Xunlei Ltd. ADR Aktie

Welcome, ladies and gentlemen, and thank you for your patience. You've joined Xunlei's Second Quarter 2026 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to turn the call over to your host, Investor Relations Manager, Ms. Luhan Tang.

Good morning, and good evening, everyone, and thank you for joining Xunlei's Q2 2026 Earnings Conference Call. With me today are Eric Zhou, CFO; and Lee Li, Vice President of Finance.

Our IR website has our earnings press release to supplement our prepared remarks during the call. Today's agenda includes prepared opening remarks from Chairman and CEO, Mr. Jinbo Li, on Q2 operational highlights, followed by CFO, Eric Zhou's presentation of financial results details of Q2 before we open up the floor to your questions in the Q&A session. Please note that this call is recorded and can be replayed on our Investor Relations website at ir.xunlei.com.

Before we get started, I'd like to take this opportunity to remind you that the discussion today will contain certain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Such statements are based on our management's current expectations under existing market conditions that are subject to risks and uncertainties that are difficult to predict, which may cause actual results to differ materially from those made in the forward-looking statements.

Please refer to our SEC filings for a more detailed description of the risk factors that may affect our results. Xunlei assumes no obligation to update any forward-looking statements, except as required under applicable law. On this call, we'll be using both GAAP and non-GAAP financial measures. A reconciliation of non-GAAP to comparable GAAP measures can be found in our earnings press release. Please note that all numbers are in U.S. dollars unless otherwise stated.

Now the following is prepared statements by Mr. Jinbo Li, Chairman and CEO of Xunlei Limited:

Good morning, and good evening, everyone. Thank you for joining our Q2 2026 earnings call. We're pleased to report continued top line growth this quarter, building on the solid consumer-focused growth foundations we established in Q1. These results serve as clear validation that our strategic pivot towards a consumer-centric business model is delivering tangible results. Our 2 primary growth drivers, subscription services and overseas audio live streaming, each posted steady year-over-year increase in revenue. Let me walk you through the performance of these core consumer-facing businesses individually.

First, our subscription business remains our stable cash flow foundation and reliable growth anchor. Q2 subscription revenue reached $44.5 million, up 22.6% year-over-year, while the growth rate softened marginally on the sequential basis. This segment maintained resilient user retention and steady monetization performance. During the quarter, we 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 our ecosystem user acquisition channels as planned. Looking ahead, we will continue refining our differentiated member perks to boost user penetration and expand end device cooperation coverage, capturing incremental user acquisition and revenue growth in the second half of the year.

Second, our overseas audio live streaming business once again emerged as our primary growth engine. In Q2, this segment generated $58.2 million in revenue, representing a significant 54.8% year-over-year increase. We continued deploying targeted investments in high-potential emerging markets, including Southeast Asia, the Middle East, Turkey and further expansion into Latin America. Concurrently, we enhanced localized product iteration and operational capabilities, optimizing our product matrix across one-on-one social interaction scenarios and multi-person chat rooms.

Additionally, we saw notable quarterly momentum for our Hupu business, which contributed $9.1 million in Q2 revenue, benefiting from the peak advertising season and the slate of major global sporting events. User discussion activity across the platform reached new highs. Our newly rolled out AI-powered features also meaningfully boosted user engagement and deepened interactive activity, creating an additional stream of incremental revenue across our consumer ecosystem.

As we communicated in our previous quarterly reports, competition in the overseas entertainment market remains intense. Accordingly, we will stick to our long-term localized operational and marketing strategies instead of chasing near-term scale expansion, fostering sustainable business growth across all our core consumer verticals. Beyond operational performance, to further reinforce market confidence and deliver long-term shareholder returns, we announced a new $20 million share repurchase program at the end of June. We believe that this initiative demonstrates our unwavering confidence in the company's solid fundamentals and long-term growth potential. We will maintain disciplined capital allocation, prioritizing investment in core consumer product innovation and international market expansion while returning excess capital to shareholders when appropriate.

Looking ahead, we will stay firmly committed to our user-centric development strategy. We will further accelerate feature iteration for our subscription offerings, deepen market penetration within our established overseas markets, selectively pursue new regional growth opportunities and uphold strict cost discipline to expand profit margins across all business lines.

By balancing growth with profitability and through rigorous capital and operational management, we aim to promote balanced and sustainable corporate development. Against the backdrop of an evolving global market landscape, our targeted consumer positioning, 2 core business structure, advanced technological strength and localized operations serve as our key competitive edges. We are optimistic about delivering sustained long-term value to our users and shareholders alike.

With that overview, I will now turn the call over to our CFO, Eric Zhou, who will walk you through our Q2 financial metrics in detail.

Thank you, Luhan, and thank you all for participating in today's conference call. I will now walk you through our financial results for the second quarter of 2026. For Q2 2026, total revenues came in at $102.7 million, up 38.9% year-over-year. This steady top line growth was primarily driven by rising revenues from our subscription business and our overseas audio live streaming business as well as improved Hupu's advertising business.

Breaking down our revenue performance. Subscription revenues reached $44.5 million, a 22.6% year-over-year increase. This performance reflected the sustained user demand for a full suite of our premium product offerings. Revenue from live streaming and other services totaled $58.2 million, representing a 54.8% year-over-year increase. This strong performance was driven chiefly by rapid expansion of our overseas audio live streaming operations alongside the growth in advertising revenue from our sports community during the peak sports season.

Cost of revenues was $44.8 million during the quarter, accounting for 43.6% of total revenues. By comparison, in Q2 2025, cost of revenues came to $27 million, or 36.6% of total revenues. The uptick in our cost base largely aligned with the expansion of our live streaming revenue, driven mainly by increased revenue sharing expenses for our overseas audio live streaming operations.

