What happened

Shares of Huya (NYSE:HUYA) gained 11.2% in August, according to data from S&P Global Market Intelligence. The stock got a boost after the streaming company published second-quarter earnings on Aug. 13 and then rode market momentum to close the month even higher.

HUYA Chart

HUYA data by YCharts.

Huya's second-quarter results arrived with sales and earnings that topped the market's expectations. Revenue climbed 93.6% year over year to reach $292.9 million, and beat the average analyst revenue estimate by roughly $41 million. The company's non-GAAP (adjusted) net income for the period rose 61.7% year over year to hit $24.8 million -- working out to adjusted per-share earnings of $0.11 and topping the average analyst estimate target by $0.03.

A person playing a video game on a PC.

Image source: Getty Images.

So what

Huya's core business revolves around providing a platform for users to stream footage of themselves playing and commenting on video games, and watch broadcasts from other users. With strong user growth and an increase in the number of users who are opting to purchase and give virtual gifts through the platform, the business is posting impressive momentum.

The company notched 4.9 million paying users in the quarter, up 46.7% from the 3.4 million paying users in the prior-year period. Average monthly active users on the company's platform climbed roughly 57%, to hit 55.9 million.

Now what

Huya stock has given up some of its August gains in September, with the stock down 6.9% in this month's trading. The sell-off comes even as the Invesco China Technology ETF -- which is a good benchmark for the country's technology industry -- has gained 6.3% across the same stretch. 

HUYA Chart

HUYA data by YCPharts.

Investors taking profits after last month's gains may be a driver in Huya stock's retreat this month, but it's also possible that the market is pricing in extra risk in the streaming space at a time when overall confidence in the Chinese technology sector was also trending higher. The South China Morning Post published an article on Sept. 5 that presented data showing some weakness in the Chinese streaming market and raised the question about whether it may have peaked.

Narrowing in on the risks facing leading gaming-video streaming companies like Huya, the article by Amanda Lee pointed to the threat of top broadcasters leaving for other platforms or asking for bigger revenue-sharing cuts. The article also highlighted the fact that China's content regulators are paying closer attention to the personal streaming space, and its publication corresponded with a slide for Huya stock. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.