    Demonstrates management's commitment to shareholder returns and confidence in the company's valuation.

    As of August 12, we bought back approximately 1.07 million shares of ADS and spent approximately $5.9 million, and the repurchase program remains ongoing, and more details will be disclosed in our third quarter financial report.

    Q&A highlights

    2

    Why was there no information about the share repurchase program in the press release, and what is its current status?

    The $20 million share repurchase program commenced on July 1st. As of August 12th, the company had bought back approximately 1.07 million ADSs for $5.9 million. The program is ongoing, and more details will be disclosed in the Q3 financial report.

    “As of August 12, we bought back approximately 1.07 million shares of ADS and spent approximately $5.9 million, and the repurchase program remains ongoing, and more details will be disclosed in our third quarter financial report.”

    asked by Zoe Zhang · answered by Eric Zhou

    2 min read8 chapters

    Detailed Narrative

    01

    Strategic Pivot Success

    The company's strategic pivot towards a consumer-centric business model is delivering tangible results, with subscription services and overseas audio live streaming emerging as primary growth drivers. This approach has led to continued top-line growth, building on the foundations established in Q1 FY26, validating the effectiveness of the new strategy.

    02

    Subscription Business Performance

    The subscription business remains a stable cash flow foundation and reliable growth anchor, with Q2 revenue reaching $44.5 million, up 22.6% year-over-year. The segment maintained resilient user retention and steady monetization performance, supported by the rollout of new AI-powered features, optimized functionality, and deepened cooperation with leading domestic smartphone partners.

    03

    Overseas Live Streaming Expansion

    The overseas audio live streaming business was the primary growth engine, generating $58.2 million in revenue, a significant 54.8% year-over-year increase. This growth was fueled by targeted investments in high-potential emerging markets, including Southeast Asia, the Middle East, Turkey, and Latin America, alongside enhanced localized product iteration and operational capabilities.

    04

    Hupu Business Momentum

    The Hupu business showed notable quarterly momentum, contributing $9.1 million in Q2 revenue. This performance benefited from the peak advertising season and major global sporting events, which drove user discussion activity to new highs. Newly rolled out AI-powered features also boosted user engagement and interactive activity, creating incremental revenue streams.

    05

    Profitability and Margin Dynamics

    While gross profit improved by 23.1% year-over-year to $57.3 million, the overall gross margin compressed to 55.8% from 63% in the prior year. This decline is attributed to a structural revenue mix shift, as the live streaming business, which carries a lower gross margin, now accounts for a larger share of total revenue.

    06

    Investment in Growth and Capital Allocation

    The company increased R&D and sales & marketing expenses to support higher labor costs and promotional investments in its core operations. Concurrently, Xunlei announced a $20 million share repurchase program, with $5.9 million already executed, demonstrating confidence in its fundamentals and commitment to returning excess capital to shareholders while prioritizing core product innovation and international expansion.

    07

    Arashi Vision Investment Volatility

    Xunlei recorded a substantial net other loss of $213.8 million in Q2 FY26, primarily due to the fair value volatility of its long-term investment in Arashi Vision Inc. This investment is accounted for on a mark-to-market basis following Arashi Vision's IPO in June 2025, leading to a significant swing from net income in the prior year.

    08

    Investment Company Act Compliance

    The company is actively consulting with advisors to ensure compliance with the 1940 Investment Company Act. Xunlei intends to gradually adjust its holdings to ensure investment securities do not exceed 45% of total assets, reaffirming its core focus on the consumer-facing business and its intention not to operate as an investment company.

    AI-generated summary of the company’s earnings call. Not investment advice.