Summary of Youdao's Q4 2025 Earnings Call

1Key Financial Results and Metrics

Q4 2025 Financials::

Net Revenues:: RMB 1.6 billion, up 16.8% year-over-year.

Operating Profit:: RMB 60.2 million, a 113% increase quarter-over-quarter, but down 28.5% year-over-year.

Net Income:: RMB 48.2 million, down from RMB 83 million in Q4 2024.

Non-GAAP Net Income:: RMB 58.7 million, compared to RMB 99.8 million in Q4 2024.

Net Cash Flow from Operating Activities:: RMB 184.2 million, up 16.4% year-over-year.

Full Year 2025 Financials::

Total Revenues:: RMB 5.9 billion, a 5% increase year-over-year.

Operating Profit:: RMB 221.3 million, up 48.7% year-over-year.

Net Cash Flow:: Positive RMB 55.2 million, a turnaround from a net outflow of RMB 67.9 million in 2024.

2Strategic Updates and Business Highlights

Learning Services::

Revenues reached RMB 727.2 million, a 17.7% increase year-over-year, driven by AI-driven subscription services and improved user retention rates (over 75%).

Introduction of new AI features, including an English AI Essay grading tool and a partnership with Turnitin.

Online Marketing Services::

Revenues of RMB 660.9 million, up 37.2% year-over-year, fueled by increased demand from the NetEase Group and international markets.

Launched AI Ad Placement Optimizer, improving advertising efficiency.

Smart Devices::

Revenues declined to RMB 176.5 million, down 26.6% year-over-year, but the Youdao Dictionary Pen remained a top seller.

3Forward Guidance and Outlook

2026 Outlook::

Expecting continued growth in Learning Services, targeting double-digit growth.

Online marketing services are projected to leverage AI advancements and expand into new markets.

Focus on enhancing the Smart Devices segment, particularly the dictionary and tutoring pens.

Emphasis on AI agents to enhance user engagement and operational efficiency.

4Bad News, Challenges, or Points of Concern

Declining Metrics::

Year-over-year decline in operating profit and net income in Q4 2025.

Smart Devices segment saw a significant revenue drop, indicating challenges in demand.

Competitive Pressures::

The need to continuously innovate in a rapidly evolving AI landscape to maintain competitiveness.

Operational Challenges::

Maintaining profitability while investing in new technologies and products could strain resources.

5Notable Q&A Insights

2026 Focus:: Management reiterated commitment to an AI-native strategy, emphasizing the importance of AI agents in both learning and advertising sectors.

Youdao Lingshi Growth:: Confidence in Youdao Lingshi's future growth due to enhanced AI features and customer retention strategies.

Cash Flow Strategy:: A balanced approach to achieving positive total cash flow while prioritizing operating cash flow as a key metric for business health. Overall, Youdao demonstrated solid financial performance in Q4 2025, with strategic initiatives focused on AI-driven growth, despite facing challenges in certain segments. The outlook for 2026 remains optimistic, with a clear focus on innovation and market expansion.