Xunlei Q3 2025 Earnings Call - Soaring Revenues and Massive Investment Gains Illuminate Growth Path

Conference Operator: Welcome, ladies and gentlemen. Thank you for your patience. You’ve joined Xunlei Q3 2025 earnings conference 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, Investor Relations Manager, Xunlei: Good morning and good evening, everyone. Thank you for joining Xunlei Q3 2025 earnings conference call. With me today are Mr. Jinbo Li, Chairman and CEO; Eric Zhou, CFO; and Li Li, Vice President of Finance. Our IR website has our earnings press release to supplement our prepared remarks during the call. Today’s agenda includes a prepared opening remark from Chairman and CEO Mr. 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 questions in the Q&A session. Mr. Jinbo Li will answer your questions in the Q&A session. 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 U.S. 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 made 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 obligation to update any forward-looking statements except as required under applicable laws. On this call, we 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 U.S. dollars unless otherwise stated. Now, the following is the prepared statement by Mr. Jinbo Li, Chairman and CEO of Xunlei Limited. Good morning and good evening, everyone. Thank you for joining us today. We’re pleased to report that Q3 2025 continues 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 an over-a-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 expansion of our overseas audio live streaming operations.

Our bottom line, on the other hand, continued to benefit significantly from the increased stock price of our investing company, Arashi Vision Inc., during the third quarter, following its IPO in June this year, 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 the shareholder return. Now, let me take a moment to walk you through each segment 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 business model, as well as the increased trust users place on our product offerings. A key highlight was the subscription revenue reached 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 the integration of the user feedback, which enhanced user satisfaction and fueled 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 live streaming operations, which have gained strong traction in multiple international markets.

In addition, the acquisition of Hupu significantly contributed to our advertising revenue, bringing in high-quality monetization opportunities through its established platform and audience reach. Hupu’s strong presence in the sports digital space has allowed us to tap into the highly engaged community of sports enthusiasts, enabling more effective ad 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 a rebound in client demand, particularly among large enterprise customers, who have 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 faces 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 durable value to our shareholders. With that, I will now pass the call over to Eric. Eric will give a detailed review of our Q3 2025 financial results and provide revenue guidance for Q4 of 2025. Thank you.

Eric Zhou, CFO, Xunlei: Thank you, Luhan. Thank you all again for participating in Xunlei’s conference call to discuss the financial results of Q3 2025. In Q3, 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 subscription were $14.7 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 the 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 Q3 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 proportion 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 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 operations, especially generally in line with the growth in revenues. Bandwidth costs as 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 Q3 2025 was $60.5 million, representing an increase of 49.6% year-over-year. Gross profit margin was 47.9% in Q3 2025, compared with 15.5% 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 a higher proportion of revenues derived from our audio live streaming business, which has a lower gross profit margin. Our energy expenses for Q3 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 Q3 2025 were $25.8 million, representing 20.4% of our 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 Q3 2025 were $10.9 million, representing 8.6% of our total revenues, compared with $11.4 million, or 14.2% 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 share-based compensation expenses during Q3 2025. Operating income was $2.7 million, compared with an operating loss of $0.2 million 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 Q3 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 Q3 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 Q3 2025 was $8.60, compared with diluted earnings per ADS of $0.07 in Q3 2024.

Non-GAAP diluted earnings per ADS was $0.09 in Q3 2025, compared with non-GAAP diluted earnings per ADS of $0.08 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 Q4 2025, Xunlei estimates total revenues to be between $131 million and $139 million, and the midpoint of the range represents a quarter-over-quarter increase of approximately 6.8%. This estimate represents 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.

Luhan Tang, Investor Relations Manager, Xunlei: Operator, we’re ready to take questions.

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

Xiao Lin Tang, Analyst, BT Capital: 管理层的你好。我想请问一下，Xunlei之前都没有分红，那么现在Xunlei又投资了饮食，收益提升了不少。请问一下管理层明年过了锁定期后，后续是否有计划分红呢？

The investor was asking Xunlei has not paid any dividend historically. Given the fact that the recent gain from our investment in Arashi Vision and the upcoming expiration of the lock-up period next year, does Xunlei plan to consider dividend distribution in the future?

Jinbo Li, Chairman and CEO, Xunlei: 你好。Xunlei持有的股份超过5%，减持的话需要向监管部门审批。目前的话，我们还没有减持和分红的计划。谢谢。

Xunlei holds 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 don’t have any plans for the share disposals or the dividend distribution.

Xiao Lin Tang, Analyst, BT Capital: 谢谢。还有第二个问题，就是之前公司有提到过会拥抱AI，请问目前有什么新的进展吗？

The investor is asking Xunlei has previously mentioned that we would embrace artificial intelligence. Are there any progress that made so far?

Jinbo Li, Chairman and CEO, Xunlei: 我们非常看好AI的未来。我们内部也正在组建团队做探索，会在合适的时机和大家分享。谢谢。

We’re very excited for the futures of artificial intelligence. We’re actively exploring the opportunities in this field. We look forward to sharing our progress with you in the future. Thank you.

Xiao Lin Tang, Analyst, BT Capital: Thank you. As a reminder to ask a question, please press star 11 again. Thank you. I see no further questions at this time. I will now pass back to management.

Luhan Tang, Investor Relations Manager, Xunlei: Thank you again for your time and participation. If you have any questions, please visit our website at ixunlei.com or send emails to our investor relations. Have a good day. Operator, we conclude today’s conference call. Thank you.

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