Xunlei Limited (NASDAQ:XNET) Q4 2025 Earnings Call Transcript

Xunlei Limited (NASDAQ:XNET) Q4 2025 Earnings Call Transcript March 12, 2026

Operator: Welcome, ladies and gentlemen, and thank you for your patience. You have joined Xunlei’s Fourth Quarter and Fiscal Year 2025 Earnings Conference Call. [Operator Instructions]. Please be advised that this conference is being recorded. I would now like to turn the call over to the host, Investor Relations Manager, Ms. Luhan Tang. Please go ahead.

Luhan Tang: Good morning, everyone, and thank you for joining Xunlei’s Q4 and Fiscal Year 2025 Earnings Conference Call. With me today are Jinbo Li, Chairman and CEO; Eric Zhou, CFO; and Lee Li, Vice President of Finance. Our IR website has our earnings press release, a supplement our prepared remarks during the call. Today’s agenda includes our prepared opening remarks from Chairman and CEO, Mr. Jinbo Li on Q4 operational highlights; followed by CFO, Eric Zhou’s presentation of financial results, details of Q4 and the fiscal year before we open up the floor to your questions in the Q&A session. Please note that this call is recorded and can be replaced 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 U.S. Private Securities Litigation Reform Act of 1995.

Such statements are based on our management’s current expectations under existing market conditions that are subject to risks and uncertainties that are difficult to predict, which may cause actual results to differ materially from those maintained in the forward-looking statements. Please refer to our SEC filings for a more detailed description of the risk factors that may affect our results. Xunlei assumes no obligations to update any forward-looking statements, except as required under abdicate laws. This call will be using both GAAP and non-GAAP financial measures. A reconciliation of non-GAAP to comparable GAAP measures can be found in our earnings press release. Please note that all numbers are in the U.S. dollars unless otherwise stated.

Now the following is prepared statements by Mr. Jinbo Li, Chairman and CEO of Xunlei Limited. Good morning, and good evening, everyone. Thank you all for joining us today. we’re extremely pleased to wrap up 2025 with exceptional fourth quarter and full year operating results, which not only met, but exceeded our expectations and demonstrated the strong momentum of our strategic transformation. 2025 has been a year of remarkable growth, strategic refinement and value creation that marked by robust performance across all core business segments, successful strategic transactions and significant progress in optimizing our business portfolio. A key milestone of our success for the year is the consistent double-digit growth across our major business lines, a testament to the effectiveness of our ecosystem-driven strategy, our focus on core competencies and our ability to adapt to evolving market dynamics.

Now I’d like to share with you detailed insight about our operations in Q4 2025 and full fiscal year, which underscore the strength of our business model and success of our strategic initiatives. First, our subscription business continues to serve as a stable core asset and reliable growth driver for the company, demonstrating strong resilience and growth momentum. In the fourth quarter, we generated $42.1 million in subscription revenue, representing a solid 22.4% year-over-year increase. For the full year 2025, subscription revenue reached $154.8 million, up 15.8% from 2024. This sustained growth is underpinned by 2 key pillars: First, our deeply integrated business ecosystem continue to deliver value as the high proportion of paying subscribers opting for our premium subscription business, which integrates Internet browsing, high-speed downloading tools, expansive storage and value-added features to enhance user engagement and retention.

And second, our strategic alliance with leading mobile manufacturers and platform partners expanded our user reach, enabling us to tap into a new user group and drive organic growth. Moving forward, we will continue to integrate advanced features, optimize our product experience and expand our market presence to drive further growth in our subscription business. Next, our cloud computing business achieved a turnaround and delivered significant growth in 2025. In Q4, cloud computing revenue was $46.1 million representing an increase of 102.7% year-over-year. For the full year, cloud computing revenues reached $137.4 million, up 31.4% from 2024. This growth was driven by the increased demand for our cost-effective solutions. As you might learn from our announcement last week, we realigned and strengthened our strategic focus and sold 50% of our stake in OneThing, the operating entity of our cloud computing business.

