Core Insights - Youdao has achieved a significant turnaround in profitability, with a 10.3% YoY increase in Q4 operating profit and a full-year operating profit of RMB 150 million, marking the first positive operating profit in its history [1][3][6] - The company reported a full-year net revenue of RMB 5.63 billion, a 4.4% YoY increase, despite a Q4 net revenue decline of 9.5% [1][3][5] - Youdao's strategic shift towards "AI-driven education services" has been validated, with a focus on technology value-added business models and a commitment to the "AI Native" strategy [2][15] Financial Performance - In Q4 2024, Youdao's net revenue was RMB 1.3 billion, while the full-year net revenue reached RMB 5.63 billion [3][5] - The annual operating profit was RMB 150 million, with Q4 operating profit at RMB 84.2 million, reflecting a 10.3% YoY growth [3][5] - Operating expenses decreased by approximately 16% YoY in Q4 and 19.6% for the full year, contributing to the profitability turnaround [6][8] Business Segments - Learning services generated RMB 2.7 billion in revenue, accounting for 48% of total revenue, but saw a 12.7% decline YoY [11][12] - Online marketing services reported a substantial 48.3% YoY increase in revenue, reaching RMB 2 billion, establishing itself as a core growth engine [12][15] - Smart devices maintained revenue at over RMB 900 million, with a notable 20% YoY increase in the Youdao SpaceOne Dictionary Pen series [12][15] AI and Technology Integration - Youdao's AI subscription services saw remarkable growth, with sales exceeding RMB 200 million, marking a 130% YoY increase [12][15] - The launch of the "Ziyue-o1" inference model and the integration of the DeepSeek-R1 model are expected to enhance Youdao's AI capabilities and educational offerings [15][17] - The company is focusing on optimizing its AI-powered educational applications and expanding its hardware offerings to enhance user engagement [17][18]
MoonFox Analysis | Youdao Optimizes Costs and Turns Profitable, Accelerating Innovation with AI-Native Strategy