Where Did Insta360's Profits Go?

A viral sensation — that was the real story of Insta360's first half.

Strong-selling products that draw attention in global markets are proof in themselves of Insta360's product strength.

But after the interim report was released, the six-month results turned out to be less than ideal.

Revenue for the first half reached 5.517 billion yuan, soaring 50.29% year on year; yet net profit attributable to shareholders of the parent company was just 30.4073 million yuan, a plunge of 94.15%, while net profit excluding non-recurring items swung to a loss of 15.3392 million yuan.

In the two trading days after the August 27 earnings release, Insta360's share price moved little, hovering below 120 yuan.

Where did Insta360's profits go?

01

Strong Sales, Little Profit

First, let's compare the Q1 2026 financial results.

In Q1 2026, Insta360 posted revenue of RMB 2.481 billion, up 83.11% year over year, with net profit attributable to shareholders of RMB 84.62 million.

In Q2, revenue rose faster to RMB 3.035 billion, continuing sequential growth, though the year-over-year growth rate slowed somewhat.

Profit, however, shifted sharply: net profit attributable to shareholders fell by more than RMB 54 million. In just one year, despite revenue still growing rapidly, profits have been almost entirely wiped out.

Also a STAR Market hardware maker expanding overseas, Roborock reported net profit attributable to shareholders of RMB 986 million in the first half, with a net margin close to 10%. Alongside revenue growth, profitability was relatively more pronounced and stable.

Of course, they are not in the same market segment, so the comparison may not be very meaningful. This is only a reference for profitability levels, not a direct benchmark.

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By contrast, Insta360 stood out in the market in the first half of the year.

For example, the Luna gimbal camera and the X6 panoramic camera have attracted considerable attention in the consumer electronics market.

Retail stores have also expanded further. Media data shows that Insta360 now has more than 10,000 experiential retail stores worldwide and over 300 brand flagship stores.

In August, Insta360 opened its first directly operated store in Japan, located in Asakusa, Tokyo, drawing large crowds of Japanese consumers who lined up in advance.

Many domestic media outlets viewed this as a groundbreaking scene: attracting large numbers of consumers in Japan, a market home to numerous established consumer electronics and imaging brands, also demonstrates the competitiveness of Insta360's products.

The financial report also shows that cumulative global shipments of Insta360 cameras have exceeded 10 million units.

On one hand, products are selling strongly; on the other, profits are vanishing. What is really behind this?

02

Breaking Down Insta360's Cost Structure

Breaking down the financial report further to find the missing profit.

In Insta360's hardware products, direct materials account for about 95% of operating costs. These raw materials are components for smart cameras, such as memory chips, sensors and lenses.

Screenshot of the share price on August 31

Operating costs in the first half were 3.231 billion yuan, up 80.46% year on year.

Rising memory chip prices have already rippled across many industries, particularly the smart hardware sector.

According to reports, to secure its supply chain, Insta360 made nearly 2 billion yuan in strategic memory chip purchases in the first half of the year, while rising raw material prices also directly pushed up costs.

Moreover, the direct entry of rival DJI has intensified market competition, and pricing pressure is squeezing gross margins.

This is also reflected in the gross margin: it was 51.22% in the first half of 2025, but fell to 41.42% in the first half of 2026. Looking at the second quarter of 2026 alone, the gross margin had already dropped to 38.33%.

But in fact, a substantial gross profit remains.

Revenue was 5.517 billion yuan and cost of sales was 3.231 billion yuan, leaving a gross profit of 2.286 billion yuan.

With so much gross profit still on the table, net profit ended up at just over 30 million yuan. Where did the rest go?

This section looks at period expenses, which include R&D expenses, selling expenses and administrative expenses.

These three cost categories are largely tied to Insta360's current market position.

Insta360 ranks first worldwide in market share for 360-degree cameras, but the overall 360-degree camera market is not large.

According to IDC data, global 360-degree camera shipments exceeded 2.5 million units in 2025, with a market value of $1.212 billion, or about RMB 8.1 billion.

By comparison, global shipments of handheld smart cameras reached 16.65 million units in 2025, of which 360-degree cameras made up a modest share.

It is not hard to see that, with or without DJI entering the market, Insta360 will still face a ceiling, making horizontal expansion into new categories highly likely.

Expansion brings new costs, requiring investment in R&D, marketing and recruitment.

Looking back at the financial report, Insta360's R&D, selling and administrative expenses all rose sharply in the first half.

Specifically, R&D spending reached 1.007 billion yuan, up 79.26% year on year, mainly going into new categories such as gimbal cameras, drones, in-house algorithms, AI imaging and in-house chips.

Broken down, R&D spending was 465 million yuan in the first quarter and 542 million yuan in the second, a steadily rising commitment that was unavoidable.

The strategy is sound: without R&D investment there is no product competitiveness, and that is the core.

Selling expenses totaled 1.017 billion yuan, up 61.96% year on year.

Because overseas markets account for a large share, investment is needed in both online and offline channels. Physical outlets require upfront spending, and more advertising is also needed, so selling expenses will rise.

Administrative expenses were 249 million yuan, up 86.74% year on year.

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As product categories grow and the company scales up, headcount and organizational structure expand accordingly.

Together, these three cost categories total 2.273 billion yuan, essentially wiping out gross profit.

But there is one problem: all of these costs are growing faster than revenue, which will inevitably squeeze profits.

In addition, due to the high proportion of overseas business and exchange rate fluctuations, financial expenses in the first half were 77.4423 million yuan, including an exchange loss of 55.10 million yuan.

The same pattern shows up at some export-focused listed companies.

03

The Cost of Growth

The vanishing net profit does not signal a change in Insta360's fundamentals.

On the contrary, this upfront spending is the price the company has chosen to pay for growth.

It is not that selling products fails to make money; it is that the gross profit earned is being poured on a large scale into future tracks, channels and supply chain.

Rather than a head-to-head clash with DJI, Insta360 is racing against itself.

Some have previously argued that Insta360's inventory is relatively high.

The financial report shows inventory of 6.212 billion yuan at the end of June 2026, up 112.82% from the start of the year, with nearly 40% of assets tied up in inventory materials and finished goods.

But this is not just finished products; it also includes large quantities of raw materials such as memory chips.

AI-generated illustration

As for stockpiling memory chips in particular, according to several leaders in the smart hardware sector, the shortage will continue.

Stockpiling like this can prevent future supply disruptions or price increases, and if prices do rise, the inventory can be sold for a profit.

This is somewhat similar to compute capacity in AI infrastructure: beyond meeting routine competition, it also allows the assets to appreciate, so the investment is not a loss.

The reality for Insta360 is that its products will remain highly competitive for some time and overseas demand is also rising. The company simply needs to invest in the future, at the cost of sacrificing high short-term gross margins.

Next, the company needs to turn its sustained R&D investment into tangible product revenue.

During this period, even without DJI, other companies may step into the ring.

       Original title : Where Did Insta360's Profits Go?