Youdao Reports Second Quarter 2026 Unaudited Financial Results

Youdao Reports Second Quarter 2026 Unaudited Financial Results

PR Newswire

HANGZHOU, China, Aug. 20, 2026

HANGZHOU, China, Aug. 20, 2026 /PRNewswire/ -- Youdao, Inc. ("Youdao" or the "Company") (NYSE: DAO), an AI solutions provider specializing in learning and advertising, today announced its unaudited financial results for the second quarter ended June 30, 2026.

Second Quarter 2026 Financial HighlightsTotal net revenues were RMB1.5 billion (US$216.2 million), representing a 3.5% increase from the same period in 2025.- Net revenues from learning services were RMB795.6 million (US$117.3 million), representing a 20.9% increase from the same period in 2025.- Net revenues from smart devices were RMB86.8 million (US$12.8 million), representing a 31.5% decrease from the same period in 2025.- Net revenues from online marketing services were RMB584.4 million (US$86.1 million), representing a 7.7% decrease from the same period in 2025.Gross margin was 48.9%, compared with 43.0% for the same period in 2025.Income from operations was RMB111.5 million (US$16.4 million), increasing by nearly 2.9 times from the same period in 2025.Basic and diluted net income per American depositary share ("ADS") attributable to ordinary shareholders were RMB0.62 (US$0.09) and RMB0.61 (US$0.09), respectively, compared with basic and diluted net loss per ADS attributable to ordinary shareholders of RMB0.15 for the same period of 2025. Non-GAAP basic and diluted net income per ADS attributable to ordinary shareholders were RMB0.76 (US$0.11) and RMB0.75 (US$0.11), respectively, compared with RMB0.11 and RMB0.10 for the same period of 2025."We delivered another strong quarter, with continued revenue growth, record operating profit and robust operating cash flow, marking our eighth consecutive quarter of operating profitability," said Dr. Feng Zhou, Chief Executive Officer and Director of Youdao. "These results reflect the progress we are making toward healthier and more sustainable growth.""AI is increasingly translating into tangible business results across Youdao. Learning services maintained strong growth, supported by Youdao Lingshi and our expanding portfolio of AI-driven subscription products, while our disciplined focus on higher-quality opportunities further improved the profitability of online marketing services. With the continued advancement of Confucius 4 and our AI Agent portfolio, we will deepen the application of AI across learning and advertising to enhance user experience, improve operating efficiency and drive sustainable growth," Dr. Zhou concluded.Second Quarter 2026 Financial ResultsNet Revenues Net revenues for the second quarter of 2026 were RMB1.5 billion (US$216.2 million), representing a 3.5% increase from RMB1.4 billion for the same period of 2025.Net revenues from learning services were RMB795.6 million (US$117.3 million) for the second quarter of 2026, representing a 20.9% increase from RMB657.8 million for the same period of 2025. The year-over-year increase was primarily driven by the strong momentum of tutoring services compared with the same period of 2025.Net revenues from smart devices were RMB86.8 million (US$12.8 million) for the second quarter of 2026, representing a 31.5% decrease from RMB126.8 million for the same period of 2025, primarily due to a decline in demand for smart learning devices.Net revenues from online marketing services were RMB584.4 million (US$86.1 million) for the second quarter of 2026, representing a 7.7% decrease from RMB632.9 million for the same period of 2025. The year-over-year decrease reflects Youdao's disciplined, strategic approach to engagement acceptance, which places greater emphasis on higher ROI (return on investment) engagements. Youdao believes this strategy has enhanced the overall operational efficiency of its business.Gross Profit and Gross MarginGross profit for the second quarter of 2026 was RMB716.9 million (US$105.7 million), representing a 17.6% increase from RMB609.4 million for the same period of 2025. Gross margin was 48.9% for the second quarter of 2026, compared with 43.0% for the same period of 2025.Gross margin for learning services was 65.5% for the second quarter of 2026, compared with 59.8% for the same period of 2025. The improvement was primarily attributable to improved economies of scale resulting from increased revenues from learning services.Gross