RLX Technology (RLX) Q4 2025 earnings review
International Expansion Ignites 40% Growth and Margin Expansion
RLX Technology concluded 2025 with a highly robust quarter, demonstrating the success of its pivot away from reliance on Mainland China. Q4 revenue surged 40% YoY to RMB 1.14 billion, with international markets now comprising 76.5% of total sales. The shift toward overseas markets, bolstered by a mid-year European acquisition, dramatically improved profitability. Gross margins expanded by 440 basis points YoY to 31.4%. While the company refrained from issuing numerical guidance for 2026, the underlying fundamentals depict a stable and accelerating operation, successfully navigating complex global regulatory environments while returning over $500 million to shareholders cumulatively.
🐂 Bull Case
With 76.5% of Q4 revenue generated internationally, RLX has successfully de-risked its business model from the heavily regulated and illicit-plagued Chinese market. The European acquisition provides a full-stack platform for further European expansion.
Gross margins have expanded consistently, reaching 31.4% in Q4. Favorable geographic revenue mix and supply chain optimizations have allowed net income to grow at an accelerating pace compared to top-line sales.
🐻 Bear Case
Despite current success, the e-vapor industry faces severe global regulatory tightening, including disposable bans in major markets like the U.K. (effective mid-2026) and New Zealand. Adapting to these shifts requires continuous capital allocation.
While management notes a 'solid recovery' in China due to customs enforcement, historical context shows the market remains a fraction of its 2021 peak, suppressed by a pervasive illicit black market.
⚖️ Verdict: 🟢
Bullish. RLX has effectively transformed its business model. The successful international expansion and accretive European acquisition have replaced lost domestic revenues, while strong gross margin expansion proves the new model is highly profitable.
Key Themes
International Dominance
International sales are accelerating, now accounting for 76.5% of net revenues in Q4 (up from 71.6% in Q3). The May 2025 consolidation of a leading European e-vapor company has provided a structural platform for scale. RLX is no longer a China-centric business, but a global operator.
Gross Margin Expansion
Gross margin has been stable and expanding throughout the year, reaching 31.4% in Q4 2025 (up from 27.0% in Q4 2024). Management explicitly attributes this to a favorable change in revenue mix—as higher-margin international sales outpace domestic sales—and continued supply chain optimization.
Surging Selling Expenses
Selling expenses are accelerating, jumping 145% YoY in Q4 to RMB 111.2 million. While overall operating expenses remained relatively flat due to a sharp decline in Share-Based Compensation (SBC), the cash cost of acquiring and maintaining customers and integrating the new European entity is rising rapidly.
Stricter Customs Aiding Domestic Recovery
In Mainland China, management noted that intensified customs enforcement has improved the competitive landscape for compliant participants. By cracking down on illicit gray-market products, RLX is capturing market share, leading to a 'solid recovery' domestically, even if total industry volumes remain depressed.
Global Regulatory Execution Risk
The transition away from single-use disposables (driven by UK and New Zealand bans) requires aggressive portfolio rotation into 'Big Puff' and reusable devices. While RLX successfully navigated this in 2025, regulatory environments remain highly volatile and could disrupt supply chains or pressure ASPs (Average Selling Prices) in 2026.
Other KPIs
RLX's balance sheet is a fortress. Total financial assets increased sequentially from RMB 15.35 billion in Q3, driven by RMB 310.2 million in positive operating cash flow during Q4. This war chest supports both the ongoing M&A strategy and the company's aggressive shareholder return programs.
Accelerating significantly, up 110.2% YoY from RMB 271.1 million in FY24. This demonstrates that the company's top-line recovery is translating directly into core operational profitability, stripping out the noise of fluctuating share-based compensation.
The company has cumulatively returned over US$ 500 million to shareholders, split between US$ 330 million in share repurchases (170 million ADSs) and US$ 171 million in cash dividends, underscoring management's commitment to capital stewardship.
Key Questions
Organic vs. Inorganic Growth
With the European acquisition fully consolidated since Q2 2025, what was the organic year-over-year growth rate for the international segment in Q4 excluding this M&A impact?
Selling Expense Run-Rate
Selling expenses surged 145% YoY this quarter. Should investors view this RMB 111 million level as the new normalized quarterly run-rate due to the expanded global footprint, or were there one-time integration costs included?
2026 Capital Allocation
With the US$ 500 million share repurchase program historically slated for expiration at the end of 2025, what is the specific Board authorization for buybacks heading into 2026?