On August 13, Xunlei (NASDAQ: XNET) released its unaudited financial results for the second quarter of 2026.

With cloud computing operations no longer consolidated, Xunlei's current revenue structure has narrowed to consumer-facing businesses, including subscription services, overseas voice live streaming, and Hupu advertising. In the second quarter, the company's revenue reached $102.7 million, a 38.9% year-over-year increase. However, this revenue growth has yet to translate into improved profitability, as operations swung from a profit to a loss.

It is important to note that Xunlei adjusted its comparable metrics this year. In March, the company sold a 50% stake in Shenzhen Wangxin Technology Co., Ltd., reducing its ownership from 70% to 20%. The cloud computing business operated by Wangxin Technology is now classified as discontinued operations. As a result, the $73.92 million in revenue reported for the same period last year in the financial statements has already excluded the cloud computing business, and is not comparable to the $104 million revenue figure disclosed in Xunlei's Q2 2025 financial report at that time.

From a business segment perspective, subscription services remain a relatively stable revenue source for Xunlei.

Subscription revenue in the second quarter was $44.5 million, up 22.6% year-over-year, accounting for approximately 43% of total revenue. Xunlei stated that the growth was primarily driven by increased demand for subscription services. Management mentioned during the earnings call that the company continues to add AI features and expand customer acquisition channels through domestic mobile phone manufacturers and internet platforms.

However, subscription revenue saw a sequential decline from the first quarter, when it was $45 million, a 26.2% year-over-year increase.

Xunlei did not disclose the number of paid subscribers or average revenue per user this time, making it difficult to determine whether the second-quarter growth was more attributable to an increase in membership numbers or changes in product mix and pricing. In contrast, overseas voice live streaming continued to be the primary driver of growth.

In the second quarter, live streaming and other services revenue was $58.2 million, a 54.8% year-over-year increase, representing approximately 57% of total revenue. This also increased sequentially from $53.6 million in the first quarter. Xunlei attributed the growth to the expansion of overseas voice live streaming and higher advertising revenue from Hupu.

During the earnings call, management stated that the company is focusing on expanding into Southeast Asia, Mexico, the Middle East, Turkey, and other Latin American markets, while also refining its product offerings around one-on-one social interactions and multi-person chat rooms.

In June 2025, Xunlei acquired Shanghai Kuanghui Network Technology Co., Ltd., which operates Hupu, for 500 million yuan.

In the current quarter, Hupu generated $9.1 million in revenue, primarily driven by a concentration of sports events and the peak advertising season. This indicates that Hupu has begun to provide a meaningful revenue contribution, though its performance will remain subject to fluctuations in the event cycle and advertising market.

The rapid growth of overseas live streaming has also altered Xunlei's profit structure.

In the second quarter, the company's gross profit was $57.3 million, up 23.1% year-over-year. The gross margin was 55.8%, down 7.2 percentage points from 63.0% in the same period last year, and also lower than the 58.5% gross margin in the first quarter. The revenue-sharing costs for the live streaming business expanded with revenue, driving operating costs up 65.6% year-over-year to $44.8 million. As the gross margin for live streaming is lower than that of subscription and advertising businesses, the increase in its revenue share has weighed on the overall gross margin.

Expenses also increased.

Research and development expenses in the second quarter were $21.4 million, up 28.9% year-over-year. Sales and marketing expenses were $27.9 million, up 34.9% year-over-year, primarily used for subscription and overseas live streaming customer acquisition. General and administrative expenses were $12.7 million, up 48.6% year-over-year, which included litigation provisions and employee costs.

As a result, the company recorded an operating loss of $4.8 million, compared to an operating profit of $0.3 million in the same period last year.

Net loss attributable to Xunlei's continuing operations was $218.5 million, which was primarily due to a change in the fair value of its investment in Insta360, rather than from daily operations.

After Insta360 went public in June 2025, the investment is measured at market price. In the same period last year, Xunlei recognized a substantial gain from this investment, but in the current quarter, it generated a fair value loss of approximately $215 million. Excluding the impact of share-based compensation and changes in the fair value of long-term investments, the company's non-GAAP net loss was $2.1 million, compared to a net profit of $7.2 million in the same period last year. Xunlei currently holds approximately 7.8% of Insta360's shares.

As of the end of June, Xunlei held $276.9 million in cash, cash equivalents, and short-term investments, a decrease of $26.7 million from the end of March. This was due to operating cash outflows, repayment of bank loans, share repurchases, and deferred consideration payments for the Hupu acquisition.

For Xunlei, after shifting its business focus to subscriptions, overseas live streaming, and sports communities, its revenue sources have become clearer. The next step for the company is to observe whether the overseas growth can gradually improve operating profits amid rising marketing spending and revenue-sharing costs.