XMax Inc (NASDAQ: XMAX) reported a net income of $32.4 million for the second quarter ended June 30, 2026, marking a significant turnaround from the net loss of $(0.3) million recorded in the same period last year. The profitability surge was driven primarily by a $42.1 million unrealized gain on the company’s investment in Preamble Capital, rather than operational performance.

While the bottom line expanded sharply, core business metrics showed mixed signals. Net sales increased by 7% year-on-year to $2.7 million, up from $2.6 million in Q2 2025. This growth was attributed to the initial contribution from new API-based services and the launch of the company’s AI platform. However, this top-line growth came at the cost of margin compression.

Operational Performance

Gross profit fell to $1.1 million in Q2 2026, down from $1.3 million in Q2 2025. Consequently, the gross margin contracted significantly to 40% from 50% in the prior year period. Management attributed this decline to the initial cost mix associated with its new AI-based services, as well as challenging market conditions and tariff impacts that weighed on furniture sales.

What the Numbers Show

The divergence between net income and gross profit highlights the non-operational nature of the company’s current profitability. The $32.4 million net income is entirely dependent on the $42.1 million unrealized investment gain; without this item, the company would have recorded a substantial operating loss given the $1.1 million gross profit against likely higher operating expenses implied by the prior year’s loss structure despite lower revenue. This indicates that the AI transition has not yet yielded operational profitability, with the balance sheet strength currently masking underlying margin pressures in the core furniture and nascent AI service lines.

Balance Sheet Strength

The company’s financial position strengthened considerably during the quarter. Cash and cash equivalents rose to $34.6 million as of June 30, 2026, compared to $6.7 million at December 31, 2025. Working capital also expanded significantly to $45.3 million, up from $9.4 million at the end of FY25.

Xiaohua Lu, Chief Executive Officer, stated that the quarter was transformative due to the launch of the API platform and the generation of first-time AI-related revenue. He noted that the increased working capital provides significant financial flexibility to pursue strategic AI initiatives through wholly owned subsidiaries XMax AI Inc. in the U.S. and Elonx AI Holdings PTE. LTD. in Singapore.

XMax Inc. has agreed to purchase a significant stake in Aerora Technology Co., Ltd., marking a strategic acquisition of equity in the Cayman Islands-based exempted company. On August 10, 2026, XMax entered into a Securities Purchase Agreement with Cobalt Pacific Holdings Ltd. to acquire 561,426 ordinary shares of Aerora.

The transaction values the acquired shares at an aggregate price of US$12,003,287.95, which translates to a purchase price of approximately US$21.38 per share. Each share carries a par value of US$0.0001.

Deal Structure and Regulatory Filing

The agreement was executed between three parties: XMax Inc. as the buyer, Cobalt Pacific Holdings Ltd. as the seller, and Aerora Technology Co., Ltd. as the target company. The terms of the Securities Purchase Agreement have been disclosed to regulators through a Current Report on Form 8-K. Specifically, the agreement is included as Exhibits 10.1 to the filing.

The summary of terms provided in the filing is subject to the full text of the Agreement, which is incorporated by reference. No additional financial performance data or strategic rationale beyond the acquisition terms was disclosed in the source document.