RLX casts smoke screen with new European acquisition, overseas revenue blip

The vaping company announced its recent purchase of 51% of a leading European distributor of smoke-free products and fast-moving consumer goods

Key Takeaways:

• RLX said its revenue rose 14.8% year-on-year in the second quarter, but its international sales for the period plunged 40% sequentially
• The vaping company announced a new acquisition in Europe, following a similar purchase in the market last year, as it aggressively expands beyond its home China market

By Doug Young

Are its revenues going up in smoke?

Not at all, says leading vaping products maker RLX Technology Inc. (RLX.US), whose latest financial report, released on Friday, showed a large decline in its international business during the second quarter compared with the first. That might look alarming to some, since international has become the company’s main business lately, accounting for more than 70% of revenue, since RLX made a sharp turn overseas after a major crackdown in its home China market.

At the same time, the company unveiled a new acquisition in Europe, marking its second on that continent in just over a year. The acquisition comes in the distribution arena, with the purchase of 51% of what RLX described as “one of Western Europe’s largest distributors of next-generation smoke-free and (fast moving consumer goods) products.”

The big sequential revenue drop, despite the company’s reassurances, may have been a factor behind a selloff that saw RLX’s stock drop 3% after the results were published on Friday. Margin erosion from the new acquisition could also be a concern, since, as company officials pointed out, distributors typically earn substantially lower margins than brand owners.

RLX never disclosed the name or purchase price of its first European acquisition, a vaping company, in May 2025, nor did it provide similar information for the latest purchase. That means the purchases probably cost less than $20 million each, which would be easily affordable for RLX, which had 13.9 billion yuan ($2.06 billion) in cash at the end of June.

Established in 2019 by Wang Ying, a veteran of DiDi Global, Uber China and Bain & Co., who also uses the name Kate, RLX rode the global vaping craze to riches in its first few years by selling its wares to e-cigarette users in China. But it ran head on into a wall of regulation starting in 2021, and saw its revenue drop sharply over the next two years as it raced to steady its ship.

Even after finding a more diversified formula for success by expanding globally, the company’s annual revenue of 3.96 billion yuan last year is still less than half its peak of 8.5 billion yuan in 2021.

Going global

The company, which uses the RELX name outside China, has found major global markets in Europe, largely through acquisitions, and also in several Asian markets, most notably Indonesia, the Philippines and South Korea. Its LinkedIn page says its products are now available from more than 150,000 points of sale and over 25,000 RELX stores in 40 countries.

The company’s revenue grew 14.8% in the second quarter year-on-year to 1.01 billion yuan, marking a sharp slowdown from previous recent quarters, including 96% growth in the first quarter. Its international business also fell to 68.5% of revenue in the latest quarter from 72.3% in the first quarter, when its revenue totaled 1.59 billion yuan. Thus, its international revenue plunged 40% on a sequential basis from the first to second quarters, while its China revenue also fell 28% over that time, according to our calculations.

Realizing investors would worry over such a massive slowdown in the global business, CEO Wang was quick to point out the drop wasn’t due to slowing demand. “As expected, revenue and gross profit moderated sequentially … reflecting a trade inventory normalization following the first quarter’s shipment pull forward driven by regulatory export adjustments.”

The earlier first-quarter revenue surge, she and others explained, owed partly to pre-stocking by some of the company’s partners. CFO Lu Chao added that the big first-quarter revenue jump owed partly to an unspecified “one-time policy adjustment boost.” The first-quarter jump does appear to represent a one-time effect, though it’s a bit unclear if the second-quarter revenue might represent a slowdown as the industry matures.

In fact, a sizable piece of RLX’s revenue growth, which ranged between 40% and 50% year-on-year in the final two quarters of 2025, owed to its first European acquisition, whose results were included in the company’s total from the third quarter of last year. The company pointed out the newest acquisition of the 51% distributor stake in June will have a similar effect in this year’s third and fourth quarters, though it will also drag down the company’s gross margin.

Smoke and mirrors

The bottom line, at least for average investors, is that RLX is engaged in a bit of smoke-and-mirrors these days, in large part from the two major acquisitions, making it difficult to know how well the company is really doing. That means it could be another year or two before RLX’s true financial health becomes more apparent, assuming it doesn’t make any new major purchases.

The newest acquisition looks somewhat different from RLX’s previous activity, as it appears to be a distributor whose products cover a wider range of both traditional smoking, vaping and smoke-free products. The distributor will carry RELX products going forward, though RLX emphasized the distributor will also continue to carry products from other companies. Sam Tsang, RLX’s head of capital markets, added that the acquisition will “meaningfully expand our operating profit and net profit scale.”

In the latest quarter, the company reported its net profit rose 1.6% year-on-year to 222 million yuan from 219 million yuan a year earlier, and its non-GAAP profit actually fell 18% to 239 million yuan over that period. While those numbers don’t look too impressive, it’s difficult to tell what might be happening in the smoke-and-mirrors environment.

Outside the new acquisition and big sequential revenue drop, RLX said it continues to explore diversification not only geographically but also into smokeless products. It said it recently launched an oral nicotine pouch line of products, and is in the process of ramping up production and distribution. It has also developed “heat not burn” products that release nicotine by heating, rather than burning tobacco, though it has yet to launch those.

Broadly speaking, the company is still very much in a state of transition characterized by global expansion both organically and through M&A, which is reflected in the instability of its revenue and profit growth.

Regulation remains the company’s biggest concern, and competition from big tobacco companies with vaping-related assets also looms as a challenge. Tariffs remain a threat as well, though the company said it is building a new manufacturing facility in Southeast Asia to mitigate that factor.

In sum, RLX has shown it can do quite well in the past, and it has plenty of financial resources to execute a new strategy following the China vaping crackdown. Now, the smoke just needs to clear for a better picture of its longer-term prospects.

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