Text | Tanglang Observation

Author | Yicheng

On the evening of August 27th, Insta360 unveiled its inaugural semi-annual report since going public.

From a revenue perspective, the numbers remain promising, with RMB 5.517 billion in revenue marking a 50.29% year-on-year increase. Global shipments have surpassed 10 million units, cementing Insta360's dominance in the panoramic camera market.

However, the profit picture is far less rosy—net profit attributable to the parent company stood at RMB 30.4 million, plummeting by a staggering 94.15% year-on-year. After deducting non-recurring items, the net loss reached RMB 15.34 million, signaling the company's first profit-to-loss transition since its public debut.

Generating RMB 5.5 billion in revenue yielded a mere RMB 30 million in net profit, translating to a razor-thin net profit margin of 0.55%.

What does this figure signify?

In 2025, Insta360 reported full-year revenue of RMB 929 million, with a net profit margin nearing 10%. In just six months, profitability appears to have evaporated.

So, where did the money go? A closer examination of the financial report reveals a clear trend: Insta360 is evolving into a company heavily reliant on marketing expenditures.

With more product launches and soaring promotional costs, profit margins are being eroded by fixed expenses.

Sales Expenses Outpacing Revenue: Spending RMB 18 on Marketing for Every RMB 100 Earned

Let's delve into the numbers.

In the first half of the year, Insta360's sales expenses soared to RMB 1.017 billion, a 61.96% year-on-year increase. This growth rate outpaces the 50.29% revenue growth by nearly 12 percentage points.

Converting this into an expense ratio provides a clearer picture—sales expenses accounted for approximately 18.4% of revenue.

In simpler terms, for every RMB 100 in revenue generated, Insta360 spends RMB 18.40 on sales and marketing.

How does this compare? As a reference, Insta360's sales expense ratio climbed from around 14.8% in 2024 to 17.2% in 2025, and then to 18.4% in the first half of 2026, representing a roughly 3.6 percentage point increase over two years.

The company's official explanation in the financial report cites "increased sales promotion expenses and sales personnel salaries due to business growth."

While this statement holds some truth, it only tells half the story.

The other half is: When a company's sales expense growth consistently outpaces revenue growth, it indicates a growing reliance on "spending to gain visibility" rather than leveraging the inherent appeal of its products.

Moreover, the expense structure warrants closer scrutiny.

Within sales expenses, "promotion expenses" and "sales personnel salaries" are the two primary components. Salaries are inherently rigid—once personnel are hired and teams expanded, wages cannot be easily reduced even if revenue growth slows in subsequent quarters.

This is the daunting aspect of expense rigidity: costs are easy to increase but difficult to decrease.

More Products, Higher Promotion Costs

Insta360 has introduced numerous new products this year.

From the panoramic camera X6 to the single-lens gimbal camera Luna Pro and the Antigravity panoramic drone, the product lineup has expanded from panoramic cameras to action cameras, gimbal cameras, drones, and even includes three custom chips.

While launching multiple new products is generally positive, each new category incurs additional market education expenses.

The drone segment serves as a prime example. Its subsidiary, Shenzhen Antigravity Technology, generated RMB 230 million in revenue in the first half of the year but incurred a net loss of RMB 290 million—exceeding its revenue.

What does this imply? For every RMB 1 in drone sales, RMB 1.26 is lost.

This figure only accounts for the subsidiary's loss; when factoring in R&D, channel, and brand expenses shared by the headquarters, the actual investment is even greater.

The company states that drones are "still in the market education phase," which is accurate—any new category requires a cultivation period. However, market education essentially boils down to marketing spending—raising awareness, highlighting benefits, and convincing consumers of the product's value all come at a cost.

Furthermore, in the drone market, Insta360 faces a dominant player that firmly occupies the market, holding over 70% of the global consumer drone market share. Its supply chain scale, brand recognition, and channel coverage far surpass what Insta360 can achieve in the short term. To carve out a niche in this competitive landscape, Insta360 must not only offer superior products but also make substantial marketing investments—a near-inevitable path.

This creates a vicious cycle: the more new products, the more markets requiring education, the higher the promotion expenses, and the thinner the profits.

This cycle is also evident in the financial report. In the first half of the year, administrative expenses surged by 86.74%, R&D expenses by 79.26%, and the combined sales, administrative, and R&D expenses totaled over RMB 2.27 billion, accounting for more than 41% of revenue.

In other words, for every RMB 100 Insta360 earns, RMB 41 is spent on sales, administration, and R&D. After deducting RMB 3.23 billion in operating costs (58.6% of revenue), profit margins are essentially squeezed to the brink.

