RLX Technology (NYSE: RLX) reported Q2 2026 net revenue of RMB1.01 billion, up 14.8% from RMB880.0 million a year earlier, while GAAP diluted net income per ADS was RMB0.167 versus RMB0.166. Gross-margin expansion lifted operating income, but lower non-operating income limited GAAP net income growth and operating cash flow turned negative.

Core earnings data

International expansion and the company’s May 2025 acquisition drove revenue growth. Gross profit increased substantially faster than revenue as favorable sales mix and further supply-chain optimization raised gross margin by 7.9 percentage points.

Operating expenses increased to RMB227.5 million from RMB203.1 million, but the additional gross profit more than covered that increase. As a result, GAAP income from operations more than tripled, while non-GAAP operating income rose 28.8%.

Non-GAAP results exclude share-based compensation, acquisition-related amortization and depreciation, and the associated tax effects.

International expansion and business mix

International operations represented 68.5% of quarterly revenue. RLX did not disclose revenue by individual country or region, but it identified international expansion and contributions from the May 2025 acquisition as the primary reasons for overall growth.

Revenue and gross profit moderated sequentially from Q1 2026. Management attributed the comparison to a one-time benefit in the first quarter arising from a change in export-related regulation, rather than describing the second-quarter decline as a new underlying trend.

In July 2026, RLX acquired a 51% equity interest and board control in a major Western European distributor of next-generation smoke-free and fast-moving consumer goods. The distributor has an offline logistics network and a proprietary business-to-business ordering platform. Its results will be consolidated into RLX’s financial statements beginning in Q3 2026, making its contribution and integration costs important items for the next report.

Profitability, cash flow and balance sheet

Selling expenses rose to RMB123.7 million from RMB84.6 million, reflecting higher compensation, branding costs, and acquisition-related depreciation and amortization. General and administrative expenses declined to RMB74.4 million from RMB88.4 million, mainly because of lower share-based compensation, partially offset by higher legal and consulting fees. Research and development expenses were broadly stable at RMB29.4 million.

The improvement in gross margin was therefore the main operating-profit driver. It allowed RLX to absorb higher selling investment while still expanding both GAAP and non-GAAP income from operations.

Cash conversion was weaker than reported earnings. RLX used RMB63.2 million in operating activities during Q2, compared with RMB229.6 million generated a year earlier. The release did not specify the reason for this reversal.

At June 30, RLX held RMB13.88 billion across cash, restricted cash, bank deposits, short- and long-term investments, and investment securities, down RMB646.3 million from RMB14.53 billion at March 31. This measure represents a broad pool of liquid and investment assets rather than cash alone.

International exposure also affected comprehensive income. Foreign-currency translation adjustments produced an RMB181.0 million loss, contributing to total comprehensive income of only RMB43.7 million despite RMB222.0 million of GAAP net income.

Operating gains did not fully reach the bottom line

RLX’s operating improvement was much stronger than its net-income growth. Gross profit increased by RMB115.7 million, while operating expenses rose by RMB24.3 million, producing a RMB91.4 million increase in GAAP income from operations.

Below the operating line, however, interest income fell to RMB109.1 million from RMB142.9 million, investment income declined to RMB7.1 million from RMB24.8 million, and other net income dropped to RMB0.2 million from RMB40.3 million. Consequently, pretax income was nearly unchanged at RMB246.8 million, and GAAP net income increased only 1.6%.

The decline in non-GAAP net income reflects another comparison effect. Share-based compensation and acquisition-related adjustments were much smaller than a year earlier, so the amount added back to GAAP earnings was also lower. That explains why GAAP operating income rose sharply while non-GAAP net income and non-GAAP diluted income per ADS declined.

Management’s perspective

CEO Kate Wang said RLX is refining its route-to-market strategy by strengthening store-level execution in Asia and combining partnerships with organic expansion in Europe. The company is also broadening its smoke-free portfolio beyond e-vapor products, including newly launched modern oral nicotine pouches and other smokeless categories.

Management expects the Western European distributor investment to deepen regional distribution and support cost optimization and cross-selling. These are strategic objectives rather than quantified financial commitments, and the acquired entity’s first consolidated results will provide the initial evidence of its impact.

Risks investors need to watch

• Weak cash conversion: Operating cash flow turned negative even though RLX remained profitable, creating a gap between accounting income and cash generation.
• Lower non-operating income: Reduced interest, investment, and other income offset much of the operating improvement, showing that bottom-line results remain sensitive to returns outside the core business.
• Acquisition execution: The May 2025 acquisition is already contributing to revenue and expenses, while the Western European distributor will enter consolidated results in Q3. Integration costs and the realization of distribution or cross-selling benefits will affect the overall outcome.
• Foreign-exchange exposure: With international business representing more than two-thirds of revenue, currency translation can materially affect comprehensive income even when operating earnings improve.
• Regulatory variability: Q1 benefited from an export-regulation change, while RLX operates in regulated e-vapor and smoke-free categories across multiple jurisdictions. Regulatory changes can affect quarterly comparability, costs, and routes to market.

Summary

RLX’s Q2 2026 results showed revenue growth and meaningful gross-margin expansion, driven by international operations, acquisition contributions, a favorable mix, and supply-chain optimization. Those gains strengthened operating income, but lower non-operating income kept GAAP net income nearly flat, non-GAAP net income declined, and operating cash flow turned negative. The next major points to monitor are cash conversion and the Q3 consolidation of the newly acquired Western European distributor.

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