Qimeng Island's Q2 FY2026 revenue increased by 39.4% quarter-over-quarter, with losses narrowing by 5.8% quarter-over-quarter.

Source: Securities Daily

Reporter Li Haoyue

On March 12, U.S. listed toy company HERE Dream Island (hereinafter referred to as “Dream Island”) released its unaudited financial report for the second quarter of fiscal year 2026 (October 1, 2025, to December 31, 2025).

In the second quarter, Dream Island achieved operating revenue of 177 million RMB, a 39.4% increase quarter-over-quarter, exceeding the upper limit of previous performance guidance; however, Dream Island still did not turn a profit. After excluding impacts such as equity incentives, adjusted net loss was 16.1 million RMB, narrowing 5.8% from a loss of 17.1 million RMB in the first quarter. Additionally, the company’s operating costs for the second quarter were 122.3 million RMB, a 63.7% increase from 74.7 million RMB in the first quarter.

Zhang Yi, CEO of Guangzhou iMedia Data & Intelligence Consulting Co., Ltd., told Securities Daily: “In the first quarter, Dream Island’s revenue also exceeded the upper limit of performance guidance. Two consecutive quarters of revenue growth indicate that the company’s strategy of transforming from an adult education company to a toy IP company is correct. The revenue growth rate cannot keep up with cost increases, which at least shows the company is still in a phase of burning money to scale up.”

Comparing the financial data of Dream Island after its transformation over two quarters, the company’s gross profit margin has declined. In Q1 2026, Dream Island’s gross profit margin was 41.2%, which dropped to 30.9% in Q2.

The reporter found that among listed and pre-listed companies in the toy and trendy toy industry, except for Pop Mart which can keep gross profit margins above 70%, most companies have margins around 40%. For example, the IPO prospectuses of 52TOYS and TOP TOY, which are aiming for Hong Kong listing in 2025, show that 52TOYS’ latest gross profit margin is 39.9%, and TOP TOY’s is 32.7%.

Dream Island’s financial report shows that the decline in gross profit margin in the second quarter is mainly due to the company’s strategic expansion into offline channels, which have lower gross margins than online direct sales. This channel diversification strategy aims to enhance IP interaction through physical retail experiences and increase customer loyalty.

The degree of IP popularization also determines the company’s revenue.

As of December 31, 2025, Dream Island owns 11 proprietary IPs and 7 licensed IPs, with “WAKUKU Wowku,” “SIINONO,” and “ZIYULI” being the company’s three core IPs. In the second quarter, “WAKUKU Wowku” generated revenue of 129 million RMB, making it the company’s largest revenue source; “SIINONO” earned 19.23 million RMB, and “ZIYULI” earned 9.5 million RMB.

In fact, “WAKUKU Wowku” already has a certain presence in the trendy toy market. Data from Wenchuanghui shows that as of February 28, in Tmall’s blind box sales rankings, “WAKUKU immediately goes viral” blind box ranked seventh among the top ten bestsellers. The top five spots on the list are dominated by Pop Mart and Miniso IPs.

From the official stores’ follower counts, most brands in the trendy toy market cannot compete with Pop Mart and Miniso. For example, as of March 12, Pop Mart’s Tmall flagship store has over 10 million followers, Miniso’s flagship store over 8 million, while Dream Island’s flagship store has about 85,000 followers. Other brands’ follower counts are mostly around 100,000. When considering total platform followers, the gap between top-tier and mid-tier brands is even more significant.

An industry insider told Securities Daily: “Mass-market appeal means stable sales, and the number of fans of different sizes reflects brand awareness. In this context, trendy toy companies need to quickly increase brand recognition and push IP beyond their original circles to achieve profitability.”

According to publicly available information, Dream Island is actively increasing its visibility through various collaborations, offline events, and opening physical stores.

For example, in collaborations, Dream Island has partnered with Beijing Radio and Television Station, with “WAKUKU Wowku” appearing in the opening dance of Beijing TV’s Spring Festival Gala; it also co-branded with the China Open Tennis Tournament and participated in activities like “Hello China” international promotion. In cultural tourism, Dream Island has carried out city-level cultural tourism collaborations in Tianjin and Xiamen, promoting deep integration of IP with local culture; it has also created cross-year theme exhibitions in key commercial districts like Wangfujing in Beijing, Guluo in Tianjin, and K11 in Shanghai to boost brand exposure.

In terms of physical stores, as of March 2026, Dream Island has opened five flagship stores in core commercial districts in Beijing, Shenzhen, and Chongqing.

Zhang Yi said, “The entry barrier for the trendy toy industry isn’t very high, but in the long run, to form an ecosystem, significant investment is needed in IP, supply chain, channels, and marketing. To stand out, companies need strong operational capabilities and longer-term investments to create hit products.”

Dream Island’s Chairman Li Peng expressed confidence in the company’s future: “We are confident in seizing the global IP trendy toy market opportunity, continuously unlocking IP value, and delivering long-term stable returns for shareholders.”

(Editor: Caishandan)