Marketing-Driven vs. Product-Driven: An Increasingly Pressing Question

It's fair to argue that in a phase of intensifying competition, increasing marketing investment is necessary.

After leading players entered the panoramic camera market, price wars have raged. Insta360 X6 is priced starting at RMB 3,999, while competitors offer similar products starting at RMB 3,299—a RMB 700 difference. Competitors' gimbal products are priced at RMB 3,799, nearly RMB 1,000 lower than Insta360's Luna Ultra's original price.

In this scenario, if Insta360 doesn't ramp up brand spending and channel promotion, its market share could decline even faster. From this perspective, high marketing expenses serve as defensive spending, not wasteful expenditure.

However, there's a fine line between defensive spending and marketing dependency.

To determine whether a company is product-driven or marketing-driven, consider this simple test: Would revenue significantly decline if marketing spending were reduced?

For product-driven companies, like early Apple or Dyson, the product itself is the best marketing tool. For marketing-driven companies, once spending is reduced, revenue growth slows markedly.

Where does Insta360 stand? Data suggests it's leaning toward marketing-driven.

Several signals are worth noting:

First, sales expense growth has exceeded revenue growth for multiple consecutive quarters.

Second, new categories (drones, gimbal cameras) contribute little to revenue but require massive investment. These new categories are still in the "spending to gain market" phase, far from the "product speaking for itself" stage.

Third, gross profit margins continue to decline, from 52.2% in 2024 to 45.7% in 2025, and then to 41.4% in the first half of this year. Aside from upstream storage product price hikes, when Insta360 has to rely on price cuts and promotions to maintain market share, it's essentially trading profits for market share.

The Real Risk of Expense Rigidity: Profit Deterioration Accelerates When Revenue Growth Slows

The most frightening aspect of expense rigidity isn't the current high costs but the leveraged effect that causes profits to deteriorate rapidly when revenue growth slows.

The logic is straightforward: if revenue growth drops from 50% to 30%, sales teams' salaries won't decrease by 30%, signed promotion contracts won't automatically shrink by 30%, and R&D projects can't be halted on a whim. Costs are fixed, while revenue is volatile. When revenue growth decelerates, profit margins decline even faster.

Insta360's Q2 data already validates this logic.

Q1 revenue grew 83% year-on-year, with net profit attributable to the parent company at RMB 84.62 million. By Q2, revenue growth slowed to 31%, and net profit turned into a RMB 54.21 million loss.

Growth halved, and profit shifted from positive to negative in just one quarter.

This is the destructive power of expense rigidity. It makes the company appear normal during high-growth periods—costs are high, but revenue rises even faster, so profits are still visible. Once revenue growth slows, the weight of costs becomes immediately apparent.

And the external environment Insta360 faces is precisely one where revenue growth may continue to be under pressure—leading competitors' price wars persist, storage chip price hikes won't peak until at least Q4, and overseas markets face exchange rate fluctuations and tariff uncertainties (foreign exchange losses in the first half were RMB 55.1 million, exceeding total net profit).

The Ultimate Test for a Hardware Company

Insta360 is a company worthy of respect. From a Shenzhen startup to the global leader in panoramic cameras, with cumulative shipments of 10 million units, carving out a position in a market surrounded by multiple giants is no small feat.

Precisely because of this, this semi-annual report is even more alarming.

The ultimate test for a hardware company has never been whether it can produce products but whether those products can sell themselves. When growth becomes increasingly reliant on marketing spending rather than the product's inherent appeal, the company enters a dangerous zone—you must constantly spend to maintain current growth rates, and every yuan spent erodes already thin profits.

Insta360's current issue isn't that its products aren't good enough but that there aren't enough good products to stand on their own. The panoramic camera core business is still profitable, but gross margins are being compressed by price wars. Drones, gimbal cameras, and other new ventures are still in the money-burning phase, far from achieving scaled profitability.

In the coming quarters, several figures are worth monitoring: Can the sales expense ratio stabilize or even decline? Can the loss rate of the drone business narrow? Can gross profit margins stabilize after storage prices peak?

If these figures move in a positive direction, it suggests that current high investments are worthwhile strategic investments.

If the expense ratio continues to climb and losses keep expanding, it's time to reconsider how far a marketing-driven hardware company can truly go.

After all, marketing can buy exposure, but it can't buy genuine user loyalty. Products can be promoted, but they can't be "sold" forever.

*All images in this article are sourced from the internet.