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01/09 19:53
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Despite strong revenue growth and a significant increase in net income, concerns about increased expenses, declining margins, and vague AI plans offset positive earnings. The lack of a dividend plan and unclear management responses in the Q&A further contribute to a neutral sentiment.
Total Revenue $126.4 million, a 57.7% year-over-year increase. The increase was mainly attributable to the increased revenue generated from major business operations.
Subscription Revenue $40.7 million, a 22.3% year-over-year increase. This growth was driven by an increase in the number of subscribers and higher average revenue per subscriber, with a rise in premium subscribers.
Live Streaming and Other Services Revenue $49.1 million, a 127.1% year-over-year increase. The growth was primarily driven by the rapid expansion of overseas audio live streaming operations and contributions from the acquisition of Hupu.
Cloud Computing Revenue $36.6 million, a 44.9% year-over-year increase. This growth was due to increased demand from major customers and enhanced service offerings.
Cost of Revenues $65.4 million, representing 51.7% of total revenues, compared to $39.4 million or 49.1% in the same period of 2024. The increase was mainly due to higher bandwidth costs and revenue sharing expenses in overseas audio live-streaming operations.
Gross Profit $60.5 million, a 49.6% year-over-year increase. The increase was mainly contributed by online advertising, overseas audio live-streaming, and subscription businesses. Gross profit margin decreased to 47.9% from 50.5% due to lower margins in cloud computing and a higher proportion of revenues from audio live-streaming.
R&D Expenses $21 million, representing 16.6% of total revenues, compared to $17.7 million or 22.1% in the same period of 2024. The increase was primarily due to higher labor costs.
Sales and Marketing Expenses $25.8 million, representing 20.4% of total revenues, compared to $11.5 million or 14.3% in the same period of 2024. The increase was due to higher marketing expenses for subscription and overseas audio live streaming businesses.
G&A Expenses $10.9 million, representing 8.6% of total revenues, compared to $11.4 million or 14.2% in the same period of 2024. The decrease was due to lower labor costs, partially offset by higher litigation provisions and share-based compensation expenses.
Operating Income $2.7 million, compared to an operating loss of $0.2 million in the same period of 2024. The increase was due to higher gross profit, partially offset by increased marketing and other operating expenses.
Other Income (Net) $547.7 million, compared to $4.8 million in the same period of 2024. The increase was primarily due to fair value changes in the long-term investment in Arashi Vision Inc. after its IPO.
Net Income $550.1 million, compared to $4.4 million in the same period of 2024. The increase was mainly due to higher other income.
Non-GAAP Net Income $5.3 million, compared to $4.9 million in the same period of 2024. The increase was due to higher operating income.
Diluted Income per ADS $8.60, compared to $0.07 in the same period of 2024. The increase was due to higher net income.
Non-GAAP Diluted Earnings per ADS $0.09, compared to $0.08 in the same period of 2024. The increase was due to higher non-GAAP net income.
Cash, Cash Equivalents, and Short-term Investments $284.1 million as of September 30, 2025, compared to $275.6 million as of June 30, 2025. The increase was due to higher net cash inflows from operating activities.
Subscription Revenue: Achieved $40.7 million in revenue, a 22.3% increase compared to Q3 2024. Growth driven by increased subscribers and higher average revenue per subscriber.
Live Streaming and Other Services: Generated $49.1 million in revenue, a 127.1% year-over-year increase. Growth driven by overseas audio live streaming operations and advertising business.
Cloud Computing Revenue: Generated $36.6 million in revenue, a 44.9% year-over-year increase. Growth attributed to increased demand from major customers and enhanced service offerings.
Overseas Audio Live Streaming Expansion: Strong traction in multiple international markets, contributing significantly to revenue growth.
Hupu Acquisition: Enhanced advertising revenue through its established platform and audience reach in the sports digital space.
Cost of Revenues: Increased to $65.4 million, representing 51.7% of total revenues, mainly due to higher bandwidth costs and revenue sharing expenses.
Gross Profit: Achieved $60.5 million, a 49.6% year-over-year increase, driven by advertising, live streaming, and subscription businesses.
R&D Expenses: Increased to $21 million, reflecting higher labor costs.
Sales and Marketing Expenses: Increased to $25.8 million, driven by marketing efforts for subscription and live streaming businesses.
Investment in Arashi Vision Inc.: Realized a gain of $545.8 million from fair value changes in a 7.8% equity stake, strengthening the balance sheet and enabling strategic flexibility.
Future Strategic Focus: Plans to invest in R&D, industry collaboration, selective investments, and shareholder returns.
Cloud Computing Business: Despite increased revenues, the cloud computing business faced challenges and headwinds, including decreased gross profit margin and higher costs associated with bandwidth and revenue sharing expenses.
Overseas Audio Live Streaming Operations: The rapid expansion of overseas audio live streaming operations has led to increased bandwidth costs and revenue sharing expenses, which could impact profitability.
Sales and Marketing Expenses: Sales and marketing expenses increased significantly, representing 20.4% of total revenues compared to 14.3% in the same period of 2024, driven by user acquisition efforts for subscription and live streaming businesses.
Gross Profit Margin: Gross profit margin decreased to 47.9% in Q3 2025 from 50.5% in Q3 2024, primarily due to lower margins in the cloud computing and audio live streaming businesses.
Litigation and Share-Based Compensation: General and administrative expenses included increased provisions for litigation and share-based compensation, which could pose financial risks.
Revenue Guidance for Q4 2025: Xunlei estimates total revenues to be between $131 million and $139 million, representing a quarter-over-quarter increase of approximately 6.8%.
The selected topic was not discussed during the call.
Despite strong revenue growth and a significant increase in net income, concerns about increased expenses, declining margins, and vague AI plans offset positive earnings. The lack of a dividend plan and unclear management responses in the Q&A further contribute to a neutral sentiment.
The company reported strong revenue growth across its main business segments, particularly in live streaming, with a significant boost from the Hupu acquisition. Despite increased costs, the net income surged due to a substantial other income gain. The guidance suggests continued growth, and analysts' questions revealed optimism about Hupu's future contributions. The lack of guidance on Hupu is a minor concern. Overall, the positive financial performance and strategic acquisitions outweigh the negatives, predicting a positive stock price movement over the next two weeks.
The earnings call presented positive financial growth, with a 10.5% revenue increase and a 7.7% rise in subscription revenue. However, the lack of detailed guidance on AI product timelines and potential regulatory risks introduce uncertainty. The absence of a shareholder return plan and the vague response in the Q&A regarding AI developments temper the positive outlook. Thus, the overall sentiment is neutral, as positive financial metrics are balanced by uncertainties and lack of concrete future plans.
Despite strong revenue growth and positive subscription numbers, the company faces significant challenges. The cloud computing sector is declining, with increased costs and operating losses leading to a net loss. The share repurchase program is a positive, but not enough to offset concerns. The lack of clarity on AI product timelines adds uncertainty. Overall, the financial health and strategic outlook suggest a negative sentiment, likely leading to a stock price decrease of -2% to -8%.
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