VTech Holdings (00303.HK) shares plummeted 5.18% in early trading on Thursday following the release of its fiscal year 2025 annual results. The Hong Kong-based electronic learning products and telecommunication devices manufacturer faced headwinds due to profit decline and a challenging business outlook.

According to the company's announcement, VTech reported a 5.9% decrease in profit attributable to shareholders, dropping to US$156.8 million for the fiscal year ended March 31, 2025. This decline was primarily attributed to lower operating profit, as total operating expenses rose following the integration of Gigaset operations. The company also declared a full-year dividend of US61.0 cents per ordinary share, representing a 6.2% decrease from the previous financial year.

Despite a 1.5% increase in Group revenue to US$2,177.2 million, investors seemed concerned about the company's future prospects. VTech's Chairman and Group CEO, Mr. Allan Wong, highlighted the increasingly challenging business environment and the impact of recently announced tariffs on imports to the US. The company forecasts a decline in Group revenue for the financial year 2026, citing the volatile US tariff situation and negative economic outlook as key factors affecting customer orders and consumer behavior.

Adding to investor concerns, VTech is accelerating the relocation of its production of US-bound products away from mainland China to mitigate tariff effects. While this move aims to protect the company's long-term interests, it may lead to short-term disruptions and increased costs. The company's ability to navigate these challenges and maintain its market position in the coming years will be crucial for its stock performance.