What happened

Shares of Xunlei Limited (NASDAQ:XNET) dipped 16% in November, according to data provided by S&P Global Market Intelligence. The cloud-services company's stock sold off following disappointing third-quarter results.

XNET Chart

XNET data by YCharts.

Xunlei published its third-quarter earnings on Nov. 14, delivering results that suggested dim prospects for the company's pivot to cloud computing after its move away from crytpocurrency and blockchain technologies. Sales for the period climbed just 1.1% year over year to reach $45.3 million.

A web of connected, digitally rendered clouds

Image source: Getty Images.

So what

Cloud services revenue rose just 8.3% year over year to reach $19.8 million, a substantial deceleration from the 186.9% year-over-year growth that the segment posted in the second quarter, and a substantial decline from the $36.5 million in sales from that period. The big sequential decline for the cloud business indicates that Xunlei does not have long-term contracts in the space, and that customers are heading elsewhere. Meanwhile, subscription services revenue fell 8% to land at $19.1 million. 

Xunlei stock posted huge gains last year amid excitement for the company's LinkToken cryptocurrency and the broader crypto market, but the company has moved away from its cryptocurrency ambitions due to missteps with the project and pressure from the Chinese government. The business's growth outlook is murky, and even though big sell-offs this year have pushed its price-to-book value down to just 0.85, Xunlei stock is far from a safe bet. 

Now what

Xunlei stock has continued to slide in December and trades down 6.5% in the month so far.

XNET Chart

XNET data by YCharts.

Xunlei management had previously touted the company's growth opportunities in the cloud-services space, but it's tough to see many positive catalysts for the business on the horizon. Guidance now suggests that its sales could be on track for a prolonged slump. The company expects sales for the current quarter to come in between $40 million and $45 million, representing a 48.4% year-over-year decline at the midpoint of the target. 

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