Datasea Inc reported QQ2 2025 results showing a meaningful top-line acceleration but a persistent quarterly loss and fragile liquidity. Revenue reached $20.46 million, up 80.3% year over year, driven by demand for the company’s smart security and data platform offerings. However, gross profit was only $0.417 million, yielding a gross margin of about 2.04%, and the company posted an operating loss of $1.238 million and a net loss of $1.136 million, with earnings per share of -$0.16. The quarter underscored ongoing fixed-cost pressure and a heavy reliance on external financing to fund operations, as evidenced by sizable stock issuances and a net cash outflow of approximately $0.67 million despite a financing inflow of $4.168 million.
From a balance sheet perspective, Datasea entered QQ2 2025 with limited liquidity: cash and cash equivalents of $0.268 million, total current assets of $1.596 million against current liabilities of $2.560 million, and current ratio of 0.62. The company carries significant intangible assets ($4.081 million) and a large accumulated deficit driven by prior losses, with negative retained earnings of about $42.54 million. Net debt stood at roughly $1.05 million on a modest cash base. Financing activity provided the primary source of cash during the quarter, including common stock issuances totaling nearly $4.0 million, which points to active management of capital raises to support operations.
Absent an available earnings call transcript in the provided data, specific management quotes or themes cannot be cited. The following analysis integrates the disclosed quantitative results with typical strategic considerations for a software infrastructure player in Datasea’s markets and offers a forward-looking view under cautious scenarios.
Net Income: -$1.136 million, Net Margin -5.55% (YoY +38.01%, QoQ +42.09%)
EBITDA: -$0.928 million, EBITDA Margin -4.54%
Financial Highlights
QQ2 2025 Highlights (USD unless noted):
- Revenue: $20.46 million, YoY +80.26%, QoQ -2.96%
- Gross Profit: $0.417 million, Gross Margin 2.04% (YoY +1,259.33%, QoQ +111.93%)
- Operating Income: -$1.238 million, Operating Margin -6.05% (YoY +30.76%, QoQ +39.01%)
- Net Income: -$1.136 million, Net Margin -5.55% (YoY +38.01%, QoQ +42.09%)
- EBITDA: -$0.928 million, EBITDA Margin -4.54%
- EPS: -$0.16, Diluted EPS -$0.16 (YoY +77.78%, QoQ +67.35%)
- Key profitability ratios: Gross Profit Margin 2.04%, Operating Margin -6.05%, Net Margin -5.55%
- Balance sheet snapshot: Total assets $5.903 million; Total liabilities $2.677 million; Total stockholders’ equity $3.237 million; Cash $0.268 million; Net debt $1.049 million; Retained earnings reported as -$42.54 million; Intangible assets $4.081 million.
- Liquidity: Current Ratio 0.623, Quick Ratio 0.498, Cash Ratio 0.105; Working capital negative by about $0.965 million.
- Cash flow: Net cash from operating activities -$0.855 million; Capital expenditures -$3.91 million; Free cash flow -$4.765 million; Net cash provided by financing activities +$4.168 million; Net change in cash -$0.670 million; Cash at end of period $0.268 million.
- Growth vs peers: Revenue growth outpaced many peers on a YoY basis but Datasea remains far from break-even, with a highly leveraged financing-driven cash flow profile. Price/Book around 5.07x and price-to-sales around 0.80x reflect a micro-cap software security exposure with low visibility on near-term profitability.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
20.46M
80.26%
-2.96%
Gross Profit
417.45K
1 259.33%
111.93%
Operating Income
-1.24M
30.76%
39.01%
Net Income
-1.14M
38.01%
42.09%
EPS
-0.16
77.78%
67.35%
Key Financial Ratios
currentRatio
0.62
grossProfitMargin
2.04%
operatingProfitMargin
-6.05%
netProfitMargin
-5.55%
returnOnAssets
-19.2%
returnOnEquity
-35.1%
debtEquityRatio
0.41
operatingCashFlowPerShare
$-0.12
freeCashFlowPerShare
$-0.66
priceToBookRatio
5.07
priceEarningsRatio
-3.61
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Transcript Highlights: No earnings transcript data were provided for QQ2 2025. As a result, management-quoted themes, strategic remarks, and market-condition commentary could not be incorporated. If a transcript is supplied, the highlights would typically cover strategic priorities (e.g., product roadmap, customer traction, geographic expansion), operational efficiency initiatives, and market dynamics in China and adjacent markets.