Turning to profitability. We generated $57.3 million in gross profit during the second quarter of 2026, up 23.1% year-over-year. Gross margin stood at 55.8%, compared with 63% in the prior year period. The gross profit improvement was fueled by both our subscription business and the Hupu advertising revenue. The notable margin decline stems from a structural revenue mix shift. Since live streaming carries a lower gross margin than subscription and advertising business, its larger share of total revenue mix modestly compressed our overall gross margin.

On the expense front, R&D expenses were $21.4 million in Q2 2026, representing 20.8% of total revenues compared with $16.6 million or 22.4% of total revenues in Q2 2025. The year-over-year increase was mainly due to higher labor costs. Sales and marketing expenses rose to $27.9 million during the second quarter of 2026, representing 27.2% of revenue compared with $20.7 million or 28% of total revenues in Q2 2025. The increase in absolute marketing spending reflected ramp-up promotional investment across our subscription and overseas audio live streaming operations as we continued to proactively prioritize acquisition and brand visibility.

G&A expenses came in at $12.7 million, equal to 12.4% of total revenues, versus $8.5 million or 11.6% of total revenue in Q2 2025. The increase was primarily driven by provision for ongoing legal litigations and higher employee-related costs year-over-year. At the operating level, we posted an operating loss of $4.8 million this quarter, a reversal from operating income of $0.3 million in the same period last year. This swing was largely due to the sequential and year-over-year rise in our selling, marketing and general and administrative expenses outlined above.

We posted a net other loss of $213.8 million for the quarter versus net income of $721.5 million in Q2 2025. The dramatic swing was mainly driven by fair value volatility on our long-term investment in Arashi Vision Inc., which is accounted for on a mark-to-market basis using public stock prices after the company's IPO in June 2025. Unlike Q1, there were no discontinued operations to report for Q2 2026, following the disposal of our Shenzhen Onething business last quarter. Our net loss from continuing operations was $218.5 million this quarter compared with net income of $726.4 million in Q2 2025.

The net loss was mainly due to the material net other loss just mentioned, partially offset by positive gross profit growth in our core consumer-facing business. On a non-GAAP basis, we posted a non-GAAP net loss from continuing operations of $2.1 million, down from non-GAAP net income of $7.2 million in the prior year period. On a per share basis, diluted loss per ADS from continuing operations was $3.43 for the quarter compared with diluted EPS of $11.47 in Q2 2025. Our non-GAAP diluted loss per ADS from continuing operations came to $0.03 versus non-GAAP diluted earnings of $0.12 per ADS in the same period last year.

Finally, on our balance sheet. As of June 30, 2026, cash, cash equivalents and short-term investments totaled $276.9 million, down from $303.6 million as of March 31, 2026. The sequential decrease was primarily driven by net operating cash outflows, bank loan repayments, disbursements related to our newly announced share repurchase program and deferred consideration payments related to our Hupu acquisition.

This concludes our prepared remarks. Operator, we are now ready to open the line for questions.

[Operator Instructions] First question comes from the line of [ Zoe Zhang ], retail investor.

[Foreign Language]

The question is the company announced a share repurchase program at the end of June, but she didn't see any share repurchase information in our press release and she'd like to know what's going on with the buyback program.

Thanks for asking. The Board of Directors of the company approved a new share repurchase program of $20 million at the end of June, and the repurchase officially commenced on July 1. And 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. Thank you.

[Foreign Language]

[Operator Instructions] Next, we have [ X. J. ], individual shareholder.

[Foreign Language]

Okay. Basically, his question is surrounding our stake in [indiscernible] Arashi Vision Inc. And he'd like to know our progress in reducing our stake in this investment and what our plans for the proceeds for the future. And thank you for the question. And currently, we hold more than 5% of shareholders or exactly 7.8% of Vision's equity stake. And we need to follow certain regulatory rules and regulations when we began to sell the stock and do it in an ordinary manner and make timely disclosure. And for the time being, we are following -- going through certain procedures to get ready to reduce our stake in the company. But at this time, we have no specific plans for the share disposal for the time being.

And he also asked a question regarding the 1940 Investment Company Act. And according to that, 1940 Investment Act, a listed company needs to follow certain regulations to be in compliance with the requirements of the Investment Act. And we will continue to monitor our holdings of our operated assets, and we've been consulting with relevant advisers. And if needed, we will gradually seek to adjust our holdings so that Xunlei holds investment securities with a value not exceeding 45% of the company's total assets, excluding government securities and cash items. In line with the company's intention to mainly engage in the core business, which is the consumer-facing business, 2C business, we never intend to be an investment company. Thank you.

[Foreign Language]

Thank you. I see no further questions at this time. I will now turn the conference back to Eric for closing remarks.

Thank you again your time and participation. For any follow-up inquiries, please visit our website at ir.xunlei.com or contact our Investor Relations team. Have a good day.

Operator, we conclude today's conference call. Thank you.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.

Welcome, ladies and gentlemen, and thank you for your patience. You've joined Xunlei's First Quarter 2026 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to turn the call over to the host, Investor Relations Manager, Ms. Luhan Tang. Thank you. Please go ahead.

Good morning, everyone, and thank you for joining Xunlei's Q1 2026 Earnings Conference Call. With me today are Eric Zhou, CFO; and Lee Li, Vice President of Finance. Our IR website has our earnings press release to supplement our prepared remarks during the call.

Today's agenda includes a prepared opening remarks from Chairman and CEO, Mr. Jinbo Li, on Q1 operational highlights, followed by CFO, Eric Zhou's presentation of financial results details of Q1 before opening up the floor to your questions in the Q&A session. Please note that this call is recorded and can be replayed in our Investor Relations website at ir.xunlei.com.

Before we get started, I would like to take this opportunity to remind you that the discussion today will contain certain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Such statements are based on our management's current expectations under existing market conditions that are subject to risks and uncertainties that are difficult to predict, which may cause actual results to differ materially from those made in the forward-looking statements.

