Financial Data and Key Metrics Changes - In Q3 2025, net revenues reached RMB 1.6 billion, up 3.6% year-over-year, while operating profit was RMB 28.3 million, a decline of 73.7% year-over-year due to increased investments and a high comparison base from the previous year [4][16][19] - For the first nine months of 2025, operating profit reached RMB 161.1 million, representing a substantial 149.2% year-over-year increase [5] - Operating cash outflow for the quarter was RMB 58.6 million, an improvement of 31.4% year-over-year [5][20] Business Line Data and Key Metrics Changes - Learning services segment net revenues were RMB 643.1 million, down 16.2% year-over-year, reflecting a strategic approach to customer acquisition [6][16] - Online marketing services net revenues reached RMB 739.7 million, a record increase of 51.1% year-over-year, driven by demand from the NetEase Group and overseas markets [10][17] - Smart devices segment net revenues were RMB 245.8 million, down 22.1% year-over-year, due to disciplined marketing expenditures [14][17] Market Data and Key Metrics Changes - Youdao Ling Shi achieved over 40% year-over-year growth in gross billings, with a retention rate exceeding 75% [7][28] - The online marketing services segment saw advertising revenues from the gaming industry grow by over 50% year-over-year [11] Company Strategy and Development Direction - The company is focused on deepening the application of AI technologies across both learning and advertising businesses to create value for customers [15][28] - A commitment to maintaining disciplined operations while achieving full-year targets, including robust year-over-year operating profit growth and reaching annual operational cash flow break-even for the first time [15][19] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving full-year cash flow break-even despite cumulative net operating cash outflow in the first three quarters, citing significant improvements in cash flow performance [50][52] - The company anticipates strong revenue growth in both learning and advertising segments, with a focus on AI-driven services [26][28] Other Important Information - Youdao was included in the 2026 GSV 150, highlighting its position as a transformational growth company in digital learning [7] - The company launched several new AI-driven products, including an AI tutor for programming classes and an upgraded Youdao Dictionary app, which received positive user feedback [9][10] Q&A Session Summary Question: Will online marketing services become more important than learning services in the future? - Management sees growth opportunities in both areas, with online marketing services currently experiencing higher growth due to advanced ad tech and AI capabilities [24][25] Question: What plans are in place to recover online marketing gross margins? - Management aims to improve gross margins through initiatives like the iMagicBox creative production platform and optimizing the data management platform [32][35] Question: What is the potential for operating profit rebound in Q4? - Management is optimistic about achieving operating profit improvement in Q4, supported by strong performance in Youdao Ling Shi and advertising growth [39][41] Question: Should we expect any change to the full-year break-even target given the cash outflow? - Management remains confident in achieving the full-year cash flow break-even target, citing significant year-over-year improvements and expected strong performance in Q4 [48][52]

Financial Data and Key Metrics Changes - In Q3 2025, net revenues reached RMB 1.6 billion, up 3.6% year-over-year, while operating profit was RMB 28.3 million, a decline of 73.7% year-over-year due to increased investments and a high comparison base from the previous year [4][5][16] - For the first nine months of the year, operating profit reached RMB 161.1 million, representing a substantial 149.2% year-over-year increase [5] - Operating cash outflow for the quarter was RMB 58.6 million, an improvement of 31.4% year-over-year [5] Business Line Data and Key Metrics Changes - Learning services segment net revenues were RMB 643.1 million, down 16.2% year-over-year, reflecting a strategic approach to customer acquisition [6][17] - Online marketing services net revenues reached RMB 739.7 million, a new record and an increase of 51.1% year-over-year, driven by demand from the NetEase Group and overseas markets [10][11][17] - Smart devices segment net revenues were RMB 245.8 million, down 22.1% year-over-year, due to disciplined marketing expenditures [14][17] Market Data and Key Metrics Changes - Youdao Ling Shi achieved over 40% year-over-year growth in gross billings, with a retention rate exceeding 75% [7][27] - Advertising revenues from the gaming industry grew by over 50% year-over-year, primarily from NetEase [11] - The overseas advertising business delivered strong momentum, with revenues growing by more than 100% year-over-year [12] Company Strategy and Development Direction - The company is focused on executing an AI-native strategy, enhancing the application of its large language model across learning and advertising businesses [15][42] - There is a commitment to driving growth in both learning and advertising sectors by leveraging AI technologies [27][42] - The company aims to achieve full-year targets, including robust year-over-year operating profit growth and reaching annual operational cash flow break-even for the first time [15][42] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving full-year cash flow break-even despite cumulative net operating cash outflow recorded in the first three quarters [50] - The company anticipates strong revenue growth in both learning services and online marketing services, with a focus on customer satisfaction and operational efficiency [25][40] - Management highlighted the importance of investments in AI capabilities to enhance advertising performance and customer engagement [25][36] Other Important Information - Youdao was included in the 2026 GSV 150, recognizing it as one of the world's most transformational growth companies in digital learning [7] - The company launched several new AI-driven products, including an AI tutor for programming classes and a new AI audio and video translation product [8][10] Q&A Session Summary Question: Will online marketing services become more important than learning services in the future? - Management sees growth opportunities in both areas, with online marketing services currently experiencing higher growth due to advanced ad tech and AI capabilities [24] Question: What is the plan to return online marketing gross margin above 30%? - Management aims to improve gross margin through initiatives like broadening the application of the iMagicBox platform and optimizing data management systems [32][35] Question: What is the potential for operating profit rebound in Q4? - Management is optimistic about achieving operating profit improvement in Q4, supported by strong performance in Youdao Ling Shi and advertising growth [38][41] Question: Should we expect any change to the full-year break-even target? - Management remains confident in achieving the full-year cash flow break-even target, citing significant improvements in cash flow performance [47][50]