margin for smart devices was 32.8% for the second quarter of 2026, compared with 41.5% for the same period of 2025. The decrease was mainly attributable to increased bill-of-materials cost for smart devices.Gross margin for online marketing services was 28.7% for the second quarter of 2026, compared with 25.8% for the same period of 2025.Operating ExpensesTotal operating expenses for the second quarter of 2026 were RMB605.3 million (US$89.2 million), compared with RMB580.6 million for the same period of last year.Sales and marketing expenses for the second quarter of 2026 were RMB424.1 million (US$62.5 million), representing an increase of 5.5% from RMB401.8 million for the same period of 2025. This increase was primarily driven by increased sales and marketing efforts associated with learning services.Research and development expenses for the second quarter of 2026 were RMB142.0 million (US$20.9 million), representing an increase of 10.7% from RMB128.3 million for the same period of 2025. The increase was primarily driven by Youdao's increased investments in cutting-edge AI technology to enhance product and service quality.General and administrative expenses for the second quarter of 2026 were RMB39.2 million (US$5.8 million), representing a decrease of 22.3% from RMB50.4 million for the same period of 2025. The decrease was mainly attributable to a decrease in expected credit losses on the Company's accounts receivables.Income from OperationsAs a result of the foregoing, income from operations for the second quarter of 2026 was RMB111.5 million (US$16.4 million), increasing by nearly 2.9 times from RMB28.8 million for the same period in 2025. The margin of income from operations was 7.6%, compared with 2.0% for the same period of last year.Net Income/(Loss) Attributable to Youdao's Ordinary ShareholdersNet income attributable to Youdao's ordinary shareholders for the second quarter of 2026 was RMB73.8 million (US$10.9 million), compared with net loss attributable to Youdao's ordinary shareholders of RMB17.8 million for the same period of last year. Non-GAAP net income attributable to Youdao's ordinary shareholders for the second quarter of 2026 was RMB90.6 million (US$13.4 million), surging over sevenfold from RMB12.5 million for the same period of last year.Basic and diluted net income per ADS attributable to ordinary shareholders for the second quarter of 2026 were RMB0.62 (US$0.09) and RMB0.61 (US$0.09), respectively, compared with basic and diluted net loss per ADS attributable to ordinary shareholders of RMB0.15 for the same period of 2025. Non-GAAP basic and diluted net income per ADS attributable to ordinary shareholders were RMB0.76 (US$0.11) and RMB0.75 (US$0.11), respectively, compared with RMB0.11 and RMB0.10 for the same period of 2025.Other InformationAs of June 30, 2026, Youdao's cash, cash equivalents, current and non-current restricted cash, and short-term investments totaled RMB849.3 million (US$125.2 million), compared with RMB743.2 million as of December 31, 2025. For the second quarter of 2026, net cash provided by operating activities was RMB334.2 million (US$49.3 million). Youdao's ability to continue as a going concern is dependent on management's ability to implement an effective business plan amid a changing regulatory environment, generate operating cash flows, and secure external financing for future development. As of June 30, 2026, Youdao has received various forms of financial support from NetEase Group, including, among others, RMB878.0 million in a short-term loan, and US$118.9 million in long-term loans maturing on March 31, 2030, drawn from a US$300.0 million revolving loan facility.As of June 30, 2026, the Company's contract liabilities, which mainly consisted of deferred revenues generated from Youdao's learning services, were RMB835.1 million (US$123.1 million), compared with RMB847.7 million as of December 31, 2025.Share Repurchase ProgramOn November 17, 2022, the Company announced that its Board of Directors had authorized the Company to adopt a share repurchase program in accordance with applicable laws and regulations for up to US$20.0 million of its Class A ordinary shares (including in the form of ADSs) during a period of up to 36 months beginning on November 18, 2022. This amount was subsequently increased to US$40.0 million in August 2023. In November 2025 and August 2026, the Board approved amendments to this Program, each extending its