Xunlei Ltd. ADR Aktie

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.

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

Good morning, and good evening, everyone, and thank you for joining Xunlei's Q2 2025 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 Q2 operational highlights, followed by CFO, Eric Joe's presentation of financial results details of Q2 2025 and revenue guidance for Q3 2025 before I 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 I 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 forward-looking statements. Please refer to our SEC filings for a more detailed description of the risk factors that may affect our results. Xunlei assume no obligations to update any forward-looking statements, except as required under applicable law.

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. The second quarter of 2025 marked a significant milestone for Xunlei. During this period, we achieved a series of notable achievements, the successful acquisition of Hupu, a leading online community for sport enthusiasts, expanding Xunlei's reach into new user segments and content domain. Meanwhile, the IPO of Arashi Vision Inc., one of our invested companies, highlighted our strategic investment capabilities and our ability to identify high potential ventures. Additionally, we reported year-over-year revenue growth of 30.6%, driven by strong performance across key business segments.

This growth underscores the resilience of our business model and the effectiveness of our growth strategy. Just as I mentioned earlier, all of our core businesses showed robust growth during the second quarter. I'd like to take a moment to walk you through each segment and share some insights into the key drivers behind this performance.

In Q2, our subscription business generated $36.4 million in revenue, reflecting a 10.5% increase compared to the same period in 2024. Notably, we achieved a new record with a number of the subscribers reaching 6.4 million. This growth was primarily driven by our continuous improvement on the existing features, our efforts to meet evolving user needs as well as more refined marketing strategies aimed at expanding our diverse user base. Additionally, the percentage of users choosing our premium subscription, our highest tier offering rose to 81%, up from 77.1% in Q2 2021. It serves as evidence that our products and services have achieved user affirmation, and we're confident that our subscription offerings will continue to gain popularity among our value user base.

We're also excited to report our live streaming and other services achieved a strong year-over-year revenue growth of 85.5% in the second quarter, reaching $37.6 million, this growth was largely fueled by the expansion of our overseas audio live streaming business as well as advertising revenue from the recent acquisition of Hupu. We remain committed to defending our presence in international markets by improving user engagement and continuously enhancing our features and services.

Additionally, we are pleased to welcome Hupu to our Xunlei family. We expect integration of Hupu will bring valuable complementary strengths and synergies, particularly in the areas of community-driven content, sports and lifestyle sectors as well as in advertising resources and strategies. We believe this collaboration will create promising new opportunities for future growth. Additionally, our cloud computing business brought in $30 million in revenue, marking a 13.6% increase compared to the same period in 2024. This growth is largely due to the recovery from previous setbacks and a rising demand from our major clients. As we focus on providing cost-effective, scalable and secure solutions that meet the diverse needs of our enterprise clients.

At the same time, we actively tackled ongoing challenges such as competition and market uncertainties, turning them into opportunities for innovation and expansion. Our team's acute business sense and agile approach helps to strengthen our market position and capacity to explore future options. During the second quarter, we booked approximately $720 million on realized pretax capital gains on our investment in our Arashi Vision Inc. I believe that the future returns on this investment will provide a solid foundation for our sustained efforts to enhance operational efficiency and pursue innovative growth opportunities in the emerging industries.

Looking ahead, I'm confident that the financial flexibility gained from this success will enable us to further strengthen our core business, invest in cutting-edge technologies and expand into high-growth markets. We intend to explore all options to create value for our shareholders as well as all stakeholders.

With that, I'll now pass the call over to Eric. Eric will give a detailed review of our Q2 2025 financial results. and provide revenue guidance for the third quarter of 2025.

Thank you, Luhan. Thank you all for participating in Xunlei's conference call to discuss the financial results of the second quarter call of 2025. In the second quarter, our total revenues were $104 million, representing an increase of 30.6% year-over-year. The increase in total revenues was mainly attributable to the increased revenues generated from our major business operations.

Revenues from subscriptions were $36.4 million presenting an increase of 10.5% year-over-year. The increase in subscription revenues were mainly driven by the increase in the number of subscribers and the increased average revenue per subscriber. The number of subscribers was 6.4 million as of June 30, 2025, compared with 5.71 million on June 30, 2024. The average revenue per subscriber for the second quarter was RMB 40.8 compared with RMB 39.5 in the same period of last year. The higher average revenue per subscriber was due to the increased proportion of premium subscribers which have high average revenue per subscriber.

Revenues from live streaming and other services were $37.6 million, representing an increase of 85.5% year-over-year. The increase was mainly due to the growth of our overseas audio live streaming business as well as advertising business as a result of the acquisition of Hupu in June this year. The second quarter results included 1 month financial results from Hupu.

Revenues from cloud computing were $30 million, representing an increase of 13.6% year-over-year. The increase in cloud computing revenues was mainly attributable to the recoveries from previous loans and increased demand from our major customers for cloud computing services.

Cost of revenues were $52.3 million, representing 50.3% of our total revenues compared with $38.6 million or 48.5% 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 generally in line with the growth in revenues.