Please refer to our SEC filings for a more detailed description of the risk factors that may affect our results. Xunlei assumes no obligation to update any forward-looking statements, except as required under applicable laws. On this call, we'll be using both GAAP and non-GAAP financial measures. A reconciliation of non-GAAP to comparable GAAP measures can be found in our earnings press release. Please note that all numbers are in U.S. dollars unless otherwise stated.

Now the following is the prepared statement by the Mr. Jinbo Li, Chairman and CEO of Xunlei Limited.

[Interpreted] Good morning, and good evening, everyone. Thank you for joining us today. We're excited to begin 2026 with a strong first quarter, one defined by disciplined execution, strategic clarity and tangible progress in our business transformation.

Q1 was a period of decisive action. We delivered robust revenue growth across our core segments, completed a successful corporate restructuring and concentrated our focus on our highest potential business area after carefully balancing our resources and the business opportunities. Total revenue for Q1 2026 reached $98.6 million, a significant 54.1% increase year-over-year. This growth was driven by our strategic emphasis on consumer-oriented businesses, particularly our two key growth engines, subscription services and overseas audio live streaming business.

Now let me share with you some insights on these two vital business lines. For our subscription business, it remains Xunlei's stable cornerstone, delivering consistent cash flow and steady growth. In Q1, subscription revenue reached $45 million, a solid 26.2% year-over-year increase. This performance reflects our two focused efforts. Firstly, by thoughtfully enhancing the premium subscription experience, listening closely to user feedback and refining features, we have attracted a record number of users to use our premium services. Their trust is both our motivation and our greatest reward.

And secondly, through constructive long-term collaborations with leading mobile phone manufacturers and Internet platform partners, we have expanded our reach naturally and inclusively, bringing our services to new communities while staying true to our mission of enriching everyday digital life. Looking ahead, we're excited to introduce new features designed to make every interaction more intuitive, joyful and personal.

With your continued support, we are confident in sustaining this purposeful growth. Our overseas live streaming business and other services have emerged as a powerful growth engine, delivering results in line with our expectations. In Q1, this segment generated $53.6 million in revenue, also an 89.3% year-over-year increase.

This exceptional growth validates our strategic focus on overseas markets, especially high-growth emerging regions such as Southeast Asia and the Middle East. These markets benefit from supportive platform policies and growing user demand. We have leveraged our strength in product refinement, user engagement and monetization to enhance local operations. The diverse user base, high engagement levels and increasing willingness to pay in these regions create substantial opportunities.

Our ability to adapt services to local market preference, combining geographic and cultural insights with digital entertainment consumption is a key driver for this remarkable growth. We will continue to intensify our overseas expansion, exploring new markets and optimizing service offerings to sustain momentum. That said, given the ever-changing competitive landscape, our rapid growth may experience a modest slowdown in future quarters.

In conclusion, Q1 2026 was a transformative period of Xunlei. We achieved strong financial results, executed a strategic restructuring to concentrate fully on To C operations and saw our overseas live streaming business emerge as a leading growth driver. We have demonstrated our ability to make both strategic decisions, adapt to market dynamics and drive growth through focus and innovation. With a clear strategic direction, robust business momentum and optimized resource allocation, we believe we are well positioned to capture growing opportunities in the To C market, sustain our growth trajectory and create long-term value for our shareholders.

We remain committed to executing our strategy with discipline and agility, and we're excited about the future ahead. I will now hand the call over to our CFO for a detailed review of our Q1 2026 financial results.

Thank you, Luhan, and thank you all for participating in today's conference call. I will now walk you through our financial results for the first quarter of 2026. Please note that in Q1, we restructured our cloud computing business and it's no longer consolidated in our financial statements. Hence, the following financials exclude discontinued operations.

For the first quarter of 2026, our total revenues came in at $98.6 million, up 54.1% year-over-year. This strong top line growth was mainly driven by higher revenue from our subscription business as well as solid gains from our overseas audio live streaming business. Breaking down our revenue performance, subscription revenues reached $45 million, representing a 26.2% year-over-year increase.

This growth reflects stronger user demand for our subscription offerings. Our live streaming and other services delivered $53.6 million in revenue, jumping 89.3% year-over-year, thanks primarily to the robust expansion of our overseas audio live streaming business. Our cost of revenues were $40.4 million in the quarter, making up 41% of total revenues.

For comparison, we recorded $24.1 million or 37.8% of total revenues in the same period of 2025. The higher cost of revenues aligned closely with our live streaming revenue growth, driven mainly by increased revenue sharing expenses for our overseas audio live streaming operations. The remaining portion of revenue costs mainly came from payment handling fees and bandwidth expenses.

Moving to profitability. We generated $57.7 million in gross profit this quarter, up 45.1% year-over-year. Our gross margin stood at 58.5% compared to 61.9% in the prior year quarter. The gross profit improvement was fueled by both our overseas audio live streaming business and our subscription business.

The slight margin decline was a structural mix change. Live streaming, which carries a lower gross margin than subscription now accounts for a larger share of our total revenues, which compressed our overall gross margin modestly. On the expense front, our R&D expenses were $20.2 million in Q1 2026, representing 20.4% of total revenues.

This compares with $16 million or 25.1% of total revenues in the first quarter of 2025. The year-over-year increase was mainly due to higher labor costs this quarter. Sales and marketing expenses rose to $22.4 million this quarter, flat as a percentage of revenue at 22.8% compared with $14.5 million or 22.7% of our total revenues.

The higher absolute spending this year reflects increased marketing investments across our subscription and overseas audio live streaming business as we continue to prioritize user acquisition. G&A expenses came in at $10.9 million, equal to 8.5% of our total revenues versus $10 million or 15.7% of total revenues in Q1 2025. The increase was primarily driven by higher share-based compensation expenses.

On an operating level, we delivered operating income of $4.3 million this quarter, improving from an operating loss of $1 million in the prior year period. This turnaround was largely driven by stronger gross profit across our core businesses. We recorded a net other loss of $195.1 million this quarter compared with a net other income of $1.1 million in Q1 2025. This year-over-year shift was mainly attributable to the fair value changes related to our long-term investment in Arashi Vision Inc., which completed its IPO back in June 2025.

