Xunlei Q3 Earnings Call Highlights

Key Points

• Revenue grew 12.9% year over year to $101.3 million, but Xunlei swung to a $14.8 million operating loss as higher expenses weighed on profitability. A decline in the fair value of its Arashi Vision investment contributed to a $235.8 million net loss from continuing operations.
• Subscription revenue increased 8.5% to $44.1 million, with growth moderating after Xunlei shifted toward acquiring users with stronger retention potential. Higher marketing costs and competition also pressured campaign efficiency, though management said it expects to control marketing expenses in the final quarter.
• Xunlei authorized a new $20 million share repurchase program for the next 12 months. It has no specific plan to sell its 7.8% Arashi Vision stake and said any divestiture would depend on market conditions and required procedures.

Xunlei NASDAQ: XNET reported third-quarter revenue growth of 12.9% year over year, but a swing to an operating loss and a decline in the fair value of its Arashi Vision investment weighed on results.

Revenue reached $101.3 million, while the company recorded a net loss from continuing operations of $235.8 million, compared with net income of $550.4 million a year earlier. CFO Eric Zhou said the change was driven by the investment’s fair value movement and the shift to an operating loss.

The company also announced a new $20 million share repurchase authorization covering the next 12 months. Management said Xunlei had completed its previous repurchase program by reaching the maximum number of shares authorized under that plan.

Subscription Growth Slows

Subscription revenue rose 8.5% to $44.1 million. In prepared remarks delivered by Investor Relations Manager Luhan Tang, Chairman and CEO Jinbo Li said growth moderated as the company adjusted its user acquisition strategy beginning in the second quarter.

Zhou said the revised approach prioritizes users with stronger long-term retention potential. Those customers typically have lower initial average revenue per user, he said, but stronger retention can increase their lifetime value.

The CFO said Xunlei’s subscriber base grew from about 3 million in 2020 to more than 7 million in 2025. The company did not disclose its latest subscriber count.

Li’s prepared remarks put live streaming and other services revenue at $57.2 million, up 16.6% year over year. Zhou separately stated that the segment generated $87.2 million, also citing 16.6% growth. The transcript did not reconcile the two figures.

Li said overseas audio live streaming continued to grow, although rising acquisition costs and competition pressured campaign efficiency. The company is refining its localized products and traffic allocation in Southeast Asia, the Middle East, Turkey and Latin America, according to the prepared remarks.

Li also said Hupu’s advertising business benefited from higher traffic and engagement in a World Cup year, with growth in both brand and performance advertising. Because the boost from sports events is cyclical, Xunlei is exploring additional product offerings, he said.

Higher Spending Pressures Profitability

Xunlei posted an operating loss of $14.8 million, compared with operating income of $3.3 million in the prior-year quarter. Zhou attributed the change mainly to higher operating expenses.

Sales and marketing expenses were $33.3 million, or 32.9% of revenue, as the company increased user acquisition spending for subscriptions and overseas live streaming. Research and development expenses were $25.6 million, while general and administrative expenses totaled $12.4 million.

Zhou said expansion into Latin America required continued advertising investment, while competition reduced advertising conversion efficiency. He said Xunlei expects marketing expenses in the final quarter to be controlled, or hopes they will begin generating higher returns than in the third quarter.

On a non-GAAP basis, Xunlei reported a net loss of $16.4 million, compared with net income of $5.6 million a year earlier. Cash, cash equivalents and short-term investments totaled $265.1 million at September 30, down from $276.9 million at June 30.

Buybacks and Arashi Vision Stake

Xunlei spent $13.8 million under its previous $20 million repurchase program through September 30. Li said the company subsequently reached the program’s authorized share limit for less than the full $20 million because of a lower market price.

Asked about monetizing Xunlei’s Arashi Vision investment, Zhou said the company had not started a sale process and had no specific divestiture plan. Xunlei holds a 7.8% stake, he said, and sales by holders above 5% require certain regulatory approval procedures.

Zhou said management would wait for an appropriate opportunity, citing Arashi Vision’s share-price performance, market liquidity and the broader A-share market among the factors affecting a potential sale. Once a window becomes available, the company will consult its board and design a divestiture plan, he said.

Responding to a question about the Investment Company Act of 1940, Zhou said Xunlei had not received reviews or questions from relevant agencies on the issue and was monitoring it internally. He said the company intends to remain an operating company and comply with applicable regulations.

About Xunlei (NASDAQ:XNET)

Xunlei Limited is a Chinese technology company founded in 2003 and headquartered in Shenzhen. It develops internet software and services, including Xunlei, a download and content-delivery platform designed to accelerate file transfers and online access. The company also offers cloud-related services, such as cloud storage and distributed cloud computing. Through its OneThing and related offerings, Xunlei uses shared computing resources to support services including content delivery and data processing.

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