Qimeng Island's Q2 FY2026 revenue increased by 39.4% quarter-over-quarter, and losses narrowed by 5.8% quarter-over-quarter.

On March 12, HERE Qimeng Island (hereinafter referred to as “Qimeng Island”), a play-toy company listed in the U.S., released its unaudited financial report for the second quarter of fiscal year 2026 (from October 1, 2025 to December 31, 2025).

In the second quarter, Qimeng Island recorded operating revenue of RMB 177 million, up 39.4% quarter-over-quarter, exceeding the upper limit of its prior performance guidance; however, Qimeng Island was still not profitable. In the second quarter, after excluding the effects of equity incentives and other items, the adjusted net loss was RMB 16.10 million, compared with a net loss of RMB 17.10 million in the first quarter, narrowing by 5.8% quarter-over-quarter. In addition, Qimeng Island’s operating cost in the second quarter was RMB 122.3 million, which expanded 63.7% compared with the RMB 74.70 million cost in the first quarter.

Zhang Yi, CEO of Guangzhou Aimei Digital Media Information Consulting Co., Ltd., told reporters from the Securities Daily that, “In the first quarter, Qimeng Island’s revenue also exceeded the upper limit of performance guidance. Revenue has been trending positively for two consecutive quarters, which means that Qimeng Island’s strategy to transform from an adult education company into a play-toy company is correct. If revenue growth cannot keep up with cost growth, it at least indicates that the company is still in a stage of burning cash to gain scale.”

Compared with the company’s financial results over the two quarters after its transformation, the company’s gross margin declined. In the first quarter of 2026, Qimeng Island’s gross margin was 41.2%, and it fell to 30.9% in the second quarter.

The reporter found that among listed and pre-listed companies in the play-toy industry, in addition to Pop Mart being able to keep gross margin at 70% or above, most companies’ gross margins are around 40%. For example, the prospectuses of 52TOYS and TOP TOY, which launched IPO sprints in Hong Kong stocks in 2025, show that 52TOYS’s latest gross margin is 39.9%, while TOP TOY’s latest gross margin is 32.7%.

Qimeng Island’s financial report shows that the decline in gross margin in the second quarter was mainly attributable to the company’s strategic expansion of offline channels, and that the gross margin of offline channels is lower than that of online direct sales. This multi-channel diversification strategy aims to enhance IP engagement through physical retail experiences and improve customer loyalty.

The level of IP mainstreaming also determines the company’s revenue.

As of December 31, 2025, Qimeng Island had 11 proprietary IPs and 7 licensed IPs, among which “WAKUKU哇库库,” “SIINONO赛诺诺,” and “ZIYULI又梨” are the company’s three core IPs. In the second quarter, “WAKUKU哇库库” generated revenue of RMB 129 million, making it the company’s largest IP revenue source; “SIINONO赛诺诺” revenue reached RMB 19.23M, and “ZIYULI又梨” revenue was RMB 9.5M.

In fact, in the play-toy market, “WAKUKU哇库库” already has some presence. According to Wen Chuang Hui data, as of February 28, among Tmall’s best-selling blind box rankings, the “WAKUKU立刻开挂吧” blind box entered the top 10, ranking seventh. Meanwhile, the top five by sales in the ranking are all taken by Pop Mart and Miniso’s IP bundles.

Judging by the number of followers in official stores, most brands in the play-toy market cannot compete with Pop Mart and Miniso. For example, as of March 12, Pop Mart’s Tmall flagship store had “10 million+” followers, Miniso’s flagship store had “8 million+” followers, Qimeng Island’s flagship store had 85k followers, and other brands’ store follower counts are also mostly around 100k fans. If follower counts across all platforms are used, the gap in fan numbers between top-tier brands and mid-tier/low-to-mid-tier brands is even more pronounced.

A practitioner in the toy sector told reporters from the Securities Daily that “mainstreaming means stable sales; the number of fans for different specifications represents the size of a brand’s awareness. Against this backdrop, for play-toy companies to become profitable, they need to quickly enhance brand awareness and push their IPs to break into wider circles.”

Based on publicly available information, Qimeng Island is improving awareness through a series of ways, such as various collaborations, offline events, and opening physical stores.

For example, in terms of co-branding, Qimeng Island has a strategic cooperation with the Beijing Radio and Television Station; “WAKUKU哇库库” appeared in the opening dance performance of the Beijing TV Spring Festival Gala. In addition, Qimeng Island also collaborated with the China Open Tennis tournament and took part in activities such as “Hello China” international promotions. In the cultural tourism and travel segment, Qimeng Island has carried out city cultural tourism cooperation in places like Tianjin and Xiamen, promoting deep integration between IP and city culture. In Beijing’s Wangfujing (600859), Tianjin Gulou, Shanghai K11, and other key commercial districts, it has created cross-year themed exhibitions to achieve brand exposure.

In terms of physical stores, as of March 2026, Qimeng Island already has 5 brand image stores open in key commercial districts in Beijing, Shenzhen, Chongqing, and other cities.

“Actually, the entry barrier to the play-toy industry is not that high, but in the long run, to build an ecosystem requires a great deal of spending across IP, the supply chain, channels, and marketing. So for companies to break through, in addition to creating blockbuster products, they also need operational capability and longer-term investment,” Zhang Yi said.

Qimeng Island Chairman Li Peng is confident about the company’s future: “We are confident that we can seize opportunities in the global IP play-toy market, continuously unlock the value of our IPs, and deliver long-term, steady returns to shareholders.”