Core Insights - Youdao, Inc. reported a 3.6% increase in net revenues for Q3 2025, totaling RMB1,628.5 million (US$228.8 million) compared to RMB1,572.5 million in Q3 2024 [5][8] - The company emphasized its AI-Native Strategy, which has led to significant growth in online marketing services and AI-driven subscription services [3][4] Financial Performance - Net revenues from online marketing services surged by 51.1% year-over-year to RMB739.7 million (US$103.9 million), driven by demand from the NetEase group and international markets [9][8] - Learning services revenues decreased by 16.2% to RMB643.1 million (US$90.3 million), attributed to a strategic focus on higher ROI customer engagements [6][8] - Revenues from smart devices fell by 22.1% to RMB245.8 million (US$34.5 million), primarily due to reduced demand for smart learning devices [7][8] Profitability Metrics - Gross profit for Q3 2025 was RMB687.9 million (US$96.6 million), reflecting a 12.9% decrease from RMB789.5 million in Q3 2024, with a gross margin of 42.2% compared to 50.2% in the previous year [10][8] - Income from operations dropped significantly by 73.7% to RMB28.3 million (US$4.0 million), resulting in an operating margin of 1.7% [16][8] - Net income attributable to ordinary shareholders was nearly zero, down from RMB86.3 million in Q3 2024, with non-GAAP net income at RMB9.2 million (US$1.3 million) [17][18] Operating Expenses - Total operating expenses decreased to RMB659.6 million (US$92.7 million) from RMB682.2 million in the same period last year [13][8] - Sales and marketing expenses fell by 6.1% to RMB487.7 million (US$68.5 million), while research and development expenses increased by 6.9% to RMB127.8 million (US$18.0 million) [14][13] Cash Flow and Financial Position - As of September 30, 2025, Youdao's cash and short-term investments totaled RMB557.7 million (US$78.3 million), down from RMB662.6 million at the end of 2024 [19][8] - The company reported net cash used in operating activities of RMB58.6 million (US$8.2 million) for the quarter [19][8] Future Outlook - Youdao plans to continue executing its AI-Native Strategy, focusing on the application of its large language model, Confucius, to enhance customer value [4][3] - The company remains confident in achieving its full-year targets, including operating cash-flow breakeven for the first time [4][3]

Core Viewpoint - Youdao, Inc. reported its first-ever profitable second quarter, driven by strong execution of its AI Native Strategy and the launch of new AI products, including the Large Language Model Confucius 3 and AI Essay Grading function [3][5][18]. Financial Highlights - Net revenues for Q2 2025 were RMB 1.4 billion (US$ 197.9 million), a 7.2% increase from RMB 1.3 billion in Q2 2024 [5][18]. - Revenues from learning services were RMB 657.8 million (US$ 91.8 million), up 2.2% from RMB 643.8 million in Q2 2024 [5][18]. - Revenues from smart devices decreased by 23.9% to RMB 126.8 million (US$ 17.7 million) due to declining consumer electronics demand [6][18]. - Revenues from online marketing services increased by 23.8% to RMB 632.9 million (US$ 88.3 million), driven by demand from the gaming industry and overseas markets [7][18]. Profitability Metrics - Gross profit for Q2 2025 was RMB 609.4 million (US$ 85.1 million), a 4.3% decrease from RMB 636.8 million in Q2 2024, with a gross margin of 43.0% compared to 48.2% in the same period last year [8][18]. - The gross margin for learning services remained stable at 59.8%, while the gross margin for smart devices improved to 41.5% from 30.3% in Q2 2024 [9][10][18]. - The gross margin for online marketing services decreased to 25.8% from 39.1% in Q2 2024 due to strategic expansion efforts [10][18]. Operating Expenses - Total operating expenses for Q2 2025 were RMB 580.6 million (US$ 81.0 million), down from RMB 709.3 million in Q2 2024 [11][18]. - Sales and marketing expenses decreased by 22.1% to RMB 401.8 million (US$ 56.1 million) due to reduced marketing expenditures [11][18]. - Research and development expenses decreased by 16.1% to RMB 128.3 million (US$ 17.9 million) due to a reduction in headcount [12][18]. Income and Loss Metrics - Income from operations for Q2 2025 was RMB 28.8 million (US$ 4.0 million), compared to a loss of RMB 72.6 million in Q2 2024, resulting in a margin of 2.0% [14][18]. - Net loss attributable to ordinary shareholders was RMB 17.8 million (US$ 2.5 million), significantly improved from a loss of RMB 99.5 million in the same period last year [16][18]. - Non-GAAP net income attributable to ordinary shareholders was RMB 12.5 million (US$ 1.7 million), compared to a non-GAAP net loss of RMB 96.0 million in Q2 2024 [16][18]. Cash and Financial Support - As of June 30, 2025, Youdao's cash and short-term investments totaled RMB 617.0 million (US$ 86.1 million), down from RMB 662.6 million at the end of 2024 [19][18]. - Net cash provided by operating activities for Q2 2025 was RMB 185.0 million (US$ 25.8 million) [19][18]. - NetEase Group has agreed to provide financial support, including RMB 878.0 million in short-term loans and US$ 130.7 million in long-term loans [19][18]. Share Repurchase Program - The company has repurchased approximately 7.5 million ADSs for a total consideration of approximately US$ 33.8 million under its share repurchase program [21][18].