Turning to discontinued operations, which relates entirely to our Shenzhen Onething business, which we recognized in March and recognized income of $17.7 million in Q1 2026, which comprised the operating loss of $1.8 million from discontinued operations and a disposal gain of $4.3 million as well as the income tax benefits related to the disposal of $15.2 million.

Our net loss from continuing operations was $192.4 million this quarter compared with net loss of $0.2 million in Q1 2025. The large net loss was mainly due to the net other loss we just discussed, partially offset by our improved operating performance. On a non-GAAP basis, we achieved solid growth in non-GAAP net income from continuing operations, which rose to $4.1 million, up from $0.9 million in the prior year period.

On a per share basis, our diluted loss per ADS from continuing operations was $3.06 for the quarter compared with a diluted EPS of $0 in Q1 2025. Our non-GAAP diluted earnings per ADS from continuing operations increased to $0.10 -- to increased to $0.07 versus $0.02 in the same quarter last year. Finally, on the balance sheet, as of March 31, 2026, our cash, cash equivalents and short-term investments totaled $303.6 million, up from $283.5 million as of December 31, 2025.

The increase was primarily driven by positive operating cash flows and proceeds from the disposal of our 50% equity stake in Shenzhen Onething. These gains were partially offset by deferred consideration payments for our Hupu acquisition. This concludes our prepared remarks. Operator, we are now ready to take questions.

[Operator Instructions] You have a question from the line of George Kim.

[Foreign Language]

The first question is he noticed from our annual report that in November last year, Hupu was sued for the alleged unauthorized dissemination of NBA game content and the unauthorized use of the NBA trademark. And the claimed damage amounted to approximately USD 12.1 million in total. And he would like us to provide more details regarding such copyright litigation and he wants to know if it has -- or if it will have any material impact on this business.

Thanks for the question. And as it is an ongoing case, we can't comment on it right now. But that said, we have set aside some allowances to cover any potential expenses related to this litigation, and we don't expect this case will have a significant impact on our operations. Thank you.

[Foreign Language]

And the second question is he mentioned that there is a 1940 Investment Act that requires companies to maintain the ratio of investment income to total assets below a certain threshold. And it is expected that equity gains will exceed that ratio. And he would like to know if any measures the company would take to address this regulation by SEC.

This is a good question. And you are correct. We will continue to monitor our holdings of our appreciated assets in Arashi Inc. And we've been consulting with relevant advisers. And if needed, we will gradually seek to adjust our holdings so that Xunlei will hold investment in securities with a value not exceeding 45% of the company's total assets, excluding government securities and cash items, in line with the company's intention to mainly engage in our core To C business. And in fact, we never intend to be an investment company. Thank you.

[Operator Instructions] At this time, no further questions from the line. Allow me to hand the call back to Eric for closing.

Thank you again for your time and participation. If you have any questions, please visit our website at ir.xunlei.com or send e-mails to our Investor Relations. Have a good day. Operator, we conclude today's conference call. Thank you.

That does conclude today's conference call. Thank you for your participation. You may now disconnect.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]

Welcome, ladies and gentlemen, and thank you for your patience. You have joined Xunlei's Fourth Quarter and Fiscal Year 2025 Earnings Conference Call. [Operator Instructions]. Please be advised that this conference is being recorded. I would now like to turn the call over to the host, Investor Relations Manager, Ms. Luhan Tang. Please go ahead.

Good morning, everyone, and thank you for joining Xunlei's Q4 and Fiscal Year 2025 Earnings Conference Call. With me today are Jinbo Li, Chairman and CEO; Eric Zhou, CFO; and Lee Li, Vice President of Finance.

Our IR website has our earnings press release to supplement our prepared remarks during the call. Today's agenda includes a prepared opening remarks from Chairman and CEO, Mr. Jinbo Li on Q4 operational highlights; followed by CFO, Eric Zhou's presentation of financial results details of Q4 and the fiscal year, before we open up the floor to your questions in the Q&A session.

Please note that this call is recorded and can be replayed on our Investor Relations website at ir.xunlei.com.

Before we get started, I would like to take this opportunity to remind you that the discussion today will contain certain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Such statements are based on our management's current expectations under existing market conditions that are subject to risks and uncertainties that are difficult to predict, which may cause actual results to differ materially from those made in the forward-looking statements. Please refer to our SEC filings for a more detailed description of the risk factors that may affect our results. Xunlei assumes no obligations to update any forward-looking statements, except as required under applicable laws.

On this call, we'll be using both GAAP and non-GAAP financial measures. A reconciliation of non-GAAP to comparable GAAP measures can be found in our earnings press release. Please note that all numbers are in U.S. dollars unless otherwise stated.

Now the following is prepared statements by Mr. Jinbo Li, Chairman and CEO of Xunlei Limited: Good morning, and good evening, everyone. Thank you all for joining us today. We're extremely pleased to wrap up 2025 with exceptional fourth quarter and full year operating results, which not only met but exceeded our expectations and demonstrated the strong momentum of our strategic transformation. 2025 has been a year of remarkable growth, strategic refinement and value creation that marked by robust performance across all core business segments, successful strategic transactions and significant progress in optimizing our business portfolio.

A key milestone of our success for the year is the consistent double-digit growth across our major business lines, a testament to the effectiveness of our ecosystem-driven strategy, our focus on core competencies and our ability to adapt to evolving market dynamics.

Now I'd like to share with you detailed insight about our operations in Q4 2025 and full fiscal year, which underscore the strength of our business model and success of our strategic initiatives. First, our subscription business continues to serve as a stable core asset and reliable growth driver for the company, demonstrating strong resilience and growth momentum.