We believe that the equity divestiture will support business optimization and leverage our partners’ expertise to advance OneThing’s edge computing and CDN services. Meanwhile, Xunlei will reallocate its resources to core growth drivers, subscription and overseas live streaming, while retaining a minority stake in OneThing to capture future upside, if any. We believe that the transaction will have no significant negative impact on our core operations, cash flows or profitability. And instead, it may improve our capital efficiency and strategic clarity in the long run. Our live streaming and other Internet value-added services has emerged as a key growth engine, delivering rapid growth in 2025. In Q4, this segment generated $55.1 million in revenue, representing a 102.8% year-over-year increase.

For the full year, live streaming and other IVAS revenues reached $170.2 million, a remarkable 97.5% increase from 2024. This exceptional growth validates our strategic pivot in late 2023 to exit low-margin volatile domestic market and focus on high-growth emerging regions such as Southeast Asia and the Middle East and North Africa. By leveraging our strength in product refinements, user engagement and monetization, we have achieved significant growth in our overseas audio live streaming business. Additionally, the integration of Hupu, which we acquired in 2025, generated synergies to our business, with Hupu contributing to our advertising revenue through its vibrant and highly engaged community, Reviewing our overall financial performance for 2025.

We delivered substantial results across the board. Total revenues for Q4 2025 reached $143.3 million, a 17% year-over-year increase, reflecting the strong growth of all our core business segments. For the full year 2025, total revenue hit $462.4 million, representing a 42.5% increase from 2024. This robust revenue growth is a clear indication of the success of our strategic transformation, which has focused on strengthening core businesses, optimizing product portfolio and exploring high-growth opportunities. Additionally, our investment in Arashi Vision has generated significant unrealized capital gains and may further enhance our financial strength and capital flexibility. To conclude, 2025 has been a transformative year for Xunlei, marked by strong financial performance, successful strategic transactions and significant progress in our core businesses.

We have demonstrated our ability to adapt to market changes, optimize our portfolio and drive growth through strategic focus and innovation. With our clear strategic direction, strong business momentum and enhanced captive flexibility, we believe we are well positioned to capitalize on market opportunities and deliver sustained growth in 2026 and beyond. And we remain committed to create long-term value for our shareholders. With that, I will now pass the call over to Eric. Eric will give a detailed review of our Q4 and fiscal year financial results.

Eric Zhou: Thank you, Luhan. Thank you all for participating in Xunlei’s conference for today. I will now walk you through our financial results for the fourth quarter and the full fiscal year of 2025. . Let’s begin with the fourth quarter of 2025 results. Total revenues for the fourth quarter were $143.3 million. This represents an increase of 17% compared to the same period last year. This growth was primarily driven by higher revenue from our cloud computing and live streaming businesses. Looking at our revenue streams in more details. Revenues from subscriptions reached at $42.1 million, up 22.4% year-over-year. This increase was mainly due to higher demand for our subscription services. Revenues from and other were $55.1 million, up 102.8% year-over-year.

This significant growth was driven by the expansion of audio live streaming business as well as growth in our advertising business, largely resulting from our acquisition of Hupu. Revenues from cloud computing were $46.1 million, up 102.7% year-over-year. This increase was due to greater demand for our major — from our major customers for cloud computing services. Moving to costs and profitability. Cost of revenues were $80.8 million, representing 56.4% of our total revenues. This compares to $40.4 million or 47.9% of total revenues in the same period of 2024. The increase was mainly due to higher revenue sharing costs for live streaming business and increased bandwidth costs associated with higher demand for our cloud computing services. Gross profit for the quarter was $61.7 million, an increase of 41.5% year-over-year.

Gross profit margin was 43% compared to 51.7% in the fourth quarter of 2024. While gross profit dollars increased driven by our subscription and overseas audio live streaming business, the margin decreased. This was primarily because a larger portion of our revenue now comes from our overseas audio live streaming and cloud computing business, which carries lower gross profit margins, while the proportion of revenues from our higher-margin subscription business decreased. Turning to operating expenses. expenses were $21.9 million or 15.3% of total revenues, up from $18.7 million last year. The increase was primarily due to higher labor costs. Sales and marketing expenses were $23.2 million or 16.4% of total revenues, up from $12.5 million. This was driven by the expansion of marketing campaigns for our subscription and overseas audio live streaming business.

