Xunlei's Q2 Revenue Grows Nearly 40%, Overseas Live Streaming Expansion Pressures Gross Profit Margin

On the evening of August 13, Xunlei released its unaudited financial results for the second quarter of 2026.

With cloud computing business no longer consolidated, Xunlei's current revenue structure has contracted to consumer-facing businesses such as subscription services, overseas voice live streaming, and Hupu advertising. In the second quarter, the company's revenue was $102.7 million, a year-on-year increase of 38.9%. However, this revenue growth has not yet translated into improved profits, as operations shifted from profit to loss.

It is important to note that Xunlei adjusted its comparison basis this year. In March this year, the company sold a 50% equity stake in Shenzhen Wangxin Technology Co., Ltd., reducing its shareholding from 70% to 20%. The cloud computing business operated by Wangxin Technology was classified as discontinued operations. Therefore, the $73.92 million in revenue for the same period last year listed in the financial report excludes the cloud computing business and is not comparable to the $104 million disclosed in the Q2 2025 financial report at that time.

From a business composition perspective, subscription services remain Xunlei's relatively stable source of income.

Subscription revenue in the second quarter was $44.5 million, a year-on-year increase of 22.6%, accounting for approximately 43% of total revenue. Xunlei stated that the growth was mainly driven by increased demand for subscription services. During the earnings call, management indicated that the company continues to add AI features and expand customer acquisition channels through domestic mobile phone manufacturers and internet platforms.

However, subscription business declined quarter-on-quarter. In the first quarter of this year, this revenue stream was $45 million, a year-on-year increase of 26.2%.

Xunlei did not disclose the number of paying users or average revenue per user (ARPU) this time, making it difficult to determine whether the Q2 growth stemmed more from an increase in member numbers or changes in product structure and pricing. In contrast, overseas voice live streaming continued to drive the main incremental growth.

In the second quarter, revenue from live streaming and other services was $58.2 million, a year-on-year increase of 54.8%, accounting for approximately 57% of total revenue. This also represented an increase from the $53.6 million recorded in the first quarter. Xunlei attributed the growth to the expansion of overseas voice live streaming and increased advertising revenue from Hupu.

During the conference call, management stated that the company is focusing its investments on Southeast Asia, Mexico, the Middle East, Turkey, and other Latin American markets, while refining its products around one-on-one social interactions and multi-user chat rooms.

In June 2025, Xunlei acquired Shanghai Kuanghui Network Technology Co., Ltd., which operates Hupu, for RMB 500 million.

Entering this quarter, Hupu generated revenue of $9.1 million, primarily driven by concentrated sports events and the peak advertising season. Thus, Hupu has begun to contribute a certain amount of revenue, although its performance remains subject to the influence of event cycles and changes in the advertising market.

The rapid growth of overseas live streaming has also altered Xunlei's profit structure.

The company's gross profit in the second quarter was $57.3 million, a year-on-year increase of 23.1%; the Gross Profit Margin was 55.8%, a decrease of 7.2 percentage points from 63.0% in the same period last year, and also lower than the 58.5% in the first quarter. As revenue expanded, sharing costs for the live streaming business increased, driving operating costs up by 65.6% year-on-year to $44.8 million. Since the gross margin of live streaming is lower than that of subscription and advertising businesses, its rising share of revenue has dragged down the overall gross margin.

Expenses also increased.

R&D expenses in the second quarter were $21.4 million, a year-on-year increase of 28.9%; sales and marketing expenses were $27.9 million, a year-on-year increase of 34.9%, mainly used for customer acquisition for subscriptions and overseas live streaming; general and administrative expenses were $12.7 million, a year-on-year increase of 48.6%, involving litigation provisions and employee costs.

As a result, the company recorded an operating loss of $4.8 million, compared to an operating profit of $300,000 in the same period last year.

Xunlei's net loss attributable to continuing operations for the period reached $218.5 million. This was not primarily due to daily operations but rather to changes in the fair value of its shares in Insta360 (Yingshi Innovation).

After Insta360's listing in June 2025, this investment is measured at market price. While Xunlei recognized significant related gains in the same period last year, it incurred a fair value loss of approximately $215 million this quarter. Excluding share-based compensation and changes in the fair value of long-term investments, the company's Non-GAAP net loss was $2.1 million, compared to a net profit of $7.2 million in the same period last year. Xunlei currently holds approximately 7.8% of Insta360's shares.

As of the end of June, Xunlei held cash, cash equivalents, and short-term investments totaling $276.9 million, a decrease of $26.7 million from the end of March. This involved operating cash outflows, repayment of bank loans, share repurchases, and payment of deferred consideration for the Hupu acquisition.

For Xunlei, with its business focus shifting towards subscriptions, overseas live streaming, and sports communities, revenue sources have become clearer. The next key observation is whether overseas growth can gradually improve operating profits amidst rising marketing investments and sharing costs.