In the fourth quarter, we generated $42.1 million in subscription revenue, representing a solid 22.4% year-over-year increase. For the full year 2025, subscription revenue reached $154.8 million, up 15.8% from 2024. This sustained growth is underpinned by 2 key pillars. First, our deeply integrated business ecosystem continue to deliver value and the high proportion of paying subscribers opting for our premium subscription business, which integrates Internet browsing, high-speed downloading tools, expanded storage and value-added features to enhance user engagement and retention.

And second, our strategic alliance with leading mobile manufacturers and platform partners expanded our user reach, enabling us to tap into a new user group and drive organic growth. Moving forward, we will continue to integrate advanced smart features, optimize our product experience and expand our market presence to drive further growth in our subscription business.

Next, our cloud computing business achieved a turnaround and delivered significant growth in 2025. In Q4, cloud computing revenue were $46.1 million, representing an increase of 102.7% year-over-year. For the full year, cloud computing revenues reached $137.4 million, up 31.4% from 2024. This growth was driven by the increased demand for our cost-effective solutions. As you might learn from our announcement last week, we realigned and strengthened our strategic focus and sold 50% of our stake in OneThing, the operating entity of our cloud computing business.

We believe that the equity divestiture will support business optimization and leverage our partners' expertise to advance OneThing's edge computing and CDN services. Meanwhile, Xunlei will reallocate its resources to core growth drivers, subscription and overseas live streaming while retaining a minority stake in OneThing to capture future upside, if any. We believe that the transaction will have no significant negative impact on our core operations, cash flow or profitability, and instead, it may improve our capital efficiency and strategic clarity in the long run.

Our live streaming and other Internet value-added services have emerged as a key growth engine, delivering rapid growth in 2025. In Q4, this segment generated $55.1 million in revenues, representing a 102.8% year-over-year increase. For the full year, live streaming and other IVAS revenues reached $170.2 million, a remarkable 97.5% increase from 2024. This exceptional growth validates our strategic pivot in late 2023 to exit low-margin volatile domestic market and focus on high-growth emerging regions such as Southeast Asia and the Middle East and North Africa.

By leveraging our strength in product refinement, user engagement and monetization, we have achieved significant growth in our overseas audio live streaming business. Additionally, the integration of Hupu, which we acquired in 2025, generated synergies to our business, with Hupu contributing to our advertising revenue through its vibrant and highly engaged community.

Reviewing our overall financial performance for 2025. We delivered substantial results across the board. Total revenues for Q4 2025 reached $143.3 million, a 70% year-over-year increase, reflecting the strong growth of all our core business segments. For the full year 2025, total revenue hit $462.4 million, representing a 42.5% increase from 2024. This robust revenue growth is a clear indication of the success of our strategic transformation, which has focused on strengthening core businesses, optimizing product portfolio and exploring high-growth opportunities. Additionally, our investment in Arashi Vision has generated significant unrealized capital gains and may further enhance our financial strength and capital flexibility.

To conclude, 2025 has been a transformative year for Xunlei, marked by strong financial performance, successful strategic transactions and significant progress in our core businesses. We have demonstrated our ability to adapt to market changes, optimize our portfolio and drive growth through strategic focus and innovation. With our clear strategic direction, strong business momentum and enhanced capital flexibility, we believe we are well positioned to capitalize on market opportunities and deliver sustained growth in 2026 and beyond. And we remain committed to create long-term value for our shareholders.

With that, I will now pass the call over to Eric. Eric will give a detailed review of our Q4 and fiscal year financial results.

Thank you, Luhan. Thank you all for participating in Xunlei's conference call today. I will now walk you through our financial results for the fourth quarter and full fiscal year of 2025.

Let's begin with the fourth quarter of 2025 results. Total revenues for the fourth quarter were $143.3 million. This represents an increase of 70% compared to the same period last year. This growth was primarily driven by higher revenue from our cloud computing and live streaming businesses.

Looking at our revenue streams in more details. Revenues from subscriptions reached $42.1 million, up 22.4% year-over-year. This increase was mainly due to higher demand for our subscription services. Revenues from live streaming and other IVAS were $55.1 million, up 102.8% year-over-year. This significant growth was driven by the expansion of our overseas audio live streaming business as well as growth in our advertising business, largely resulting from our acquisition of Hupu.

Revenues from cloud computing were $46.1 million, up 102.7% year-over-year. This increase was due to greater demand for our -- from our major customers for cloud computing services.

Moving to costs and profitability. Cost of revenues were $80.8 million, representing 56.4% of our total revenues. This compares to $40.4 million or 47.9% of total revenues in the same period of 2024. The increase was mainly due to higher revenue sharing costs for our live streaming business and increased bandwidth costs associated with high demand for our cloud computing services. Gross profit for the quarter was $61.7 million, an increase of 41.5% year-over-year. Gross profit margin was 43% compared to 51.7% in the fourth quarter of 2024.

While gross profit dollars increased, driven by our subscription and overseas audio live streaming business, the margin decreased. This was primarily because a larger portion of our revenue now comes from our overseas audio live streaming and cloud computing business, which carried lower gross profit margins, while the proportion of revenues from our higher-margin subscription business decreased.

Turning to operating expenses. R&D expenses were $21.9 million or 15.3% of total revenues, up from $18.7 million last year. The increase was primarily due to higher labor costs. Sales and marketing expenses were $23.2 million or 16.2% of total revenues, up from $12.5 million. This was driven by the expansion of marketing campaigns for our subscription and overseas audio live streaming business. G&A expenses were $12.4 million or 8.6% of total revenues compared to $12.1 million last year. The slight increase was due to higher legal expenses during the quarter.

As a result, operating income was $4.7 million. This is a significant improvement from an operating loss of $20.5 million in the same period of last year. The turnaround was primarily due to the absence of a goodwill impairment charge of approximately $20.7 million that were incurred in the fourth quarter of last year. Net loss for the quarter was $228.9 million compared to a net loss of $9.9 million in the same period last year. The increase in net loss was primarily due to other losses net, which totaled $232.6 million, this compares to other income of $1.5 million last year. The change was mainly due to a decrease in the fair value of our long-term investment in Arashi Vision following its IPO in June 2025.

