Xunlei Q2 revenue rises 39% to $102.7 million; buyback begins
Xunlei's Q2 2026 results show robust top-line growth with revenue reaching $102.7 million, up 38.9% year-on-year, driven by strong performance in subscription services and overseas audio live streaming. However, GAAP profitability was heavily impacted by a $213.8 million non-cash loss on its Arashi Vision Inc. investment, resulting in a net loss of $218.5 million. On a non-GAAP basis, the net loss was just $2.1 million. The company initiated a $20 million share buyback program and continues to manage its investment portfolio while focusing on consumer-centric growth.
*this image is generated using AI for illustrative purposes only.
Xunlei Limited (NASDAQ: XNET) reported a significant divergence between its operating performance and reported profitability in its unaudited financial results for the second quarter ended June 30, 2026. The company logged total revenues of $102.7 million, representing a 38.9% year-on-year increase from $73.9 million in the corresponding period of 2025. However, this top-line expansion was overshadowed by a GAAP net loss of $218.5 million, compared to net income of $726.4 million in the prior year, largely driven by non-cash fair value adjustments to its long-term investments.
The revenue growth was broad-based across its core segments. Subscription revenues rose 22.6% year-on-year to $44.5 million, fueled by increased demand for premium services and AI-powered feature enhancements. Live-streaming and other services revenues surged 54.8% to $58.2 million, primarily attributable to growth in its overseas audio live-streaming business and the advertising operations of Hupu. This mix shift contributed to a compression in gross margins, which fell to 55.8% from 63.0% in the same period last year, as live-streaming carries a lower margin profile than subscription services.
Financial Performance
| Metric: | Q2 2026 | Q2 2025 | Change |
|---|---|---|---|
| Total Revenues: | $102.7 million | $73.9 million | +38.9% |
| Gross Profit: | $57.3 million | $46.6 million | +23.1% |
| Gross Margin: | 55.8% | 63.0% | -720 bps |
| Operating Loss: | $(4.8) million | $0.3 million income | N/A |
| GAAP Net Loss: | $(218.5) million | $726.4 million income | N/A |
| Non-GAAP Net Loss: | $(2.1) million | $7.2 million income | N/A |
What the Numbers Show
The financial results highlight a critical distinction between operational cash generation and accounting earnings. While Xunlei’s core business generated an operating loss of $4.8 million (versus $0.3 million income previously), this was a modest deterioration compared to the massive swing in bottom-line figures. The GAAP net loss of $218.5 million was predominantly driven by $213.8 million in other losses, net, specifically stemming from fair value changes in its long-term investment in Arashi Vision Inc. Excluding these non-cash items and share-based compensation, the company’s Non-GAAP net loss narrowed significantly to $2.1 million, indicating that operational pressures are manageable relative to the volatility of its investment portfolio.
Operating expenses expanded alongside revenue, with sales and marketing costs rising to $27.9 million (up from $20.7 million) as the company invested in user acquisition for its subscription and overseas streaming businesses. Research and development expenses increased to $21.4 million, driven by higher labor costs. General and administrative expenses also rose to $12.7 million, partly due to provisions for ongoing litigations.
Despite the net loss, Xunlei maintains a strong liquidity position. As of June 30, 2026, the company held $276.9 million in cash, cash equivalents, and short-term investments, down slightly from $303.6 million at the end of Q1 2026. The decrease was attributed to operating cash outflows, bank loan repayments, share repurchases, and deferred consideration payments for the Hupu acquisition. Chairman and CEO Jinbo Li emphasized that the company is pursuing a consumer-only (To-C) business model.
Capital Allocation and Investment Strategy
Xunlei announced a new $20 million share repurchase program at the end of June, which officially commenced on July 1. As of August 12, the company had bought back approximately 1.07 million ADS shares, spending approximately $5.9 million. The repurchase program remains ongoing.
Regarding its investment in Arashi Vision Inc., Xunlei currently holds a 7.8% equity stake. CFO Eric Zhou stated that the company is following regulatory rules to reduce its stake in an orderly manner but has no specific plans for share disposal yet. The company is also monitoring compliance with the 1940 Investment Company Act, aiming to ensure that investment securities do not exceed 45% of total assets, excluding government securities and cash, to maintain its focus on core consumer-facing businesses.
How will Xunlei's ongoing reduction of its Arashi Vision stake impact its compliance with the Investment Company Act and its reported volatility in future quarters?
Can Xunlei reverse the gross margin compression caused by the shift toward lower-margin live-streaming services while maintaining its current revenue growth trajectory?
What specific operational efficiencies or cost-cutting measures does management plan to implement to return the core business to profitability beyond the modest Non-GAAP loss?
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