Xunlei Q1 Earnings Call Highlights

Xunlei (NASDAQ:XNET) reported a sharp increase in first-quarter 2026 revenue as growth in subscription services and overseas audio live streaming offset the effects of a recent restructuring that removed its cloud computing business from consolidated results.

On the company’s earnings call, Investor Relations Manager Luhan Tang said the financial results discussed excluded discontinued operations. Chairman and CEO Jinbo Li described the quarter as “a transformative period” for Xunlei, citing disciplined execution, a completed corporate restructuring and a sharper focus on consumer-facing, or “To C,” operations.

Total revenue for the quarter was $98.6 million, up 54.1% from the prior-year period. Management said the increase was driven primarily by subscription services and the company’s overseas audio live streaming business.

Subscription and Live Streaming Drive Revenue Growth

Li said Xunlei’s subscription business remained a “stable cornerstone,” generating $45 million in revenue during the quarter, a 26.2% year-over-year increase. He attributed the growth to improvements in the premium subscription experience, user feedback-driven feature refinements and partnerships with mobile phone manufacturers and internet platforms.

“We have attracted a record number of users to use our premium services,” Li said in prepared remarks. He added that Xunlei plans to introduce new features intended to make interactions “more intuitive, joyful, and personal.”

The company’s live streaming and other services segment generated $53.6 million in revenue, up 89.3% year over year. Li said the performance reflected strong growth in overseas markets, particularly Southeast Asia and the Middle East, where Xunlei sees supportive platform policies and rising user demand.

Management said the business has benefited from product refinement, user engagement and monetization efforts tailored to local markets. Li said Xunlei will continue to pursue overseas expansion and optimize its service offerings, though he cautioned that rapid growth could see “a modest slowdown in future quarters” due to the changing competitive landscape.

Profitability Improves at Operating Level

Chief Financial Officer Naijiang Zhou said cost of revenues rose to $40.4 million, or 41% of total revenue, from $24.1 million, or 37.8% of revenue, in the same period last year. The increase was mainly tied to higher revenue-sharing expenses from overseas audio live streaming operations, along with payment handling fees and bandwidth expenses.

Gross profit rose 45.1% year over year to $57.7 million. Zhou said the improvement was supported by both the overseas audio live streaming and subscription businesses. He also said the company’s margin was affected by a structural shift in revenue mix, as live streaming carries a lower gross margin than subscription services and now represents a larger share of total revenue.

Operating income was $4.3 million, compared with an operating loss of $1 million in the prior-year quarter. Zhou said the turnaround was largely driven by stronger gross profit across Xunlei’s core businesses.

Operating expenses increased in absolute terms. Research and development expenses were $20.2 million, or 20.4% of revenue, compared with $16 million, or 25.1% of revenue, a year earlier. Sales and marketing expenses rose to $22.4 million, or 22.8% of revenue, from $14.5 million, or 22.7% of revenue, as Xunlei increased marketing investments in its subscription and overseas audio live streaming businesses. General and administrative expenses were $10.9 million, or 8.5% of revenue, compared with $10 million, or 15.7% of revenue, with the increase attributed primarily to higher share-based compensation.

Investment-Related Loss Weighs on Net Results

Despite the improvement in operating performance, Xunlei reported a net loss from continuing operations of $192.4 million, compared with a net loss of $0.2 million in the first quarter of 2025. Zhou said the loss was mainly due to a net other loss of $195.1 million, driven by fair value changes related to the company’s long-term investment in Arashi Vision Inc., which completed its initial public offering in June 2025.

On a non-GAAP basis, Xunlei reported net income from continuing operations of $4.1 million, up from $0.9 million in the year-earlier period. Diluted loss per American depositary share from continuing operations was $3.06, compared with diluted earnings per ADS of $0 in the first quarter of 2025. Non-GAAP diluted earnings per ADS from continuing operations rose to $0.07 from $0.02.

For discontinued operations, Zhou said the amount related entirely to the Shenzhen Wanting business, which was reorganized in March. Xunlei recognized income of $17.7 million from discontinued operations in the quarter, including an operating loss of $1.8 million, a disposal gain of $4.3 million and income tax benefits related to the disposal of $15.2 million.

Cash Position Rises; Management Addresses Litigation and Regulation

As of March 31, 2026, Xunlei had $303.6 million in cash equivalents and short-term investments, up from $283.5 million at the end of 2025. Zhou said the increase was primarily driven by positive operating cash flow and proceeds from the disposal of the company’s 50% equity stake in Xinjiang, partially offset by deferred consideration payments related to the Hupoo acquisition.

During the question-and-answer session, an analyst asked about litigation disclosed in Xunlei’s annual report involving Hupoo and alleged unauthorized dissemination of NBA game content and unauthorized use of the NBA trademark, with claimed damages of about $12.1 million. Zhou declined to comment on the ongoing case but said the company has set aside allowances for potential expenses and does not expect the case to have a significant impact on operations.

Another question focused on whether Xunlei’s investment gains could raise issues under the Investment Company Act of 1940. Zhou said the company is monitoring its holdings of appreciated assets in Arashi Vision and has been consulting advisors. If needed, he said Xunlei would “gradually seek to adjust” its holdings so that investment securities do not exceed 45% of total assets, excluding government securities and cash items.

Zhou said the company’s intention remains to focus on its core consumer-facing business and that Xunlei “never intend[ed] to be an investment company.”

About Xunlei (NASDAQ:XNET)

Xunlei Limited (NASDAQ: XNET) is a China-based technology company specializing in content acceleration and cloud services. Its core offerings include the Xunlei download manager, which integrates peer-to-peer (P2P) and cloud-based acceleration technologies to enhance file delivery speeds for large downloads. The company has expanded its suite of products to encompass cloud storage solutions, media streaming applications and mobile browsing tools, all aimed at improving digital content distribution and user experience.

Founded in 2003 and headquartered in Shenzhen, Xunlei originally gained traction by addressing bandwidth constraints in China's burgeoning internet market.

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