On a non-GAAP basis, which excludes the impact of share-based compensation and certain other items, net income for the fourth quarter was $4.8 million compared to $11.3 million in the same period of 2024. Diluted loss per ADS was $3.64 compared to a loss of $0.16 in the fourth quarter of 2024. Non-GAAP diluted earnings per ADS were $0.08 compared to $0.18 in the same period last year.

Turning to our balance sheet. As of December 30, 2025, (sic) [ December 31, 2025, ] we had cash, cash equivalents and short-term investments of $305.2 million. This compares to $284.1 million as of September 30, 2025. The increase was mainly due to the net cash inflow from operating activities and an increase in proceeds from bank borrowings.

Now let's move to our full year 2025 financial results. For the full year, total revenues were $462.4 million, an increase of 42.5% compared to the previous year. This growth was attributable to revenue increase across all of our major business segments.

Breaking down the full year results. Subscription revenues were $154.8 million, up 15.8% year-over-year, driven by increased demand. Revenues from live streaming and other IVAS were $170.2 million, an increase of 97.5% year-over-year, primarily due to the growth of our overseas audio live streaming business and advertising business following the Hupu acquisition.

Cloud computing revenues were $137.4 million, up 31.4% year-over-year due to increased demand for our services. Cost of revenues for the year were $242.9 million, representing 52.5% of total revenues. This compares to $155.6 million or 48% of our total revenues in 2024. The increase was mainly due to higher demand for cloud computing services and increased revenue sharing costs from the expansion of our overseas audio live streaming business.

Gross profit for the year was $217.5 million, an increase of 29.8%. Gross profit margin was 47% compared to 51.7% in the previous year. The increase in gross profit dollars was driven by our subscription and live streaming businesses, partially offset by a decrease in gross profit from cloud computing. The margin decline similar to the quarter reflects a shift in revenue mix towards our lower-margin overseas audio live streaming and cloud computing businesses.

Looking at full year operating expenses, R&D expenses were $80 million or 17.3% of our total revenues, up from $71.6 million last year, primarily due to higher labor costs. Sales and marketing expenses were $86.3 million or 18.7% of total revenues, up significantly from $44.8 million. This was driven by expense marketing campaigns for our subscription and live streaming businesses as well as higher labor costs.

G&A expenses were $44.9 million or 9.7% of total revenues compared to $45.8 million last year. Operating income for the year was $6.6 million, a significant improvement from an operating loss of $15.7 million in 2024. This was primarily due to the increase in gross profit and the absence of the onetime goodwill impairment we recorded at the end of 2024.

Net income for the year was approximately $1.05 billion compared to $0.7 million in the previous year. This large increase was primarily driven by high gross profit and other income during the year. On a non-GAAP basis, net income was $18.5 million in 2025 compared to $23.9 million in 2024. Diluted GAAP earnings per ADS were $16.56 compared to $0.02 in the previous year. Non-GAAP diluted earnings per ADS were $0.30 compared to $0.38 in the previous year.

Our year-end cash position remains strong. As of December 31, 2025, we had cash, cash equivalents and short-term investments of $305.2 million compared to $287.5 million at the end of 2024. The increase was mainly due to net cash inflow from operating activities and the proceeds from bank borrowings, partially offset by the payment of the acquisition of Hupu.

Finally, a quick update on our share buybacks. As of December 31, 2025, we had spent approximately $1 million to repurchase about 435,000 ADS during 2025. Since the inception of this program on June 4, 2024, we have spent a total of about $6.5 million on share buybacks.

This concludes our prepared remarks for today. Operator, we are now ready to open the line for questions.

[Operator Instructions]. And now we're going to take our first question, and it comes from the line [ Dante ] from -- he is a retail investor.

[Foreign Language]

The investor is asking what's our [indiscernible] plan for cash consideration obtained from the transaction?

[Foreign Language]

[Interpreted] So Jinbo Li was answering, we're going to use the cash consideration for the development of the company's core businesses, specifically including the R&D in technology as well as the integration of upgrades for our products. For example, the cloud acceleration and overseas audio live streaming businesses. Besides that, we also will use the money on the market expansion and brand promotion aimed at increasing the market share of our products and at the same time, optimize the company's operating capital structure and enhance overall operational liquidity.

Thank you.

[Foreign Language]

[Interpreted] So he's asking, is the Kingsoft Cloud the related party to Xunlei? And why you are selling the stake to them?

[Foreign Language]

[Interpreted] So to answer this question, Mr. Jinbo Li says, so Kingsoft Cloud is not the only one option that we were looking for. In the past 2 years, we have been looking for the buyers, and we did a lot of market research, and we finally decided to choose Kingsoft Cloud for the 2 reasons. One is it has the maximum return for Xunlei, and the second reason is because Kingsoft Cloud has advantage in the cloud infrastructure and the cloud technology R&D and industry solutions. So they will offer support for OneThing business development and the contribution to the enhancement for the OneThing's market competitiveness and operating performance in the future.

[Operator Instructions] Luhan, please be advised we have another line to asking the question. And if you don't mind, please, can you announce these participants?

Sure. [Foreign Language] Please go ahead to ask your question.

My apologies, this person just put his name in Mandarin, so therefore, I cannot even pronounce his name.

Yes. I try to speak Mandarin to her, I guess. [Foreign Language]

My apologies, dear participants with e-mail [ [email protected] ] your line is open, if you would like to ask a question, please ask your question. My apologies, there are no questions from this line. [Operator Instructions]

Dear speakers, there are no further questions for today. I would now like to hand the conference over to the management team for any closing remarks. My apologies, now we have another question which has come through. Would you like to take it?

Yes, please.

And the question comes from the line of [ Jeff Sheng ] from [ Stonehill ] Capital Management.

