On August 14, RLX Technology (NYSE:RLX) reported second-quarter results that told two different stories at once. International sales climbed to roughly 70% of revenue as the company absorbed a new European distribution partner, even as trade normalization back home pulled growth down from where the year started. RLX is no longer just an e-vapor device maker. It is trying to become a diversified, direct-to-retail nicotine platform before its home market tightens further.
Europe Becomes The New Battleground
Net revenues reached RMB1.01 billion in the second quarter, up 14.8% year over year, powered by international volume growth and the contribution of a company RLX acquired in May 2025. Gross margin expanded to 35.4% from 27.5% a year earlier, a jump management credited to supply chain optimization and a better mix of products and geographies. Non-GAAP income from operations rose 28.8% to RMB149.6 million, marking the 11th straight quarter of positive non-GAAP operating profit.
In July 2026, RLX took a 51% controlling stake in a Western European distributor that reaches 30,000 retail endpoints and runs a digital ordering platform connecting 20,000 independent merchants, a deal management framed as the next step in building direct retail relationships rather than depending on layers of wholesalers. CEO Kate Wang argued that as vaping hardware becomes commoditized, “competition is shifting from pure product development to route-to-market execution.”
The company is also leaning into modern oral nicotine pouches as a new growth line and is building a manufacturing hub in Southeast Asia to produce them at scale, all while sitting on RMB13.9 billion in total capital resources as of June 30, 2026.
Old Markets Turn More Complicated
The same quarter that produced margin expansion also produced warning signs closer to home. Mainland China revenue is now expected to be roughly flat for the full year, and Sam Tsang, the company’s head of capital markets, said the “procedural time line for government approval has become more conservative” as domestic enforcement tightens. Revenue and margins both moderated sequentially from the first quarter, which had been inflated by a shipment pull-forward tied to regulatory export changes, and management flagged that the elevated 35.4% margin should settle into a lower range going forward.
Selling expenses jumped to RMB123.7 million from RMB84.6 million on higher salary and branding costs tied to the European acquisition, and the company used RMB63.2 million in operating cash during the quarter, a reversal from cash generation in the same period last year. Regulatory friction is not confined to China. The United Kingdom is weighing plain packaging rules, device display bans, restricted flavor names, and limits on dark store operations, and RLX itself is still holding back in the United States, keeping its Premarket Tobacco Product Applications in advanced stages without committing meaningful capital until the regulatory path there looks more durable.
What The Numbers Are Signaling
Hedge fund ownership of RLX slipped from 17 funds to 15 in the most recent quarter, a modest pullback in institutional conviction. Short interest sits at just 1.17% of the float, which points to very little organized bearish positioning against the stock. Fewer funds holding shares alongside almost no short pressure suggests any skepticism here looks more like selective repositioning than a coordinated bet against the company.
Where This Story Goes Next
RLX’s second quarter shows a company mid-transition, trading a China-heavy, wholesale-driven business for a more diversified, direct-to-retail global platform. Europe now carries the growth story, and the new distribution network will only matter if it converts reach into durable margin rather than one-time revenue. Oral nicotine pouches remain an early bet, dependent on the Southeast Asia manufacturing hub reaching real scale.
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