Gross profit for the second quarter of 2025 was $51.2 million, representing an increase of 25.9% year-over-year. Gross profit margin was 49.3% in the second quarter of 2025 compared with 51.1% in the same period of 2024. The increase in gross profit was mainly driven by our overseas audio live streaming business, subscription business and advertising business. The decrease in gross profit margin was mainly attributable to the decreased gross profit margin of our cloud computing business.

Research and development expenses for the second quarter of 2020 were $18.4 million, representing 17.7% of our total revenues, compared with $17.5 million or 21.9% of our total revenues in the same period of 2024. This increase in R&D spending was primarily due to the increased labor costs incurred during the quarter. Sales and marketing expenses for the second quarter of 2025 were $21.6 million, representing 20.8% of our total revenues compared with $10.9 million or 13.7% of our total revenues in the same period of 2024. The increase was 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 acquisition.

G&A expenses for the second quarter of 2025 were $9.8 million, representing 9.4% of our total revenues compared with $11.2 million or $0.41 of our total revenues in the same period of 2024. The decrease was primarily due to the decrease in provision for the litigation, depreciation expenses and labor costs during the second quarter of 2025. Operating income was $1.1 million compared with an operating income of $1 million in the same period of 2024.

Other income, net was $721.8 million at compared with other income, net of $2.5 million in the same period of 2024. The increase was primarily attributable to the fair value changes in our long-term investment in Arashi Vision Inc., which completed its IPO in June 2025.

Net income was $727.4 million compared with net income of $2.5 million in the same period of 2024. The increase in net income was primarily due to the increase in other income. Non-GAAP net income was $8.3 million in the second quarter of 2022 compared with $3.2 million in the same period of 2024. The increase in non-GAAP income was primarily due to the increase in operating income and income tax benefits. Diluted income per ADS in the second quarter of 2025 was $11.48 compared with diluted earnings per ADS of $0.04 in the second quarter of 2024. Non-GAAP diluted earnings per ADS was $0.13 in the second quarter, compared with non-GAAP diluted earnings per ADS of $0.05 in the same period of 2024.

As of June 30, 2025, the company had cash, cash equivalents and short-term investments of $275.6 million compared with $274.6 million as of March 31, 2025. The increase was mainly due to the increase in proceeds from bank borrowings and net cash inflow from operating activities, partially offset by the payment for acquisition of Hupu. On June 4, 2024, Xunlei announced that its Board of Directors authorized a new plan for the purchase of up to $20 million of its stock over the 12 months that followed. As of June 4, 2025. The company had spent $6.5 million on share buybacks under the new share repurchase program, no shares were purchased during the second quarter of 2025.

Now let's turn to the guidance for the third quarter of 2025. For the third quarter of 2025, Xunlei estimates total revenues would be between $116 million and $124 million. And the midpoint of the range presents a quarter-over-quarter increase of approximately 15.4%. This estimate represents management's preliminary view as of the date of this press release, which is substituting and any change could be material.

Now we conclude prepared remarks for the conference call. Operator we are ready to take questions.

[Operator Instructions] We will now take our first question from the line of [ Di Li ].

[Foreign Language].

Thank you [indiscernible] high maintenance and congrats for your good performance for the second quarter of 2025. And she mentioned that our live streaming business achieved more than 80%, quarter-on-quarter increase. And she would like to know the breakdown of the components of the live streaming and other services for the Hupu.

Thanks for your question. The acquisition of Hupu completed at the end of May this year. And during the second quarter only Hupu's financial debt for the month of June was consolidated, contributing about USD 3.2 million or approximately 3.1% of our total revenues. And we expect to report more for Hupu's operational debt during the coming quarters.

[Foreign Language].

[Foreign Language].

Excluding Hupu's contribution, what would be the growth rate of our overseas live streaming business? And the revenue from live streaming and other services together were $37.6 million, representing an increase of 85.5% year-on-year. And if we exclude Hupu's contribution, the growth rate for the second quarter for overseas live streaming business alone was about 80.3%.

[Foreign Language].

[Operator Instructions] We will now take our next question from the line of [ Wei Zhou from HWS Fund ].

[Foreign Language].

Okay. Basically he would like to know the performance of each of our 3 main business segments. And he would like to also know that if our Hupu operations will make positive contributions to our total performance?

Basically, as I mentioned, we have 3 main businesses. And for subscription business, basically, it contributed all our positive operating income. And for our live streaming business and it's still in the growth stage, and we're still investing heavily in this business. And so far, it's still losing money. And for our cloud computing business and recently, it had improved the performance. But overall, the sector is still losing money. So we have 1 segment making money and 2 other segments are still losing on.

And for our Hupu business, and in June, it contributed to our top line and also it made positive contributions to the bottom line and though we do not provide earnings or net income guidance, but we do expect Hupu business on a yearly basis, will make positive contributions to our total performance.

[Foreign Language].

[Operator Instructions] I'm showing no further questions. I'd now like to turn the conference back to the management team for closing comments.

Thank you again for your time and participation. If you have any questions, please visit our website at ir.xunlei.com or send us 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 your lines.

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