I just wanted to quickly ask Mr. Jinbo Li, what is the company's plan and the Board's plan with the Arashi Vision stake once the lockup expires? And how should shareholders think about potential shareholder return and the size of potential shareholder return?

[Foreign Language]

[Foreign Language]

[Interpreted] So Mr. Jinbo Li answered the first question about how we -- after this invest, how are we going to allocate the funds. He said we intend to allocate the funds towards the R&D of emerging technologies and also the exploration for the new business initiatives and may create -- the initiatives that create significant value for the company. At the same time, we will also assess all the physical options to reward shareholders. We will determine the pace of divesting from [indiscernible] based on the company's business development and also the capital market condition at the time. We'll have a lot of options to choose from. So please stay tuned for the disclosure during that time.

He actually answered the question about the return. He said we will -- please stay tuned for the further disclosure during the time.

[Operator Instructions] And now we're going to take another question, and the question comes from line of [ Fujitsubo Sihon ].

We cannot hear you.

There is no answer from this line. Dear speakers, there are no further questions for today. I would now like to hand the conference over to the management team for any closing remarks.

Okay, operator. We conclude prepared remarks for the conference call. And we are -- I think that's all for today. And for any callers, if you have any questions in the future, please feel free to contact us. Operator, now we can close this conference. Thank you.

This concludes today's conference call. Thank you for participating. You may now all disconnect. Have a nice day.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]

Welcome, ladies and gentlemen. Thank you for your patience. You've joined Xunlei Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to turn the call over to your host, Investor Relations Manager, Ms. Luhan Tang. Please go ahead.

Good morning, and good evening, everyone. Thank you for joining Xunlei's Q3 2025 Earnings Conference Call. With me today are Mr. Jinbo Li, Chairman and CEO; Eric Zhou, CFO; and Lee Li, Vice President of Finance. Our IR website has our earnings press release to supplement our prepared remarks during the call. Today's agenda includes a prepared opening remarks from Chairman and CEO, Mr. Jinbo Li, on Q3 operational highlights, followed by CFO, Eric Zhou's presentation of financial results details of Q3 2025 and the revenue guidance for the Q4 2025 before we open up the floor to your questions in the Q&A session.

Mr. Jinbo Li will answer your questions in the Q&A session. Please note that this call is recorded and can be replayed on our Investor Relations website at ir.xunlei.com. Before we get started, I would like to take this opportunity to remind you that the discussion today will contain certain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Such statements are based on our management's current expectations under existing market conditions and are subject to risks and uncertainties that are difficult to predict, which may cause actual results to differ materially from those made in the forward-looking statements.

Please refer to our SEC filings for a more detailed description of the risk factors that may affect our results. Xunlei assumes no obligation to update any forward-looking statements, except as required under applicable laws. On this call, we will be using both GAAP and non-GAAP financial measures. A reconciliation of non-GAAP to comparable GAAP measures can be found in our earnings press release. Please note that all numbers are in U.S. dollars unless otherwise stated.

Now the following is the prepared statement by Mr. Jinbo Li, Chairman and CEO of Xunlei Limited.

[Interpreted] Good morning, and good evening, everyone. Thank you for joining us today. We're pleased to report that the third quarter of 2025 continued to demonstrate positive growth momentum, supported by solid performance across all of our major business operations. Our top line exceeded the upper end of our expectations, reaching total revenues of $126.4 million, representing an over-year of increase of 57.7%. This outcome underscores the effectiveness of our initiatives to enhance user experience and deepen community engagement as well as the further expansion of our overseas audio live streaming operations.

Our bottom line, on the other hand, continued to benefit significantly from the increased stock price of our investee company, Arashi Vision Inc. during the third quarter following its IPO in June this year and reflected a gain of $545.8 million resulting from the fair value changes in our approximately 7.8% equity stake in the company. We believe that future realization of investment gains will drastically strengthen our balance sheet and provide strategic flexibility to pursue opportunities in research and development of new technologies, pursuing industry collaboration, selective investments as well as more options for the shareholder return.

Now let me take a moment to walk you through each segment and share some insights into the key drivers behind this performance. In Q3, our subscription business achieved significant milestones, generating $40.7 million in revenue, a 22.3% increase compared to the same period in 2024. This sustained growth underscored the strength and resilience of our business model as well as increased trust users place on our product offerings.

A key highlight was the subscription revenue reached a record high, reflecting strong market demand for our services. This upward trajectory is attributable to several strategic initiatives driven by continuous product integration and the integration of the user feedback, which enhanced user satisfaction and both organic growth. We developed more refined strategies tailored to various platforms, enabling effective engagement with diverse audience segments across demographics. Furthermore, our live streaming and other services achieved robust year-over-year revenue growth of 127.1% in the third quarter, reaching $49.1 million. The growth was primarily driven by the rapid expansion of our overseas audio live streaming operations, which have gained strong traction in multiple international markets.

In addition, the acquisition of Hupu significantly contributed to our advertising revenue, bringing in high-quality monetization opportunities through its established platform and audience reach. Hupu's strong presence in the sports digital space has allowed us to tap into the highly engaged community of sports enthusiasts, enabling more effective ads targeting and higher advertiser satisfaction.

Finally, our cloud computing business generated $36.6 million in revenue, representing a significant year-over-year increase of 44.9% compared to the same period in 2024. This notable growth reflected a strong recovery from earlier setbacks. With the rebound in client demand, particularly among large enterprise customers, we successfully capitalized on emerging opportunities by enhancing our service offerings to provide more tailored, cost-effective, scalable and secure solutions. But despite the increased revenues, our cloud computing business still faced challenges and headwinds. Looking ahead, we intend to foster innovation, enhance operational resilience and a capitalize on emerging opportunities to drive long-term growth and deliver a durable value to our shareholders. With that, I will now pass the call over to Eric. Eric will give a detailed review of our Q3 2025 financial results and provide revenue guidance for the fourth quarter of 2025. Thank you.

