XNET

• Strategic Pivot Validation

  • The company's strategic shift to a consumer-centric business model delivered tangible, sustained top-line growth, building on the solid foundation established in Q1 2026.

• Core Business Operations

  • Subscription business: Continued rolling out new AI-powered premium features, optimized existing functionality, deepened long-term partnerships with leading domestic smartphone manufacturers, and scaled ecosystem user acquisition channels as planned. The segment maintained resilient user retention and steady monetization despite a marginal sequential softening in growth rate.
  • Overseas audio live streaming: Continued targeted investment in high-potential emerging markets including Southeast Asia, the Middle East, Turkey, and expanded further into Latin America. Enhanced localized product iteration and operational capabilities, and optimized the product matrix for one-on-one social interaction and multi-person chat room scenarios.
  • Hoku sports community: User discussion activity reached a new quarterly high. Newly launched AI-powered features meaningfully boosted user engagement across interactive activities, generating additional incremental revenue for the consumer ecosystem.

• Capital Allocation and Shareholder Returns

  • A new $20 million share repurchase program was approved and announced at the end of June to reinforce market confidence and deliver long-term shareholder returns. The company will maintain disciplined capital allocation, prioritize investment in core consumer product innovation and international expansion, and return excess capital to shareholders when appropriate.

• The company will continue refining differentiated member perks for the subscription segment to boost user penetration, expand ecosystem coverage, and capture incremental user acquisition and revenue growth in H2 2026.
• The company will stick to long-term localized operational and marketing strategies for the overseas entertainment business, prioritizing sustainable growth over near-term rapid scale expansion.
• Moving forward, the company will accelerate feature iteration for subscription offerings, deepen market penetration in established overseas markets, selectively pursue new regional growth opportunities, and uphold strict cost discipline to expand profit margins across all business lines. The company aims to deliver balanced, sustainable corporate development by balancing growth and profitability.

Total Q2 2026 revenue was $102.7 million, representing a 38.9% year-over-year increase. 1. Subscription services: Generated $44.5 million in revenue, a 22.6% year-over-year increase. This segment contributed 43.3% of total company revenue, and serves as the company's stable cash flow foundation. 2. Overseas audio live streaming and related services: Generated $58.4 million in revenue, a 54.8% year-over-year increase. This segment contributed 56.9% of total company revenue, and is the company's primary growth engine. 3. Hoku (Hukou) sports community advertising: Contributed $9.1 million in incremental revenue during the quarter, benefiting from peak advertising season and major global sporting events.

• Intense competition persists in the global overseas entertainment market, which may pressure growth and margins.
• The company's marked-to-market long-term investment in Arashia Vision Inc. is exposed to significant fair value volatility, which can cause large swings in quarterly net income/loss.
• The company must comply with U.S. Investment Company Act of 1940 requirements, which may force future stake reductions in investment holdings if total investment assets exceed regulatory limits. The company is not an investment company and intends to remain focused on its core 2C consumer business.
• Higher revenue share from the lower-margin live streaming segment has caused a structural compression of the company's overall gross margin compared to prior periods.

Q: A retail investor asks for an update on the new $20 million share repurchase program announced at the end of June, which was not detailed in the quarterly financial report. / A: The repurchase program officially launched on July 1, 2026. As of August 12, the company has repurchased approximately 1.07 million ADS, spending roughly $5.9 million. The program remains ongoing, and full details will be disclosed in the Q3 2026 financial report.

Q: An individual shareholder asks for an update on the company's stake in the recently unlocked Arashia Vision Inc., after management previously stated it would release a plan for the stake around the unlock date. / A: Xunlei currently holds a 7.8% stake in Arashia Vision. The company is following required regulatory procedures to prepare for a potential stake reduction, but has no finalized disposal plan at this time. To comply with the 1940 Investment Company Act, the company will continue monitoring its total holding of investment assets, consulting advisors, and adjust holdings if needed to keep investment assets under the 45% regulatory threshold, consistent with its focus on core consumer business.