Financial Data and Key Metrics Changes - In Q3 2025, net revenues reached RMB 1.6 billion, up 3.6% year-over-year, while operating profit was RMB 28.3 million, a decline of 73.7% year-over-year due to increased investments and a high comparison base from the previous year [4][5][14] - For the first nine months of the year, operating profit reached RMB 161.1 million, representing a substantial 149.2% year-over-year increase [5] - Operating cash outflow for the quarter was RMB 58.6 million, an improvement of 31.4% year-over-year [5] Business Line Data and Key Metrics Changes - Learning services segment net revenues were RMB 643.1 million, down 16.2% year-over-year, reflecting a strategic approach to customer acquisition [5][15] - Net revenues from online marketing services reached RMB 739.7 million, a new record and an increase of 51.1% year-over-year, driven by demand from the NetEase Group and overseas markets [10][15] - Smart devices segment net revenues were RMB 245.8 million, down 22.1% year-over-year, due to disciplined marketing expenditures [12][15] Market Data and Key Metrics Changes - Youdao Ling Shi achieved over 40% year-over-year growth in gross billings, with a retention rate exceeding 75% [6][25] - Advertising revenues from the gaming industry grew by over 50% year-over-year, supported by programmatic advertising and influencer marketing campaigns [10] Company Strategy and Development Direction - The company is focused on executing an AI-native strategy, enhancing the application of its large language model across learning and advertising businesses [13][41] - There is a commitment to deepen collaboration with partners like NetEase and Google to unlock additional synergies and support Chinese companies in expanding globally [11][41] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving full-year targets, including robust year-over-year operating profit growth and reaching annual operational cash flow break-even for the first time [13][41] - The company anticipates that the restructuring of the learning services segment will enhance profitability in the long run [41] Other Important Information - Youdao was included in the 2026 GSV 150, highlighting its position as a transformational growth company in digital learning [6] - The company launched several innovative products, including an AI tutor for programming classes and a new AI audio and video translation product [7][9] Q&A Session Summary Question: Will online marketing services become more important than learning services in the future? - Management sees growth opportunities in both areas, with online marketing services currently experiencing higher growth due to advanced ad tech and AI capabilities [22][24] Question: What is the plan to return online marketing gross margin above 30%? - Management aims to improve gross margin through initiatives like broadening the application of the iMagicBox creative production platform and optimizing the data management platform [30][33] Question: What is the potential for rebound in operating profit for Q4? - Management is optimistic about Q4, citing strong performance in Youdao Ling Shi and advertising growth, which will create momentum for profitability [36][40] Question: Should we expect any change to the full-year break-even target given the cumulative net operating cash outflow? - Management remains confident in achieving the full-year cash flow break-even target, emphasizing significant year-over-year improvements in cash flow performance [45][49]

Financial Performance - Youdao's net revenues increased by 3.6% year-over-year in 3Q25[9], reaching RMB 1,628.6 million[10,41] - Online Marketing Services achieved record-high net revenues in 3Q25[29], contributing RMB 739.7 million to the total net revenues[10,41] - The company achieved profitability for five consecutive quarters in terms of income from operations[12], with RMB 28.3 million in 3Q25[12] - Operating cash flow outflow narrowed by 31.4% year-over-year in 3Q25[13] - Gross billings for learning services achieved over 40% year-over-year growth in 3Q25[19] - Gross margin was 42.2% in 3Q25[41] Learning Services - Learning Services generated RMB 643.1 million in net revenues in 3Q25[10,41] - Retention rate for learning services exceeded 75% recently, up from over 70% in the fourth quarter of last year[20] Assets and Liabilities - As of September 30, 2025, the company's cash assets totaled RMB 554.521 million[40]