G&A expenses were $12.4 million or 8.6% of total revenues compared to $12.1 million last year. The slight increase was due to higher legal expenses during the quarter. As a result, operating income was $4.7 million, which is a significant improvement from an operating loss of $20.5 million in the same period of last year. The turnaround was primarily due to the absence of a goodwill impairment charge of approximately $20.7 million that were incurred in the fourth quarter of last year. Net loss for the quarter was $228.9 million compared to a net loss of $9.9 million in the same period last year. The increase in net loss was primarily due to other losses net, which totaled $232.6 million. This compares to other income of $1.5 million last year.

The change was mainly due to a decrease in the fair value of our long-term investment in Russia-Beijing following its IPO in June 2025. On a non-GAAP basis, which excludes the impact of share-based competition and certain other items, net income for the fourth quarter was $4.8 million compared to $11.3 million in the same period of 2024. Diluted loss per ADS was $3.64 compared to a loss of $0.16 in the fourth quarter of 2024. Non-GAAP diluted earnings per ADS were $0.08 compared to $0.18 in the same period last year. Turning to our balance sheet. As of December 30, 2025, we had cash, cash equivalents and short-term investments of $305.4 million. This compares to $284.1 million as of September 30, 2025. The increase was mainly due to the net cash inflow from operating activities and an increase in proceeds from bank borrowings.

Now let’s move to our full year 2025 financial results. For the full year, total revenues were $462.4 million, an increase of 42.5% compared to the previous year. This growth was attributable to revenue increase across all of our major business segments. Breaking down the full year results subscription revenues were $154.8 million, up 15.8% year-over-year driven by increased demand. Revenues from live streaming and other IVAS were $117.2 million, an increase of 97.5% year-over-year primarily due to the growth of our overseas audio live streaming business and advertising business following the Hupu acquisition. Cloud computing revenues were $137.4 million, up 31.4% year-over-year due to increased demand for our services. Cost of revenues for the year were $242.9 million, representing 52.5% of total revenues.

This compares to $155.6 million or 48% of our total revenues in 2024. The increase was mainly due to higher demand for car computing services and increased revenue sharing costs from the expansion of overseas audio live streaming business. Gross profit for the year was $217.5 million, an increase of 29.8%. Gross profit margin was 47% compared to 51.7% in the previous year. The increase in gross profit dollars was driven by our subscription and large streaming businesses, partially offset by a decrease in gross profit from cloud computing. The margin declined similar to the quarter reflects a shift in revenue mix towards our lower-margin oversea audio live streaming and cloud computing businesses. Looking at full year operating expenses, expenses were $18 million or 17.3% of our total revenues, up from $71.6 million last year, primarily due to higher labor costs.

Sales and marketing expenses were $86.3 million or 18.7% of total revenues, up significantly from $44.8 million. This was driven by expense marketing campaigns for our subscription and live streaming businesses as well as higher labor costs. G&A expenses were $44.9 million or 9.7% of total revenues compared to $45.8 million last year. Operating income for the year was $6.6 million, a significant improvement from an operating loss of $15.7 million in 2024. This was primarily due to the increase in gross profit and the absence of the onetime goodwill impairment we recorded at the end of 2024. Net income for the year was approximately $1.05 billion compared to $0.7 million in the previous year. This large increase was primarily driven by higher gross profit and other income during the year.

On a non-GAAP basis, net income was $18.5 million in 2025 compared to $23.9 million in 2024. Diluted GAAP earnings per ADS were $16.56 compared to $0.02 in the previous year. Non-GAAP diluted earnings per ADS were $0.30 compared to $0.38 in the previous year. Our year end cash position remains strong. As of December 31, 2025, we had cash, cash equivalents and short-term investments of $305.2 million compared to $287.5 million at the end of 2024. The increase was mainly due to net cash inflow from operating activities and proceeds from bank borrowings, partially offset by the payment of the acquisition of Hupu. Finally, a quick update on our share buybacks. As of December 31, 2025, we had spent approximately $1 million to repurchase about 435,000 ADAs during 2025.

