Xunlei Limited (NASDAQ:XNET) Q3 2025 Earnings Call Transcript

Xunlei Limited (NASDAQ:XNET) Q3 2025 Earnings Call Transcript November 13, 2025

Operator: Welcome, ladies and gentlemen. Thank you for your patience. You have joined Xunlei Limited’s third quarter 2025 earnings call. At this time, all participants are in a listen-only mode. 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.

Luhan Tang: Good morning, and good evening, everyone. Thank you for joining Xunlei Limited’s Q3 2025 Earnings Conference Call. With me today are Jinbo Li, Chairman and CEO, Eric Zhou, CFO, and Lily, Vice President of Finance. Our IR website has our earnings press release to supplement our prepared remarks during the call. Today’s agenda includes prepared opening remarks from Chairman and CEO, 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 Q4 2025 before we open up the floor to your questions. In the Q&A session, Jinbo Li will answer your questions. 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 US 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 making forward-looking statements. Please refer to our SEC filings for a more detailed description of the risk factors that may affect our results. Xunlei Limited assumes no obligation 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. Reconciliation of non-GAAP to comparable GAAP measures can be found in our earnings press release. Please note that all numbers are in US dollars unless otherwise stated. Now the following is the prepared statement by Jinbo Li, the Chairman and CEO of Xunlei Limited.

Jinbo Li: Good morning, and good evening, everyone. Thank you for joining us today. We are pleased to report that 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 a year-over-year 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 extension of our overseas audio live streaming operation. 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, 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, selected investments, as well as more options for shareholder return. Now let me take a moment to walk you through each assessment 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 model, as well as increased trust users placed on our product offering. A key highlight was the subscription revenue reaching 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 integration of user feedback, which enhance user satisfaction and build 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 streaming operations, which have gained strong traction in multiple international markets. In addition, the acquisition of Hufu significantly contributed to our advertising revenue, bringing in high-quality monetization opportunities through its established platform and audio audience reach.

Hufu’s strong presence in the sports digital space has allowed us to tap into the highly engaged community of sports enthusiasts, enabling more effective and fast 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. Despite the increased revenues, our cloud computing business still faced challenges and headwinds.

Looking ahead, we intend to foster innovation, enhance operational resilience, and capitalize on emerging opportunities to drive long-term growth and deliver enduring value to our shareholders. With that, I will now pass the call over to Eric Zhou. Eric will give a detailed review of our Q3 2025 financial results and provide revenue guidance for 2025. Thank you.

Eric Zhou: Thank you, Luhan Tang. Thank you all again for participating in Xunlei Limited’s call to discuss the financial results 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 subscribers 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 an 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 portion 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 our 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 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 operation, especially generally in line with the growth in revenues. Bandwidth costs 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 2025 was $60.5 million, representing an increase of 49.6% year-over-year.

Gross profit margin was 47.9% in 2025 compared with 51.5% 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.

Eric Zhou: Our R&D expenses for 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 2025 were $25.8 million, representing 20.4% of 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 2025 were $10.9 million, representing 8.6% of our total revenues, compared with $11.4 million or 14.4% 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 the share-based compensation expenses during 2025. Operating income was $2.7 million compared with an operating loss of $200,000 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 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 2025 was $8.60 compared with diluted earnings per ADS of 7¢ in 2024. Non-GAAP diluted earnings per ADS was 9¢ in 2025, compared with non-GAAP diluted earnings per ADS of 8¢ 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 2025, Xunlei Limited estimates total revenues to be between $131 million and $139 million. The midpoint of the range represents a quarter-over-quarter increase of approximately 6.8%. These estimates represent 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.

Q&A Session

Operator: Thank you. As a reminder, to ask a question, please press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. Just a moment for our first question, please. The first question comes from Xiaolan Tan from BT Capital. Please go ahead.

Luhan Tang: So the investor was asking, Xunlei Limited has not paid any dividend historically. Given the fact that the recent investment in Arashi Vision Inc. and the upcoming expiration of the lockup period next year, does Xunlei Limited plan to consider dividend distribution in the future? So, since we hold more than 5% of the shares, if we want to sell our shares, we have to follow certain regulatory rules and also the regulations. So far, we do not have any plans for the share disposals or the dividend distribution.

Operator: Thank you. The next question comes from Xiaolan Tan from BT Capital. Please go ahead.

Luhan Tang: So the investor is asking, Xunlei Limited has previously mentioned that we would embrace artificial intelligence. Are there any progress made so far? We are very excited for the future of artificial intelligence. We are actively exploring the opportunities in this field. We look forward to sharing our progress with you in the future. Thank you.

Operator: Thank you. As a reminder, to ask a question, please press 11 again. Thank you. I see no further questions at this time. I will now pass back to management.

Eric Zhou: Thank you again for your time and participation. If you have any questions, please visit our website at ir.xunlei.com or send emails to our investor relations. Have a good day. We conclude today’s conference call. Thank you.

Operator: This concludes today’s conference call. Thank you for participating. You may now disconnect.