Xunlei Ltd ((XNET)) has held its Q3 earnings call. Read on for the main highlights of the call.
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Xunlei Ltd’s recent earnings call conveyed a generally positive sentiment, underscored by impressive revenue growth and substantial gains from strategic investments. The company demonstrated positive momentum across its major business segments, despite facing challenges such as increased costs and decreased gross profit margins. Nevertheless, Xunlei’s robust net income and strategic positioning suggest a favorable outlook.
Record Revenue Growth
Xunlei Ltd reported record revenue growth, with total revenues reaching $126.4 million, marking a 57.7% year-over-year increase. This impressive growth exceeded market expectations and highlights the company’s ability to expand its revenue base significantly.
Significant Equity Gain
A notable highlight from the earnings call was the reported gain of $545.8 million from changes in the fair value of a 7.8% equity stake in Arashi Vision Inc. This substantial gain underscores the strategic value of Xunlei’s investments.
Subscription Revenue Milestone
The subscription business achieved a milestone by generating $40.7 million, a 22.3% increase year-over-year. This growth reflects the company’s successful efforts in expanding its subscription services to new heights.
Robust Growth in Live Streaming
Live streaming and other services experienced robust growth, with a 127.1% year-over-year increase, reaching $49.1 million. This surge was primarily driven by the success of overseas audio streaming services.
Cloud Computing Recovery
Cloud computing revenue saw a recovery, increasing by 44.9% year-over-year to $36.6 million. This indicates a resurgence in client demand for Xunlei’s cloud computing services.
Net Income Surge
The company’s net income surged to $550.1 million, a dramatic increase from $4.4 million in the same period of the previous year. This surge was largely attributed to the significant equity gain from Arashi Vision Inc.
Decreased Gross Profit Margin
Despite the revenue growth, Xunlei experienced a decline in its gross profit margin, which fell to 47.9% from 51.5% the previous year. This decline was mainly due to lower margins in the cloud computing and audio live streaming businesses.
Increased Costs
The cost of revenues rose to $65.4 million, representing 51.7% of total revenues. The increase was primarily due to higher bandwidth costs, which impacted the company’s overall cost structure.
Increased Operating Expenses
Operating expenses, particularly in sales and marketing, saw a significant increase to $25.8 million, up from $11.5 million. This rise in expenses affected the company’s overall profitability.
Forward-Looking Guidance
Looking ahead, Xunlei Ltd provided guidance for Q4 2025, forecasting total revenues between $131 million and $139 million, which implies a quarter-over-quarter increase of approximately 6.8%. The company plans to leverage the strategic flexibility gained from its investment gains to enhance R&D, industry collaboration, and shareholder returns.
In summary, Xunlei Ltd’s earnings call painted a picture of strong financial performance, with record revenue growth and significant investment gains. Despite challenges such as increased costs and decreased gross profit margins, the company’s strategic positioning and robust net income suggest a positive outlook for the future.