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Youdao Reports Impressive Financial Results for Q2 2025

Youdao, Inc. (NYSE: DAO), a leading AI solutions provider, recently shared its second-quarter financial results for 2025, showcasing significant advancements in various sectors. This report covers the period ending June 30, 2025, and highlights remarkable developments, particularly in learning services and online marketing.

Financial Overview

In Q2 2025, Youdao recorded total net revenues of RMB 1.4 billion (approximately USD 197.9 million), representing a 7.2% increase compared to the same quarter in 2024. This growth reflects Youdao's successful implementation of its AI Native Strategy, which emphasizes innovation and the expansion of its AI capabilities.

Breakdown of Revenue Streams

1. Learning Services: Net revenues from learning services reached RMB 657.8 million (USD 91.8 million), marking a 2.2% increase from the previous year. This steady growth is attributed to enhanced product offerings that resonate well with educational institutions and learners.
2. Smart Devices: In contrast, revenues from smart devices fell by 23.9%, totaling RMB 126.8 million (USD 17.7 million). This decline is primarily due to reduced consumer demand within the electronics market.
3. Online Marketing Services: Online marketing services saw a significant surge of 23.8%, with revenues hitting RMB 632.9 million (USD 88.3 million). The growth in this segment is linked to rising demand from the gaming industry and overseas markets, driven by Youdao's continuous investments in AI technology.

Profit Margins and Operational Income

Youdao's gross margin for the quarter stood at 43.0%, a slight decrease from 48.2% in Q2 2024. Operational income was reported at RMB 28.8 million (USD 4.0 million), contrasting sharply with the operational loss of RMB 72.6 million in the same period last year, illustrating the company's recovery trajectory.

Shareholder Metrics

The net loss per American Depositary Share (ADS) attributable to ordinary shareholders was recorded at RMB 0.15 (USD 0.02), a significant improvement compared to RMB 0.85 in Q2 2024. Moreover, Youdao's non-GAAP basic and diluted net incomes per ADS were recorded at RMB 0.11 and RMB 0.10, respectively, emphasizing the company's recovery and operational success in the current reporting period.

Strategic Innovations

During this quarter, Youdao launched its latest Large Language Model (LLM), Confucius 3, along with an AI Essay Grading function in Youdao Lingshi. These innovations not only enhance product efficiency but have also contributed to a historically high retention rate among users. Additionally, the introduction of the AI Ad Placement Optimizer is poised to maximize advertising returns on investment.

Future Directions

CEO Dr. Feng Zhou stated that Youdao is committed to advancing its AI Native Strategy, aiming to enhance productivity in learning environments while improving returns on advertising investments. With ongoing innovation and product optimization, Youdao is set to bolster its market leadership position.

Ongoing Support and Commitments

As of June 30, 2025, Youdao's cash reserves were RMB 617.0 million (USD 86.1 million). The financial backing from the NetEase Group, including short and long-term loans, is crucial to support Youdao's operational continuity over the next three years.

Looking Ahead

As Youdao continues to evolve within the competitive landscape of AI applications, stakeholders can expect further growth in revenue streams aligned with the demands of both the education and marketing sectors. The company has scheduled a conference call to discuss these results in detail, indicating its commitment to transparency.

In summary, Youdao's second-quarter financial results not only depict resilience after a tumultuous period but also signal exciting prospects for future growth through intelligent applications in various sectors. With a focus on customer value creation and technological advancement, Youdao is clearly on a promising path.