GoPro recently launched a new VR portal to showcase its OMNI VR camera rig. Image source: GoPro Inc.

GoPro Inc. (GPRO -2.92%) is set to release second-quarter 2016 results on Wednesday, July 27, after the market close. With shares of the action camera maker trading almost exactly where they stood just after last quarter's surprising top-line beat -- but still down more than 80% over the past year -- GoPro would love to swing investor sentiment back in its favor with another positive showing. 

But what should investors be watching when GoPro's report hits the wires?

First, keep in mind GoPro didn't offer specific quarterly financial guidance three months ago. But CFO Brian McGee did suggest they would see "modest" revenue growth on a sequential basis (revenue last quarter fell 49.5% year over year, to $183.5 million), "resulting in the vast majority of our full-year revenue occurring in the second half of the year." GoPro also reaffirmed its full-year 2016 guidance, which calls for revenue in the range of $1.35 billion to $1.5 billion.

Sell-through should continue to exceed sell-in in the second quarter, indicating consumer demand for GoPro's capture devices remains strong. This should drive inventories in the second quarter to another substantial decline in the range of 35% to 50%, according to McGee, as measured by weeks of inventory basis in the channel. GoPro also stated it expects adjusted gross margin in the first quarter (which fell 1,220 basis points, to 33%) will have marked a low point for the year. 

Perhaps most importantly, these inventory reductions come on the heels of GoPro's decision two quarters ago to narrow its capture device line to just three cameras -- a strategy it claimed last quarter was proving effective -- and will happen ahead of GoPro's impending new product launches, including plans to introduce both its new Karma quadcopter and the HERO5 line of cameras in time for the crucial 2016 holiday season. To that end, recall Karma was delayed last quarter from what was originally supposed to be a first-half 2016 launch, as GoPro claimed it needed more time to fine-tune Karma's "revolutionary features that differentiated from other drones." Listen closely, then, for any updates on not only inventory reduction progress but also whether the Karma and HERO5 products remain on track for their respective pre-holiday launches this year. 

We should also receive supplemental data on the relative strength of GoPro's core capture device line. Three months ago, NPD data showed GoPro commanded around 20.9% of unit share of the combined digital camera/camcorder market, up 150 basis points year over year -- albeit as the camera/camcorder market as a whole declined. And both downloads of GoPro's mobile app (2.8 million last quarter to bring cumulative downloads to 27 million), as well as average daily video exports (up 33.5%, to 52,000 in Q1) should give us an idea of whether existing GoPro users are continuing to utilize their devices.

International sales should also continue to represent more than half of total revenue; GoPro last quarter sold six of the top 10 camcorders in Europe on a unit basis, while China was a top 10 market. And most recently in June, GoPro announced its cameras are now available through a partnership with Reliance Digital, India's largest consumer electronics outlet. 

Next, listen for comments regarding the traction for GoPro's efforts delve deeper into the virtual reality space. Shortly after last quarter's report, for example, GoPro launched a new virtual reality content portal, dubbed GoPro VR, to showcase the capabilities of its new six-camera Omni VR rig. And that's not to mention the fruits of GoPro's acquisition of spherical media software specialist Kolor a little over a year ago. 

Finally, things should get much more interesting with any revisions to GoPro's aforementioned full-year guidance. Considering the "vast majority" of this year's revenue should arrive in the second half, and unless GoPro manages to move significantly more inventory than expected this quarter, it seems safe to assume updates to guidance will center around the status of and expectations for new product launches.

If one thing is sure in the end, it's that GoPro has a lot to prove to investors for the remainder of this year. And what it says this week could prove to be either a fresh start for weary investors or a stumbling block to its future success.