Financial Data and Key Metrics Changes - The company reported its first profitable second quarter with operating income of RMB28.8 million compared to an operating loss of RMB72.6 million in the same period last year [6] - Net revenues reached RMB1.4 billion, an increase of 7.2% year over year [6][20] - Operating cash inflow was RMB185 million, down 26.1% year over year, primarily due to strategic scaling back of certain courses [7] - Total gross profit was RMB609.4 million, representing a 4.3% decrease from the same period of 2024 [21] - Non-GAAP net income attributable to ordinary shareholders was RMB12.5 million compared to a non-GAAP net loss of RMB96 million for the same period last year [23] Business Line Data and Key Metrics Changes - Net revenues from learning services rose 2.2% year over year to RMB657.8 million, driven by strong performance in Youdao Ling Shi [7][21] - Net revenues from online marketing services reached RMB632.9 million, up 23.8% year over year, driven by demand from the gaming industry and overseas markets [12][21] - Net revenues from smart devices declined 23.9% year over year to RMB126.8 million, attributed to the end of product life cycles and reduced marketing expenditure [15][21] Market Data and Key Metrics Changes - The gaming advertising segment saw revenue growth of more than 50% year over year, supported by collaborations with major gaming advertisers [13] - The overseas market contributed significantly to growth, with revenue from partnerships with TikTok and Google increasing significantly [64] Company Strategy and Development Direction - The company aims to advance its AI native strategy, focusing on scenario-based optimizations of large language models to enhance learning and advertising services [18] - There is a strong emphasis on integrating hardware and learning services to improve operational efficiency and reduce sales and marketing expenses [40] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving operating cash flow breakeven despite a year-over-year decline in operating cash inflow [52][56] - The company anticipates stronger cash flow performance in the second half of the year, driven by improved profitability and operational efficiency [54] Other Important Information - The company launched several AI-driven features and products, including the AI essay grading feature and the Confucius III language model, which received positive feedback [8][10] - The company signed 12 gold medalists from the National Olympiads in Informatics to enhance its teaching and R&D capabilities [9] Q&A Session Summary Question: Update on the third quarter outlook for Youdao Ling Shi - Management noted that Youdao Ling Shi's revenue increased by roughly 30% year over year, with a retention rate exceeding 75%, indicating strong user satisfaction and a solid foundation for future growth [28][30] Question: Improvement in Smart Device segment revenue - Management stated that while revenue declined in Q2, the health of the hardware business improved compared to the previous year, with a focus on dictionary pens and new tutoring pens expected to drive future growth [36][39] Question: Specific applications of AI ad placement optimizer - The AI ad placement optimizer covers the entire advertising delivery process, enhancing targeting strategies and optimizing ad delivery, which is expected to support revenue growth and profitability improvement [44][48] Question: Revision on the target for achieving operating cash flow breakeven - Management confirmed that despite a decrease in operating cash flow, the target for achieving breakeven remains unchanged, supported by improved profitability and operational efficiency [52][56] Question: Growth drivers in gaming and overseas markets - Management highlighted a 50% year-over-year increase in gaming revenue and significant growth in overseas markets, particularly through partnerships with TikTok and Google [63][64]

Financial Performance (1Q25) - Net revenues reached RMB 1,298.3 million [4], compared to RMB 1,391.9 million in 1Q24 [4] and RMB 1,339.8 million in 4Q24 [4] - Online marketing services revenue increased by 2.6% year-over-year to RMB 505.4 million [26] - Smart devices revenue increased by 5.1% year-over-year to RMB 190.5 million [37] - Net income attributable to ordinary shareholders of the company was RMB 76.743 million [43] - Operating cash flow net outflows narrowed by 34.7% in 1Q25 [8] Business Segments - Learning services revenue was RMB 602.4 million [43] - Youdao is positioned as an AI-powered solutions provider for learning and advertising [15] AI Strategy and Products - The company is focusing on an AI strategy, integrating AI with learning services, smart devices, and online marketing services [11] - AI-based college admission advisers were upgraded in 1Q25, contributing to over 25% year-over-year gross billing growth [21] - Youdao SpaceOne, an AI-powered large screen tutoring pen, launched in 1Q25 and contributed to over 20% year-over-year growth in dictionary pen revenue [41] Online Marketing Services - Youdao established an official partnership with Google in 1Q25 for overseas advertising expansion [27] - Youdao MagicBox, an AI-powered creative suite, was launched in 1Q25 [29]