Thank you, Luhan. Thank you all again for participating in Xunlei's conference call to discuss the financial results of the third quarter of 2025. In the third quarter, our total revenues were $126.4 million, representing an increase of 57.7% year-over-year. The increase in total revenues was mainly attributable to the increased revenue generated from our major business operations. Revenues from subscription were $40.7 million, representing an increase of 22.3% year-over-year. The increase in subscription revenues was driven by the increase in the number of subscribers and the increased average revenue per subscriber. The number of subscribers was 6.56 million as of September 30, 2025, compared with 5.51 million as of September 30, 2024.

The average revenue per subscriber for the third quarter was RMB 44.2 compared with RMB 40.9 in the same period of last year. The higher average revenue per subscriber was due to the increased proportion of premium subscribers, which have higher average revenue per subscriber. Revenues from live streaming and other services were $49.1 million, representing an increase of 127.1% year-over-year. The increase was mainly due to the growth of our overseas audio live streaming business as well as advertising business. Revenues from cloud computing were $36.6 million, representing an increase of 44.9% year-over-year. The increase in cloud computing revenues was mainly attributable to the increased demand from major customers for our cloud computing services.

Cost of revenues were $65.4 million, representing 51.7% of our total revenues compared with $39.4 million or 49.1% of the total revenues in the same period of 2024. The increase in cost of revenues was mainly attributable to the increase in bandwidth costs and revenue sharing expenses in our overseas audio live-streaming operations, especially, generally in line with the growth in revenues. Bandwidth costs as included in cost of revenues were $38.3 million, representing 30.3% of our total revenues compared with $24.8 million or 31% of the total revenues in the same period of 2024. The increase in bandwidth costs was primarily due to the increased sales of our cloud computing services. Gross profit for the third quarter of 2025 was $60.5 million, representing an increase of 49.6% year-over-year.

Gross profit margin was 47.9% in the third quarter of 2025 compared with 50.5% in the same period of 2024. The increase in gross profit was mainly contributed by our online advertising business, overseas audio live-streaming business and subscription business. The decrease in gross profit margin was mainly attributable to the decreased gross profit margin of our cloud computing business and higher proportion of revenues derived from our audio live-streaming business, which has a lower gross profit margin.

R&D expenses for the third quarter of 2025 were $21 million, representing 16.6% of our total revenues compared with $17.7 million or 22.1% of our total revenues in the same period of 2024. The increased expenses were primarily due to the increase in labor costs as compared with the same period of 2024.

Sales and marketing expenses for the third quarter of 2025 were $25.8 million, representing 20.4% of our total revenues compared with $11.5 million or 14.3% of our total revenues in the same period of 2024. The increases were primarily due to more marketing expenses incurred during the quarter for our subscription and overseas audio live streaming business as part of our ongoing efforts on user acquisition.

G&A expenses for the third quarter of 2025 was $10.9 million, representing 8.6% of our total revenues compared with $11.4 million or 14.2% of our total revenues in the same period of 2024. The decreased expenses were primarily due to the decrease in labor costs, partially offset by the increase in provision for litigations and share-based compensation expenses during the third quarter of 2025.

Operating income was $2.7 million compared with an operating loss of $0.2 million in the same period of 2024. The increase in operating income was primarily attributable to the increase in gross profit, partially offset by the increase in marketing and other operating expenses during the quarter.

Other income net was $547.7 million compared with other income net of $4.8 million in the same period of 2024. The increase was primarily due to the fair value changes in the third quarter for our long-term investment in Arashi Vision Inc., which completed its IPO in June 2025.

Net income was $550.1 million compared with net income of $4.4 million in the same period of 2024. The increase in net income was primarily due to the increase in other income, as mentioned above. Non-GAAP net income was $5.3 million in the third quarter of 2025 compared with $4.9 million in the same period of 2024. The increase in non-GAAP net income was primarily due to the increase in operating income. Diluted income per ADS in the third quarter of 2025 was $8.60 compared with diluted earnings per ADS of $0.07 in the third quarter of 2024. Non-GAAP diluted earnings per ADS was $0.09 in the third quarter of 2025 compared with non-GAAP diluted earnings per ADS of $0.08 in the same period of 2024.

As of September 30, 2025, the company had cash, cash equivalents and short-term investments of $284.1 million compared with $275.6 million as of June 30, 2025. The increase was mainly due to the increase in net cash inflows from operating activities during the quarter.

Turning to our guidance. For the fourth quarter of 2025, Xunlei estimates total revenues to be between $131 million and $139 million and the midpoint of the range represents a quarter-over-quarter increase of approximately 6.8%. This estimate represents management's preliminary view as of the date of this press release, which is subject to change and any change could be material. Now we conclude prepared remarks for the conference call. Operator, we are ready to take questions.

[Operator Instructions] first question comes from [ Zhao Lin Tan from BT Capital. ]

[Foreign Language]

[Interpreted] Investor asking Xunlei has not paid any dividend historically -- given the fact that [indiscernible] our investment in [ Xunlei ] and the upcoming expiration of the markup period next year, does Xunlei plan to consider dividend distribution in the future?

[Foreign Language]

[Interpreted] So Xunlei holds more than 5% of the shares. If we want to sell our shares, we have to follow certain regulatory rules and also the regulation. So far, we don't have any plans to -- for the share disposals or the dividend distribution.

[Foreign Language]

[Interpreted] So the investors asking Xunlei has previously mentioned that we would embrace artificial intelligence. So are there any like progress that made so far?

[Foreign Language]

[Interpreted] We're very excited for the futures of artificial intelligence. We're actively exploring the opportunities in this field. We look forward to sharing our progress with you in the future. Thank you.

[Operator Instructions] I see no further questions at this time. I will now pass back to management.

Thank you again for your time and participation. And if you have any questions, please visit our website at ir.xunlei.com or send e-mails to our Investor Relations. Have a good day. Operator, we conclude today's conference call. Thank you.

This concludes today's conference call. Thank you for participating. You may now disconnect.