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]

Core Insights - Youdao, Inc. reported a significant improvement in profitability for Q1 2025, achieving an operating income of RMB104.0 million, a 247.7% increase year-over-year [3][17] - The company experienced a 6.7% decrease in net revenues, totaling RMB1.3 billion (US$178.9 million) compared to the same period in 2024 [5][13] - Youdao's strategic focus on high-ROI customer acquisition is expected to enhance operational efficiency despite short-term revenue declines [6] Financial Performance - Net revenues from learning services decreased by 16.1% to RMB602.4 million (US$83.0 million) [6][13] - Net revenues from smart devices increased by 5.1% to RMB190.5 million (US$26.3 million), driven by sales of the Youdao Dictionary Pen [7][13] - Net revenues from online marketing services rose by 2.6% to RMB505.4 million (US$69.6 million) [7][13] Profitability Metrics - Gross profit for Q1 2025 was RMB614.2 million (US$84.6 million), a 9.9% decrease from the previous year [8][13] - The overall gross margin was 47.3%, down from 49.0% in Q1 2024 [8][13] - The gross margin for learning services decreased to 59.8% from 63.1% year-over-year, while smart devices saw an increase to 52.3% from 32.6% [9][10] Operating Expenses - Total operating expenses decreased to RMB510.2 million (US$70.3 million) from RMB651.6 million in the same period last year [12][13] - Sales and marketing expenses fell by 21.5% to RMB357.6 million (US$49.3 million) [14][13] - Research and development expenses decreased by 21.3% to RMB115.5 million (US$15.9 million) [15][13] Net Income and Earnings Per Share - Net income attributable to ordinary shareholders increased over sixfold to RMB76.7 million (US$10.6 million) [18][19] - Basic and diluted net income per ADS for Q1 2025 was RMB0.65 (US$0.09) and RMB0.64 (US$0.09), respectively, compared to RMB0.11 and RMB0.10 for the same period in 2024 [19][13] Cash and Financial Support - As of March 31, 2025, Youdao's cash and short-term investments totaled RMB424.5 million (US$58.5 million), down from RMB662.6 million at the end of 2024 [20] - The company has received financial support from NetEase Group, including RMB878.0 million in short-term loans and US$128.5 million in long-term loans [20] Share Repurchase Program - Youdao's board authorized a share repurchase program of up to US$40 million, with approximately 7.5 million ADSs repurchased for about US$33.8 million as of March 31, 2025 [22]