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Forward Guidance
Forward Guidance: The data set does not include explicit management guidance for QQ3 2025 or beyond. Given the current quarter’s deficit position, weak gross margins, and modest cash balance, near-term guidance would plausibly emphasize liquidity preservation, cost containment, and any planned monetization or scaling of high-margin software platforms. Absent improved operating leverage or notable new revenue streams, investors should monitor: (a) progress toward gross margin expansion or higher-margin product mix, (b) efficiency-driven cost controls in SG&A and R&D, (c) any capital-raising plans or debt refinancing, and (d) monetization opportunities for intangibles and data platforms. If management provides quantitative targets, key factors to assess include cadence of revenue growth, gross margin improvement, and the timing of cash flow inflection.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
DTSS Focus
2.04%
-6.05%
-35.10%
-3.61%
TAOP
22.90%
-0.69%
1.86%
83.85%
NXTP
0.00%
0.00%
0.00%
0.00%
GB
76.30%
31.60%
15.40%
16.79%
BLIN
67.50%
-19.20%
-6.89%
-5.33%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Baseline view remains cautious. The QQ2 2025 results show meaningful top-line momentum but no near-term path to profitability given the margin profile and liquidity constraints. Investment thesis hinges on a credible plan to uplift gross margins, reduce cash burn, and secure additional financing on favorable terms or achieve non-dilutive monetization of intangible assets. If Datasea demonstrates a clear route to margin expansion and sustainable cash flow, the stock could re-rate; otherwise, continued reliance on equity financing and potential dilution pose meaningful risks to equity holders. Monitoring should focus on liquidity management, gross margin improvement, and any strategic updates around productization, partnerships, and monetization of data platforms.
Key Investment Factors
Growth Potential
Medium-to-long-term growth hinges on Datasea’s ability to scale its smart security and big data platforms in PRC markets and potentially expand to adjacent APAC regions. Upside drivers include increasing annual recurring revenue from software platforms, cross-selling 5G messaging and smart payments, and potential government/educational sector deployments. Near term, growth is constrained by low gross margins, high fixed costs, and limited liquidity, requiring capital raises to fund continued investment.
Profitability Risk
Key risks include sustained net losses and weak liquidity (current ratio ~0.62), reliance on external financing to fund operations, and a large accumulated deficit. Regulatory and geopolitical risk in China, competition from larger security software ecosystems, customer concentration in security and campus sectors, and potential FX volatility given USD-denominated reporting add to uncertainty. The sustainability of equity financing and the ability to drive meaningful margin improvement are critical risk factors.
Financial Position
Financial position shows a fragile liquidity profile with cash of $0.268M and negative working capital. Intangible assets ($4.081M) dominate non-current assets, while retained earnings are markedly negative (-$42.54M), highlighting a lengthy history of losses. Net debt approx. $1.049M against a small cash balance underscores the need for ongoing financing to sustain operations. A low gross margin (2.04%) and negative net income raise questions about near-term profitability and capital efficiency.
SWOT Analysis
Strengths
Revenue growth accelerates in QQ2 2025 with YoY growth of approximately 80%.
Diverse product offerings in smart security, big data security, and 5G messaging/payments align with growing public safety and campus/security use cases.
Intangible asset base supports scalable software platforms; potential for IP monetization over time.
Weaknesses
Material net losses and negative free cash flow persist; quarterly profitability remains elusive.
Very low gross margin (about 2%) indicating high cost structure or pricing/geography mix challenges.
Weak liquidity with cash of $0.268M and current ratio below 1, increasing reliance on financing activities.