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Youdao Reports Strong Financial Results for Q2 2026

Youdao, Inc. has unveiled its unaudited financial results for the second quarter of 2026, revealing a significant increase in revenues and net income. The company, known for its AI-based learning and advertising solutions, reported net revenues of RMB 1.5 billion ($216.2 million). This marks a 3.5% increase compared to the same quarter last year.

Financial Highlights

The growth can be attributed largely to the learning services sector, which saw net revenues rise to RMB 795.6 million ($117.3 million), reflecting a remarkable 20.9% increase from 2025. This surge is mainly driven by the strong performance of tutoring services embraced by users.

In contrast, revenues from smart devices plummeted to RMB 86.8 million ($12.8 million), a staggering 31.5% decrease from the previous year. This decline can be explained by diminishing demand for smart learning devices, a trend that requires Youdao's strategists to rethink their product offerings in this category.

The online marketing services revenue also experienced a downturn, falling by 7.7% to RMB 584.4 million ($86.1 million). This decrease aligns with Youdao's strategic pivot to emphasize higher ROI engagements, indicating an ongoing refinement of their marketing strategies in search of better operational efficiency.

Profitability and Operational Performance

Notably, the gross margin for the quarter improved to 48.9%, up from 43% in 2025, showcasing better operational efficiencies. The company's capability to enhance profitability was reflected in the income from operations, which soared nearly 2.9 times to RMB 111.5 million ($16.4 million).

Youdao CEO, Dr. Feng Zhou, expressed satisfaction with the results, highlighting the ongoing revitalization within the company as it looks to leverage AI to realize significant business value. He pointed out that the sustained growth in learning services, supported by the success of offerings like Youdao Lingshi, played a pivotal role in this remarkable turnaround.

On the aspect of net income, Youdao reported a bounce back with a profit of RMB 73.8 million ($10.9 million), starkly reversing last year's net loss of RMB 17.8 million for the same time period. The diluted net income per American depositary share (ADS) reached RMB 0.61 ($0.09), a significant recovery compared with the previous year's loss per share.

Investment in Future Technologies

Furthermore, Youdao emphasized its commitment to growth through increased investment in AI technologies, which are expected to bolster service quality. The total operating expenses for Q2 reached RMB 605.3 million ($89.2 million), a moderate rise from last year, driven primarily by enhanced marketing efforts for its educational services.

The latest financial disclosures included details of the company’s sufficient cash footing, with RMB 849.3 million ($125.2 million) in cash equivalents noted. Youdao intends to continue focusing on effective business planning amid evolving regulatory climates, emphasizing sustainable cash flows and external financing avenues for development.

In addition to the solid financial update, Youdao also announced internal leadership changes with Mr. Jinhai Chen stepping into a director role, traversing from his previous position at NetEase Cloud Music.

Looking Ahead

Youdao’s plan to host a teleconference on August 20, 2026, aims to further elaborate on these financial outcomes and future directions. With its solid trajectory in the education technology space, stakeholders remain keen on Youdao's potential growth paths and continued expansion in the AI sector.

Overall, the second quarter of 2026 has proven to be a landmark period for Youdao as it emerges from prior setbacks and looks to ascend stronger within the growing landscape of AI-integrated learning and marketing services.