DAO Q3 2025 Earnings Call Summary

Net Revenues: RMB 1.6 billion (USD 228.8 million), up 3.6% year-over-year.
Operating Profit: RMB 28.3 million, down 73.7% year-over-year, attributed to increased investments and a high comparison base from the previous year.
Learning Services Revenue: RMB 643.1 million, down 16.2% year-over-year.
Online Marketing Services Revenue: RMB 739.7 million, up 51.1% year-over-year, marking a record high.
Smart Devices Revenue: RMB 245.8 million, down 22.1% year-over-year.
Gross Margin:
- Learning Services: 58.5%
- Smart Devices: 50.3%
- Online Marketing Services: 25.4%, down from 36.3% year-over-year.
Operating Cash Flow: Outflow of RMB 58.6 million, but improved by 31.4% year-over-year.

Youdao Lingshi: Achieved over 40% year-over-year growth in gross billings; retention rate improved to over 75%.
AI Innovations: Launched AI tutor for programming classes and upgraded Youdao Dictionary app, enhancing user experience.
International Recognition: Youdao included in the 2026 GSV 150 list for transformational growth in digital learning.
Advertising Growth: Significant demand from NetEase Group and overseas markets, with a focus on AI-driven advertising solutions.
New Product Launches: Introduced AI audio and video translation product, Youdao Anydub, and a new tutoring pen with advanced features.

Management remains confident in achieving full-year targets, including operating profit growth and cash flow breakeven.
Expect net revenues from the Learning Services segment to return to growth, driven by the restructuring of the segment and ongoing investments in AI.
Anticipate continued strong performance in online marketing services, leveraging AI capabilities to enhance efficiency and profitability.

Declining Metrics: Significant year-over-year declines in operating profit and revenues from Learning Services and Smart Devices.
Pressure on Margins: Online marketing services gross margin fell below 30%, with management acknowledging the need to balance customer acquisition with profitability.
Cash Flow Risks: Cumulative net operating cash outflow raises questions about achieving breakeven, although management remains optimistic about Q4 performance.

Strategic Importance of Online Marketing: Management indicated that while online marketing services are currently growing faster, they see long-term potential in both marketing and learning services.
Gross Margin Recovery Plans: Management is focused on improving gross margins through enhanced efficiency and AI integration in advertising processes.
Operating Profit Recovery: Management expressed confidence in rebounding operating profit in Q4, citing strong growth in Youdao Lingshi and improved retention rates.

This summary encapsulates the key points from Youdao's Q3 2025 earnings call, highlighting both achievements and challenges faced by the company.

DAO — Youdao, Inc.