Xunlei Swings to $235.8 Million Net Loss as Arashi Stake Weighs

Xunlei (NASDAQ:XNET) reported a net loss from continuing operations of $235.8 million for the third quarter, a sharp reversal from net income of $550.4 million a year earlier. Revenue grew 12.9% year over year to $101.3 million, but an operating loss and a decline in the fair value of its Arashi Vision investment outweighed the top-line gain.

CFO Eric Zhou said the loss stemmed from the investment's fair value movement and the shift into an operating loss. The company also announced a fresh $20 million share repurchase authorization covering the next 12 months, after completing its previous program.

What drove the losses?

The operating result swung to a loss of $14.8 million, compared with operating income of $3.3 million in the prior-year quarter. Zhou attributed the deterioration mainly to higher operating expenses.

The cost picture breaks down as follows:

• Sales and marketing: $33.3 million, or 32.9% of revenue, reflecting increased user acquisition spending for subscriptions and overseas live streaming
• Research and development: $25.6 million
• General and administrative: $12.4 million

Zhou said the Latin America expansion 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 (a measure excluding items such as fair-value changes), the net loss was $16.4 million, against non-GAAP 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.

Why did subscription growth slow?

Subscription revenue rose 8.5% to $44.1 million, a slower pace than before. In prepared remarks delivered by Investor Relations Manager Luhan Tang, Chairman and CEO Jinbo Li said growth moderated because 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. Such customers typically carry lower initial average revenue per user, he said, but better retention can raise their lifetime value. The subscriber base has grown from roughly 3 million in 2020 to more than 7 million in 2025, he added, though the latest count went undisclosed.

The live streaming segment produced a discrepancy in the transcript. Li's prepared remarks put live streaming and other services revenue at $57.2 million, up 16.6% year over year, while Zhou separately cited $87.2 million with the same 16.6% growth rate. The two figures were not reconciled.

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

Hupu's advertising business, Li said, benefited from higher traffic and engagement in a World Cup year, with growth in both brand and performance advertising. Because sports-driven boosts are cyclical, Xunlei is exploring additional product offerings.

What about buybacks and the Arashi Vision stake?

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

On monetizing Arashi Vision, Zhou said Xunlei had not started a sale process and held no specific divestiture plan. The company holds a 7.8% stake, and sales by holders above 5% require certain regulatory approval procedures, he said. Management will wait for an appropriate opportunity, weighing Arashi Vision's share-price performance, market liquidity and the broader A-share market. Once a window opens, the company will consult its board and design a divestiture plan.

Asked about the Investment Company Act of 1940, Zhou said Xunlei had received no reviews or questions from relevant agencies and was monitoring the matter internally. The company intends to remain an operating company and comply with applicable regulations, he said.

Xunlei, founded in 2003 and headquartered in Shenzhen, develops internet software and services, including its download and content-delivery platform, cloud storage, distributed cloud computing and its OneThing shared-computing offerings. The quarter's arithmetic is unambiguous: growth arrived, profitability departed.