Since the inception program on June 4, 2024, we have spent a total of about $6.5 million on share buybacks. This concludes our prepared remarks for today. Operator, we are now ready to open the line for the questions.

Q&A Session

Operator: [Operator Instructions]. And now we’re going to take our first question, and it comes for an of [ Dante ] from [indiscernible] Retail Investor.

Unknown Analyst: [Foreign Language]

Luhan Tang: The investor asks what our for the cash consideration obtained from the transaction?

Jinbo Li: [Foreign Language]

Luhan Tang: [Interpreted] So Jinbo Li answering, we’re going to use the cash consideration for the development of the company’s core businesses. specifically including the R&D in technology as well as the integration of upgrades for our products. For example, the cloud acceleration and overseas audio live streaming businesses. Besides that, we also will use the money on the market expansion and brand promotion aimed at increasing the market share of our products and at the same time, optimize the company’s operating capital structure and enhance overall operational liquidity. Thank you.

Unknown Analyst: [Foreign Language]

Luhan Tang: So he’s asking if the Cloud related quality to Xunlei and why you are selling the stake to them?

Jinbo Li: [Foreign Language]

Luhan Tang: [Interpreted] So to answer this question, Mr. Jinbo Li says, so Kingsoft Cloud is not the only one option that we were looking for. In the past 2 years, we have been looking for the buyers and we did a lot of market research, and we finally decided to choose a Kingsoft software cloud for the 2 reasons. One is it has the maximum return for Xunlei. And the second reason is because Kingsoft Cloud has advantage in the cloud infrastructure and the cloud technology R&D and industry solutions. So they will offer support for OneThing business development and the contribution to the enhancement for the OneThing’s market competitiveness and operating performance in the future.

Operator: [Operator Instructions] Luhan, please be advised we have another line to asking the question. And if you don’t mind, please can you announce these participants?

Luhan Tang: Sure. [Foreign Language]. Please go ahead to ask your question.

Operator: My apologies, this person just put his name in Mandarin, so therefore, I cannot even pronounce his name.

Luhan Tang: Yes. I try to speak Mandarin to her, I guess. [Foreign Language]

Operator: My apologies, dear participants with e-mail if you would like to ask a question, please a question. My apologies, there are no questions from these lines. [Operator Instructions]. Dear speakers, there are no further questions for today. I would now like to hand the conference over to the management team for any closing remarks. My apologies, now we have another question to come through. Would you like to take it?

Jinbo Li: Yes, please.

Operator: And the question comes from the line of [ Jeff Shang ] from [ Stonehill ] Capital Management.

Unknown Analyst: I just wanted to quickly ask Mr. Jinbo Li, what is the company’s plan and the Board’s plan with the ArachiVision stake once the lockup expires? And how should shareholders think about potential shareholder return and the size of potential shareholder return?

Luhan Tang: [Foreign Language]

Jinbo Li: [Foreign Language]

Luhan Tang: [Interpreted] So Mr. Jinbo Li answered the first question about how we — after this invest, how are we going to allocate the funds. He said we intend to allocate the funds towards the R&D of emerging technologies and also the exploration for the new business initiatives and may create the initiatives that create significant value for the company. At the same time, we will also assess all the physical options to reward shareholders. We will determine the the pace of divesting from based on the company’s business solvent and also the capital market condition at the time. We’ll have a lot of options to choose from. So please stay tuned for the disclosure during that time. He actually answered the question about the return. He said we will please stay tuned for the further disclosure during the time.

Operator: [Operator Instructions] And now we’re going to take another question, and the question comes from line of [ Fujitsu Sihon ].

Luhan Tang: We cannot hear you.

Operator: There is no answer from this line. Dear speakers, there are no further questions for today. I would now like to hand the conference over to the management team for any closing remarks.

Eric Zhou: Okay, operator. We conclude prepared remarks for the conference call. And we are — I think that’s all for today. And for any callers, if you have any questions feel free to contact us. Okay now we can close the conference.

Operator: Thank you. This concludes today’s conference call. Thank you for participating. You may now all disconnect. Have a nice day.