RLX Technology's Q3 2025: Contradictions Emerge on International Strategy, Regulatory Adaptability, and Modern Oral Investment Shift

Date of Call: November 14, 2025

Financials Results

• Revenue: RMB 1,129 million, up 49% YOY (CFO also reported RMB 1.1 billion, +49% YOY and +28% QoQ)
• Gross Margin: Gross profit margin expanded by 4 percentage points year-over-year and 3.7 percentage points sequentially
• Operating Margin: Non-GAAP operating profit margin expanded by 6 percentage points year-over-year (non-GAAP operating profit RMB 188 million)

Guidance:

• No specific 2026 revenue guidance provided; company will finalize and share detailed plans in coming quarters
• Continue selective international expansion, contingent on regulatory clarity and market readiness (70%–80% of revenues now international)
• Expect further profitability improvement through scaling, operating efficiency and disciplined capital allocation
• Phased rollout of modern oral products beginning this quarter; near-term revenue expectations remain prudent

Business Commentary:

• Strong Revenue Growth and International Expansion:
• RLX Technology reported net revenue of RMB 1,129 million for Q3 2025, with a 49% year-over-year increase.
• Growth was driven by the company's strategic emphasis on international markets, which now contribute 70% to 80% of revenues, and the integration of a European e-vapor company.

• Improved Profitability and Operational Efficiency:
• RLX achieved a non-GAAP operating profit of RMB 188 million, with a non-GAAP operating profit margin expansion of 6 percentage points year-over-year.

• This improvement was due to disciplined execution, operational excellence, and favorable shifts in geographic revenue mix.

• Regulatory Challenges and Market Recovery in Mainland China:

• Revenue from Mainland China stood at RMB 320 million, amounting to approximately 13% of Q2 2021 levels.
• The slow recovery was attributed to ongoing regulatory challenges, particularly an unregulated listed e-vapor market, despite increased enforcement efforts.

• Product Innovation and Market Localization:
• RLX's R&D capabilities and product innovations, such as the East Asia product launch and expansion into the modern oral product category, have been instrumental in driving international market penetration and growth.
• The company's focus on product evolution, user experience enhancement, and localized flavor portfolios has sustained its competitive advantage in a maturing industry landscape.

Sentiment Analysis:

Overall Tone: Positive

• Management highlighted net revenue up 49% YOY to RMB 1,129m, non-GAAP operating profit RMB 188m, cash/financial assets RMB 15.4bn, ~USD 330m repurchased and a $0.1 per ADS dividend — underscoring growth, improved margins and strong liquidity.

Q&A:

• Question from Lydia Ling (Citigroup Inc., Research Division): Congratulations on the results. So I have 2 questions. And the first one is like as we now enter close to the year-end. So based on current progression in your international expansion. So could you actually share revenue outlook for 2026 for the company and also the industry? And also, could you also give us some breakdown for the international business, like how is organic growth in the third quarter? And for your invested European e-vapor business, so how did it perform in the third quarter? So this is my first question. And the second question is given that the e-vapor industry has matured, so what areas are prioritized in the R&D to sustain your growth and differentiation?
  Response: No quantitative 2026 revenue guidance yet; company will continue selective international expansion as the primary growth driver (Q3 international organic growth outpaced industry) and consolidated European investment remains operationally stable; R&D focus on flavor authenticity, device ergonomics and localized innovation.

• Question from Yun Guo (Citic Securities Co., Ltd., Research Division): Thanks management. This is Yun Go from CITIC and congratulations to the results. My question is about the channel innovation in the select Asian market. Can the management elaborate more?
  Response: Introduced a franchise model to upgrade independent vape stores via renovation subsidies and unified branding; ~450 partners engaged in one East Asian market this year, driving significant same-store sales and revenue growth.

• Question from Zhuonan Xu (China International Capital Corporation Limited, Research Division): This is Zhuo from CICC. My question is about our Europe business. First, could you give us some update on the U.K. with company integration? And what is the strategy for Europe further expansion?
  Response: Integration is in early stages with priority on preserving brand equity and operations; strategy is to convert UK operations into a multi-brand retail distribution platform, leverage supply chain/capital advantages, drive channel development and localize products while pursuing strategic investments.

• Question from Ling Zhour (UBS): Congratulations management for the strong results in Q3. So my question is, what is the current expansion status of the modern oral business? And what are the subsequent promotional strategies of RLX?
  Response: Modern oral launched an ultra-thin fast-absorbent product in INTERTEC Germany; rollout will be phased starting this quarter with prudent near-term revenue expectations as adoption data is collected.

