Xunlei's 2024 Earnings: Navigating Stormy Clouds Amid Subscription Growth

Xunlei Limited’s 2024 financial results painted a picture of resilience amid turbulence. While the company’s bottom line took a hit—posting a diluted EPS of US$0.019, a staggering 91.4% decline from US$0.22 in 2023—the story isn’t as bleak as the headline suggests. Beneath the surface lies a mix of strategic pivots, operational challenges, and cautious optimism. Let’s dissect the numbers to uncover what investors should watch next.

Revenue Declines: Clouds Parting, But Not Yet Clearing

Total revenue fell 11.1% year-over-year to US$324.4 million, driven by steep declines in two key segments:
1. Cloud Computing: Down 15.3% to US$104.6 million, as the sector faces heightened competition, pricing pressures, and regulatory headwinds.
2. Live-Streaming & IVAS: A 29.5% drop to US$86.1 million, stemming from the shutdown of domestic audio live-streaming operations in mid-2023.

The silver lining? Subscription services surged 12.0% to US$133.7 million, fueled by a 6.38 million subscriber base (up from 5.99 million in 2023). This growth, paired with a higher average revenue per user (ARPU) of RMB36.6, highlights Xunlei’s pivot toward recurring revenue streams.

Profitability: A Tale of Two Metrics

• Gross Profit Margin Expanded: To 51.7% (vs. 44.7% in 2023), thanks to cost cuts in low-margin live-streaming and stronger margins in subscriptions.
• Net Income Plunged: To US$0.7 million from US$14.3 million, but this was entirely due to a US$20.7 million non-cash goodwill impairment charge tied to declining cloud computing prospects.

The key distinction here is between GAAP and non-GAAP results. Excluding the impairment and share-based compensation, non-GAAP net income remained flat at US$23.9 million—a sign that core operations are holding steady.

Cash Reserves and Strategic Moves: Flexibility Amid Uncertainty

Xunlei ended 2024 with US$287.5 million in cash and short-term investments, up from US$271.9 million in 2023. This financial cushion allowed the company to:
- Repurchase US$7.7 million of its shares in 2024 (including US$5.6 million under a new program).
- Acquire Hupu in January 2025 to bolster its content ecosystem and cross-platform synergies.

CEO Jinbo Li emphasized that subscription growth and overseas live-streaming are priorities, while the cloud segment remains a work in progress. The company’s Q1 2025 revenue guidance of US$85–89 million (a potential 3.2% sequential increase) hints at stabilization.

Risks and Opportunities

• Cloud Computing Recovery: Critical to reversing revenue declines. Xunlei must innovate or pivot its cloud offerings to counter competition.
• Hupu Integration: The acquisition’s success hinges on synergies between Xunlei’s tech infrastructure and Hupu’s content.
• Regulatory Landscape: Continued scrutiny in China’s tech and live-streaming sectors could limit growth unless Xunlei adapts swiftly.

Conclusion: A Company in Transition

Xunlei’s 2024 results reveal a business struggling to adapt to shifting markets, yet showing resilience in its subscription model. The EPS collapse is largely a non-cash artifact, but the underlying issues in cloud computing and domestic live-streaming demand attention.

Investors should focus on three key metrics:
1. Subscription growth: Can Xunlei sustain its 12% YoY subscriber expansion while boosting ARPU?
2. Cloud rebound: Will cost cuts and strategic shifts reverse the 15.3% revenue decline in this segment?
3. Hupu’s impact: Will the acquisition drive cross-selling opportunities or content-driven revenue streams?

While the GAAP net loss is alarming, the stable cash reserves, non-GAAP consistency, and strategic moves like Hupu suggest Xunlei isn’t out of the game. However, investors must weigh patience against the risks of further declines in legacy businesses. For now, Xunlei’s story is one of cautionary hope—a company navigating storm clouds, but still flying.