Soaring Chip Prices, Competitor Offensives, and High-Cost New Product Launches: Triple Challenges Hamper Insta360's Revenue Growth, with Q2 Turning Red.

Reported by Ai Xiaozhi

Edited by Wan Tiannan

The revenue engine continues to roar, but the profit meter has reset to zero.

Insta360 has released its financial results for the first half of 2026, showcasing "revenue growth without a corresponding profit surge." While revenue has climbed, growth has decelerated notably, plummeting from an 83.11% year-on-year increase in Q1 to just 31.08% in Q2.

The profit slump is even more striking: net profit for the first half plummeted 94.15% year-on-year, with Q2 witnessing a direct transition from profit to loss. The erstwhile "panoramic camera leader," once a star performer on the STAR Market, now grapples with the triple trials of cost escalation, fierce competition, and new business expansion.

I

Revenue Growth Slows, Q2 Slips into the Red

Insta360's revenue scale continues to expand, albeit at a much slower pace. In the first half of 2026, total operating revenue reached RMB 5.517 billion, marking a 50.29% year-on-year increase. However, a quarterly breakdown reveals Q1 growth at 83.11%, while Q2 revenue of RMB 3.035 billion saw growth moderate to 31.08%.

The profit performance is even more concerning. Net profit attributable to the parent company tumbled 94.15% year-on-year to RMB 30.407 million in H1 2026, with basic earnings per share declining 94.41% to RMB 0.08.

In Q2, the company reported a net loss attributable to the parent of RMB 54.213 million, a stark contrast to the RMB 343 million profit in the same period last year—representing a nearly RMB 400 million quarterly profit swing.

With revenue growth halving and profits turning negative, this semi-annual report confirms that market concerns over cost and competitive pressures have materialized into financial realities.

Faced with decelerating growth and plummeting profits, Insta360 attempted to reassure investors in its earnings report, stating that the company had achieved "sustained stable growth" and would continue to prioritize R&D-driven expansion, market development, and ecosystem building, including AI applications.

However, the market clearly favors tangible results over long-term visions—over the past three months, Insta360's stock price nearly halved, dropping from around RMB 225 in mid-May to RMB 120.71 as of August 27.

II

Triple Challenges Squeeze Profits

Combining Insta360's financial disclosures with UBS's latest research report, the profit collapse can be attributed to three key pressures.

First Challenge: Escalating Memory Chip Prices. Insta360 explained in its earnings report that profit declines stemmed from the "dual impacts of raw material costs and phased investments in new business categories." Specifically, "global memory chip market supply-demand fluctuations have driven sustained price hikes for DDR and other chips, posing significant challenges to product costs and short-term profitability."

UBS estimates that prior to this price surge, memory chips accounted for approximately 5% of Insta360's camera bill of materials (BOM), soaring to nearly 20% by H1 2026. With limited bargaining power against upstream suppliers, device makers faced margin compression.

Notably, the company's strategic procurement of memory chips in H1 approached RMB 2 billion, significantly increasing cash outflows. Insta360 justified this as securing a stable supply and cost control for long-term development—essentially trading short-term profits for supply chain certainty.

Second Challenge: High-Cost Investments in New Product Categories. Panoramic drones represent Insta360's most critical expansion, but they remain in the market education phase. Heavy R&D, production line setup, and channel expansion investments have negatively impacted profits before achieving scale. Compounded by stricter domestic drone regulations and weaker-than-expected overseas sales, drone revenue contributions are unlikely to cover costs in the near term.

Third Challenge: Erosion of Pricing Power Amid Competitor Onslaught. Intense competition from DJI and others has eroded Insta360's pricing power. DJI now competes head-on across panoramic, gimbal, action cameras, and drones, often releasing "mirror-image" products.

Galaxy Securities notes that DJI's supply chain strength grants it cost advantages, enabling superior hardware specifications at lower prices than Insta360. Despite Insta360's December 2025 global debut of a panoramic drone, its lack of supply chain scale and weaker traditional drone capabilities compared to DJI left it vulnerable. In 2026, DJI's price cuts for panoramic drones and gimbal cameras significantly squeezed Insta360's profit margins in these segments.

UBS data reveals that DJI maintains 20-30% price discounts against Insta360 in key overseas markets and a 5% gap domestically. Meanwhile, Insta360's global Insta360 app downloads slowed from 73% YoY growth in Q1 to 51% in Q2, while DJI's app growth accelerated from 13% to 82% in the same period.

With upstream costs rising and competitive pressures preventing terminal price hikes, Insta360 could not pass cost increases downstream. Losing pricing power closed the path to offsetting higher costs through price increases, culminating in the Q2 loss.

III

Investment Banks Divided: Goldman Sachs "Buy" vs. UBS "Downgrade"

Two leading investment banks offered starkly contrasting assessments of Insta360 at nearly the same time.

Goldman Sachs remains a staunch bull, maintaining a "Buy" rating and RMB 311 target price unchanged from February to August 2026.

On February 8, when Goldman initiated coverage with a "Buy" rating and RMB 311 target, Insta360's stock traded near RMB 223. By August, with the stock below RMB 121 (down ~46%), Goldman's target implied "upside potential" ballooned from ~39% to 156.7%.

More notably, Goldman's August 23 report focused entirely on new product strengths while ignoring the twin pressures of memory chip price hikes and DJI competition. The narrative painted a rosy product outlook but omitted cost realities.

To its credit, Goldman disclosed in the report: "We have business dealings or seek business dealings with companies covered in our research. Investors should use this report as only one factor in investment decisions."

In contrast, UBS adopted a more cautious stance, slashing its target price from RMB 200 to RMB 126.

UBS cited three key reasons: 1) upstream price hikes exceeded expectations, with Q2 gross margin estimated to decline 12 percentage points YoY; 2) fierce competition with DJI slowed growth, with new products delivering limited traction as DJI maintained double-digit price discounts in major overseas markets (though the gap narrowed); 3) stricter domestic drone regulations and weaker-than-expected overseas sales dragged camera-drone revenue below forecasts.

The divergence stems from whether cost and competition variables were incorporated into profit forecasts.

This time, the financials sided with UBS. Goldman's RMB 311 target—against a RMB 120 stock price—now appears more wishful than realistic.

For Insta360, however, this is not the final chapter. The suspense lies in strategic execution: as cost, competition, and innovation pressures converge, how long will the market sustain this "growth stock's" valuation?

In the short term, Q2's loss may not mark the profit trough—UBS expects memory price and competitive pressures to continue dragging H2 earnings. Long term, the chip stockpiling, new product investments, and competitive battles represent a three-front race against time that will define Insta360's future.