Contradiction Point 1

International Revenue Growth Strategy

It highlights a shift in the approach to international revenue growth, with a focus on market readiness and regulatory clarity in 2025Q3, whereas the previous quarter emphasized expansion plans to more countries in the second half of 2025.

What is the 2026 revenue outlook for the company and industry? What is the international business breakdown including Q3 organic growth and the European e-vapor investment's performance? - Lydia Ling(Citigroup Inc., Research Division)

2025Q3: RLX is committed to expanding its brand footprint selectively in international markets based on regulatory clarity and market readiness. - Sam Tsang(CMO)

What are the 2025 expansion plans and earnings growth targets? Can you share insights on 2025 industry product evolution? - Lydia Ling(Citi)

2024Q4: We plan to expand to more countries in 2025, likely in the second half. - Sam Tsang(CMO)

Contradiction Point 2

Regulatory Challenges and Adaptability

It demonstrates differing views on the company's ability to adapt to regulatory changes, with the 2025Q3 response suggesting optimism in navigating regional variations, while the 2024Q4 response expressed a focus on ensuring compliance while meeting user demand.

What is the current expansion status of the modern oral business and RLX's subsequent promotional strategies? - Unknown Analyst(UBS)

2025Q3: Regulations vary by region. We proactively evaluate our product portfolio and adjust strategies to ensure compliance while meeting user demand. - Sam Tsang(CMO)

Can you discuss potential regulatory changes in overseas markets and your plans to address them? - Lydia Ling(Citi)

2024Q4: We proactively evaluate our product portfolio and adjust strategies to ensure compliance while meeting user demand. - Sam Tsang(CMO)

Contradiction Point 3

Investment in Open System E-cigarettes

It shows a change in the company's stance on open system e-cigarettes, moving from an emphasis on e-vapor products in 2024Q4 to investing in ultra-thin, fast-absorbent modern oral products in 2025Q3.

What is the current expansion status of the modern oral business, and what are the subsequent promotional strategies of RLX? - Unknown Analyst(UBS)

2025Q3: Modern oral is the fastest-growing segment in the smokeless industry, presenting a clear market opportunity. RLX's ultra-thin, fast-absorbent products have launched in Germany, receiving strong industry validation. - Sam Tsang(CMO)

What new initiatives will you implement in 2025 to further drive overseas market share gains? - Christine Peng(UBS)

2024Q4: Open system e-vapor products will experience stable demand growth in price-sensitive markets. Our focus remains on e-vapor products due to their stronger competitive advantage. - Sam Tsang(CMO)

Contradiction Point 4

Regulatory Environment and Market Shift

It highlights differing perspectives on the impact of regulatory changes on market dynamics, which can influence strategic decision-making and investor confidence.

What R&D areas are prioritized to sustain growth and differentiation as the e-vapor industry matures? - Lydia Ling(Citigroup Inc., Research Division)

2025Q3: Stricter product standards and enforcement are promoting a shift to our offerings, especially our cartridge-based systems. Reputable retail channels prefer compliant businesses. This clarity and shift create growth opportunities for us. - Sam Tsang(CMO)

Has overseas market regulation tightening led to more standardized management of noncompliant products? What impact has this had on your compliant products and business development? - Lydia Ling(Citigroup Inc., Research Division)

2025Q2: The global regulatory landscape is becoming more defined, favoring compliant products. Stricter product standards and enforcement are promoting a shift to our offerings, especially our cartridge-based systems. Reputable retail channels prefer compliant businesses. This clarity and shift create growth opportunities for us. - Sam Tsang(CMO)

Contradiction Point 5

International Market Expansion Strategy

It involves the company's approach to international market expansion, which directly impacts the company's revenue growth strategy and geographical diversification.

What is the 2026 revenue outlook for the company and industry? Can you provide the international business breakdown, including Q3 organic growth and European e-vapor portfolio performance? - Lydia Ling(Citigroup Inc., Research Division)

2025Q3: RLX is committed to expanding its brand footprint selectively in international markets based on regulatory clarity and market readiness. The company plans to share detailed plans as they are finalized in the coming quarters. - Sam Tsang(CMO)

Are there any updates on overseas expansion? Are there plans to enter or consolidate new markets in the upcoming quarters? - Lydia Ling(Citi)

2025Q1: We expect to make another 1 to 2 quarters to carefully evaluate and decide on any further market expansion. We are maintaining a prudent approach towards expanding into new markets, especially as the global macro and regulatory environments have evolved substantially. - Chao Lu(CFO)