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Youdao’s Financial Performance for Q4 and FY 2025

Overview
Youdao, Inc. (NYSE: DAO), a leading AI solutions provider based in Hangzhou, China, recently disclosed its unaudited financial results for the fourth quarter and the fiscal year ending December 31, 2025. The report highlights a robust performance characterized by a notable increase in revenue, driven predominantly by the company's learning services and online marketing efforts.

Q4 2025 Financial Highlights

During the fourth quarter of 2025, Youdao reported total net revenues of RMB 1.6 billion (approximately USD 223.7 million), marking a 16.8% increase compared to the same period in the previous year. The revenue breakdown was as follows:

• - Learning Services: RMB 727.2 million (USD 104.0 million), up 17.7% year-over-year. This growth is attributed to the rising popularity of AI-driven subscription services, reflecting strong sales performance.
• - Smart Devices: RMB 176.5 million (USD 25.2 million), representing a decline of 26.6% from the previous year, primarily due to decreased demand for smart learning devices.
• - Online Marketing Services: RMB 660.9 million (USD 94.5 million), a remarkable increase of 37.2% year-over-year, driven by heightened demand from both the NetEase group and international markets, facilitated by ongoing investments in AI technology.

The gross margin for the fourth quarter was reported at 45.1%, slightly decreased from 47.8% in Q4 2024. Operational income stood at RMB 60.2 million (USD 8.6 million), a 28.5% decline year-over-year, impacted by rising operational costs.

Fiscal Year 2025 Performance

Looking at the overall fiscal year, Youdao achieved net revenues of RMB 5.9 billion (USD 845.0 million), translating to a 5.0% increase from 2024. Key figures include:

• - Learning Services Revenue: RMB 2.6 billion (USD 376.2 million), down 4.2% from 2024, influenced by lower tutoring revenues but offset somewhat by strong sales from AI subscription services.
• - Smart Devices Revenue: RMB 739.6 million (USD 105.8 million), experiencing an 18.2% drop from the previous year.
• - Online Marketing Services: RMB 2.5 billion (USD 363.0 million), marking a significant increase of 28.5% year-over-year.

The gross margin for the fiscal year stood at 44.3%, compared to 48.9% in 2024, primarily due to declining profitability within the online marketing segment.

Operational Resilience and Future Outlook

Dr. Feng Zhou, Youdao's CEO, emphasized the company's sustained operational momentum, noting that 2025 marked Youdao’s first full year of positive operating cash flow. He reiterated the commitment to the company's AI-Native strategy, aiming to enhance learning services and advertising offerings. The focus will continue to be on developing large language models and expanding AI applications to offer unique user experiences and achieve long-term growth.

With cash, cash equivalents, and investments totaling RMB 743.2 million (USD 106.3 million) by the end of 2025, Youdao is poised for continued development, supported by NetEase Group's commitment to provide necessary financial backing over the next three years.

Conclusion

Youdao's impressive performance in 2025 underscores the company's transformative impact in the education and advertising sectors through innovative AI solutions. As it navigates the complexities of the market and regulatory environment, Youdao remains focused on delivering shareholder value and advancing its technology-driven offerings in the years to come.

For more details, Youdao’s management will hold a teleconference to discuss these results further and address questions, showcasing the company’s transparency and commitment to its stakeholders.