How does combiner in Stream.collect method work in java 8?

First off, there is no need for the combiner to be executed in a non-parallel stream since there is nothing to combine.

Secondly, your issue stems from using String::new and String.concat. The accumulator is supposed to modify the first argument by combining the second argument with it but since strings in Java are immutable your code will produce nothing.

          res=res.concat(" ").concat(elem);

will create a new string and then throw away it. You want to use a StringBuilder instead so you can keep the intermediate results:

public static void main(String[] args) {
    List<String> list2 = Arrays.asList("adf", "bcd", "abc", "hgr", "jyt", "edr", "biu");

    String collect = list2.stream().collect(StringBuilder::new, (res, elem) -> {
        res.append(" ").append(elem);
    }, (res1, res2) -> {
        res1.append(res2.toString());
        System.out.printf("res1=%s, res2=%s\n", res1, res2);
    }).toString();
    System.out.println("collect=" + collect);
}

This will also work correctly with a parallel stream

res1= hgr jyt, res2= jyt
res1= bcd abc, res2= abc
res1= adf bcd abc, res2= bcd abc
res1= edr biu, res2= biu
res1= hgr jyt edr biu, res2= edr biu
res1= adf bcd abc hgr jyt edr biu, res2= hgr jyt edr biu
collect= adf bcd abc hgr jyt edr biu

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