Despite a noticeable recovery in market conditions, Ourpalm Co.,Ltd. (300315.SZ) failed to reverse its earnings decline in the first half of this year. During the reporting period, the company saw both revenue and profit fall; while its net profit attributable to shareholders remained positive, the net profit after deducting non-recurring gains and losses slipped into the red. This marks the first time the company has posted a loss on this basis for a half-year report since its listing, signaling a clear intensification of pressure on its core operations.

Industry observers have noted that in recent years, under the combined weight of an overall market downturn and a disconnect between its aging and new products, Ourpalm's revenue has kept shrinking. Last year, its revenue was already cut in half compared with the historical peak. In the first half of this year, the revenue decline continued as new titles failed to fill the gap left by old ones. At the same time, selling expenses surged year on year, severely eroding profitability. The company's net operating cash flow remained negative in the first half and the outflow expanded significantly year on year. If the pressure on its main business cannot be reversed soon, the stability of its cash position may face even greater tests.

Profit propped up by non-recurring items, operating cash flow stays negative

Founded in 2012 and listed on the Shenzhen bourse, Ourpalm focuses on the development, publishing, and operation of online games, especially mobile titles. The company once launched globally recognized games such as Miracle MU and The King of Fighters '98 Ultimate Match Online. Currently, roughly 40% of its revenue comes from overseas markets.

In the first half of this year, Ourpalm generated revenue of RMB 334 million, down 6.75% year on year. Net profit attributable to shareholders stood at RMB 36.26 million, a drop of 24.13%, while net profit after deducting non-recurring items was RMB -36.2 million, a plunge of 171.95%.

The gaming industry has entered a mature phase, with multiple headwinds including fading user growth dividends, reduced entertainment spending, and rising customer acquisition costs. Against this backdrop and the ongoing gap between old and new products, Ourpalm's growth momentum has clearly weakened. From 2021 to 2025, the company's revenue contracted for five consecutive years. Last year, revenue was halved compared with the 2019 peak. On the profit side, earnings fell sharply in 2024 and 2025, and last year the company swung to a loss. In the first half of this year, the company continued the same pattern of declining revenue and profit as in the same period last year.

Although net profit attributable to shareholders remained positive, it was largely supported by non-recurring items. During the period, total non-recurring gains, including income from holding and disposing of financial assets, reached RMB 72.459 million, compared with a negative figure in the same period last year. After stripping out these items, the company's core business was loss-making in the first half — the first such negative reading for a half-year report since its listing. Looking over a longer horizon, the company's net profit after deductions has declined continuously across the last three half-year reports, with the pace of decline accelerating, indicating that profitability of its main operations is deteriorating at a faster clip.

The heavy strain on cash flow further underscores the intensifying operational pressure. In the first half, net operating cash flow came in at RMB -73.08 million, down a sharp 182.43% year on year — a drop far exceeding the revenue decline. The company attributed this mainly to higher marketing expenses paid out and lower sales collections during the period. Notably, this metric has now been negative for two consecutive half-year reports, suggesting that the cash-generation ability of its main business is not a short-term squeeze but a worsening trend. While the net increase in cash and cash equivalents rose sharply and turned positive in the first half, this was mainly driven by maturing time deposits and redemption of wealth management products. That has improved book cash levels to some extent, but it does little to fundamentally ease the pressure on operating cash flow. If the company cannot quickly shore up its core operations, its cash stability may come under more serious threat.

Old titles fade, new launches stall; high expenses squeeze margins

Looking at its main business, Ourpalm faces two formidable challenges: a gap between waning old products and not-yet-mature new ones, and soaring customer acquisition costs. In fact, the gaming industry's outlook improved markedly in the first half of this year. Domestic revenue from self-developed games in China grew 16.31% year on year, overseas revenue from such games rose 30.22%, and revenue from domestic mini-program mobile games climbed 36.01%. Yet Ourpalm's results ran clearly against this favorable tide.

During the first half, the number of games in operation fell to 15, down from 19 in the same period last year. Revenue from its core mobile game business was RMB 308 million (accounting for 92.4% of total revenue), a decline of 6.43% year on year, extending the slide seen in the prior-year period. Due to a sharp drop in operating costs, the gross margin for this segment rose 3.72 percentage points to 75.92%. The company attributed the revenue decline to the natural falloff in revenue from mature games as they move through their life cycles, while its new SLG game is still being fine-tuned and tested and has not yet been launched on a large scale. Industry data shows that this business has shrunk considerably in recent years, with first-half revenue down more than 60% from the peak recorded in the first half of 2020.

In fact, due to intensifying competition and the natural life cycles of products, revenue from Ourpalm's mature games has been declining for years. The company has long pinned its turnaround hopes on the SLG genre, an area it began developing early on. However, its new SLG titles have yet to generate meaningful revenue, leaving the company unable to effectively offset the natural erosion of revenue from its existing game portfolio.

Despite the decline in game revenue in the first half, selling expenses rose sharply — another major factor dragging down performance. While the overall gross margin improved year on year, gross profit still fell short of the prior-year level. With selling expenses up 74.5% year on year, total period expenses rose 38.57%, severely compressing profit margins. The company said the jump in selling expenses was mainly due to increased overseas marketing for some game titles. According to its disclosed operating data, revenue in the first half was highly concentrated, with the top five games contributing nearly 70% of total revenue. Among them, "Game 5" incurred promotion and marketing expenses of RMB 24.46 million, equivalent to 89% of its revenue. For overseas markets, "Game 4" and "Game 5" spent RMB 64.39 million and RMB 24.46 million on promotion and marketing, respectively, representing 254.68% and 105.38% of their overseas revenue — in both cases exceeding the revenue they generated, which significantly worsened the pressure on profits.

It is worth noting that Ourpalm has not yet launched large-scale marketing for its new games. Once its upcoming SLG titles enter full-scale promotion, the squeeze on profit margins could intensify further. In its earnings report, the company said it will continue to advance its sustainable development strategy of integrating research and operations and focusing on quality products, striving to grow both its domestic and overseas businesses in tandem. In the domestic market, it is actively expanding into the mini-program game segment; overseas, it is concentrating on the SLG track, pushing forward project development, testing, and optimization, and accelerating progress toward launch and large-scale deployment.