expiration date by one year, ultimately to November 17, 2027. As of June 30, 2026, the Company had repurchased a total of approximately 7.5 million ADSs in the open market under the share repurchase program for a total consideration of approximately US$33.8 million.Announcement on Change in ManagementThe Company also announced today that Mr. William Lei Ding has resigned from his position as a director of the Company's Board of Directors, effective August 18, 2026, for personal reasons. Mr. Jinhai Chen was appointed as a director of the Company's Board of Directors, effective August 18, 2026. Jinhai Chen currently serves as vice president of NetEase Cloud Music Inc. (HKEX: 9899). Prior to joining NetEase Cloud Music in 2020, Mr. Chen served as technical director at Tencent Holdings Limited from 2014 to 2020. Mr. Chen received his master's degree in information and communication engineering from Harbin Institute of Technology.Conference CallYoudao's management team will host a teleconference call with a simultaneous webcast at 6:00 a.m. Eastern Time on Thursday, August 20, 2026 (Beijing/Hong Kong Time: 6:00 p.m., Thursday, August 20, 2026). Youdao's management will be on the call to discuss the financial results and answer questions.Dial-in details for the earnings conference call are as follows:United States (toll free):+1-888-346-8982International:+1-412-902-4272Mainland China (toll free):400-120-1203Hong Kong (toll free): 800-905-945Conference ID:2290552A live and archived webcast of the conference call will be available on the Company's investor relations website at http://ir.youdao.com.A replay of the conference call will be accessible by phone one hour after the conclusion of the live call at the following numbers, until August 27, 2026:United States: +1-855-669-9658International:+1-412-317-0088Replay Access Code:2290552About Youdao, Inc. Youdao, Inc. (NYSE: DAO) is strategically positioned as an AI solutions provider specializing in learning and advertising. Youdao mainly offers learning services, online marketing services and smart devices – all powered by advanced technologies. Youdao was founded in 2006 as part of NetEase, Inc. (NASDAQ: NTES; HKEX: 9999), a leading internet technology company in China.For more information, please visit: http://ir.youdao.com.Non-GAAP MeasuresYoudao considers and uses non-GAAP financial measures, such as non-GAAP net income attributable to the Company's ordinary shareholders and non-GAAP basic and diluted net income per ADS, as supplemental metrics in reviewing and assessing its operating performance and formulating its business plan. The presentation of non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP").Youdao defines non-GAAP net income attributable to the Company's ordinary shareholders as net income attributable to the Company's ordinary shareholders excluding share-based compensation expenses, impairment of long-term investments, gain from fair value change of long-term investment and adjustment for GAAP to non-GAAP reconciling item for the loss/(income) attributable to noncontrolling interests. Non-GAAP net income attributable to the Company's ordinary shareholders enables Youdao's management to assess its operating results without considering the impact of these items, which are non-cash charges in nature. Youdao believes that these non-GAAP financial measures provide useful information to investors in understanding and evaluating the Company's current operating performance and prospects in the same manner as management does, if they so choose.Non-GAAP financial measures are not defined under U.S. GAAP and are not presented in accordance with U.S. GAAP. Non-GAAP financial measures have limitations as analytical tools, which possibly do not reflect all items of expense that affect our operations. In addition, the non-GAAP financial measures Youdao uses may differ from the non-GAAP measures uses by other companies, including peer companies, and therefore their comparability may be limited.For more information on these non-GAAP financial measures, please see the table captioned "Unaudited Reconciliation of GAAP and Non-GAAP Results" set forth at the end of this release.The accompanying table has more details on the reconciliation between our GAAP financial measures that are mostly directly comparable to non-GAAP financial measures. Youdao encourages you to review its financial information in its entirety and not rely on a single financial measure.Exchange Rate InformationThis announcement contains translations of certain RMB amounts into U.S. dollars ("US$") at specified rates solely for the convenience of the reader. Unless otherwise stated, all translations from RMB to US$ were made at the rate of RMB6.7851 to US$1.00, the exchange rate on June 30, 2026 set forth in the H.10 statistical release of the Federal Reserve Board. The Company makes no representation that the RMB or US$ amounts referred to could be converted into US$ or RMB, as the case may be, at any particular rate or at all.Safe Harbor StatementThis press release contains forward-looking statements. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. Statements that are not historical facts, including statements about the Company's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties, and a number of factors could cause actual results to differ materially from those contained in any forward-looking statement. In some cases, forward-looking statements can be identified by words or phrases such as "may," "will," "expect," "anticipate," "target," "aim," "estimate," "intend," "plan," "believe," "potential," "continue," "is/are likely to" or other similar expressions. The Company may also make written or oral forward-looking statements in its reports filed with, or furnished to, the U.S. Securities and Exchange Commission, in its annual reports to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Further information regarding such risks, uncertainties or factors is included in the Company's filings with the SEC. All information provided in this press release is as of the date of this press release, and the Company does not undertake any duty to update such information, except as required under applicable law.For investor and media inquiries, please contact: In China:Jeffrey WangYoudao, Inc.Tel: +86-10-8255-8163 ext. 89980E-mail: IR@rd.netease.comPiacente Financial CommunicationsHelen WuTel: +86-10-6508-0677E-mail: youdao@thepiacentegroup.comIn the United States:Piacente Financial CommunicationsBrandi PiacenteTel: +1-212-481-2050E-mail: youdao@thepiacentegroup.comYOUDAO, INC.UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS(RMB and USD in thousands)As of December 31,As of June 30,As of June 30,202520262026RMBRMBUSD (1)AssetsCurrent assets: Cash and cash equivalents439,731568,56883,797 Restricted cash1,9901,540227 Short-term investments298,290275,90440,663 Accounts receivable, net381,243332,25548,968 Inventories140,776114,04316,808 Amounts due from NetEase Group321,359261,06638,476 Prepayment and other current assets139,117141,11920,799Total current assets1,722,5061,694,495249,738Non-current assets: Property, equipment and software, net44,60337,8375,576 Operating lease right-of-use assets, net46,94360,4938,916 Long-term investments19,81115,0252,214 Goodwill109,944109,94416,204 Other assets, net31,23838,7915,717Total non-current assets252,539262,09038,627Total assets1,975,0451,956,585288,365Liabilities and Shareholders' DeficitCurrent liabilities: Accounts payables110,00365,8449,704 Payroll payable294,824235,69634,737 Amounts due to NetEase Group22,81818,7122,758 Contract liabilities847,707835,112123,080 Taxes payable43,51557,1188,418 Accrued liabilities and other payables738,045809,296119,277 Short-term loan from NetEase Group878,000878,000129,401Total current liabilities2,934,9122,899,778427,375Non-current liabilities: Long-term lease liabilities18,84027,4474,045 Long-term loans from NetEase Group926,588807,000118,937 Other non-current liabilities28,80229,1504,296Total non-current liabilities974,230863,597127,278Total liabilities3,909,1423,763,375554,653Shareholders' deficit: Youdao's shareholders' deficit(1,974,058)(1,844,677)(271,871) Noncontrolling interests39,96137,8875,583Total shareholders' deficit(1,934,097)(1,806,790)(266,288)Total liabilities and shareholders' deficit1,975,0451,956,585288,365Note 1:The conversion of Renminbi (RMB) into United States dollars (USD) is based on the noon buying rate of USD1.00=RMB6.7851 on the last trading day of June (June 30, 2026) as set forth in the H.10 statistical release of the U.S. Federal Reserve Board.YOUDAO, INC.UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(RMB and USD in thousands, except share and per ADS data)Three Months EndedSix Months EndedJune 30,March 31,June 30,June 30,June 30,June 30,202520262026202620252026RMBRMBRMBUSD (1)RMBRMBNet revenues: Learning services657,838627,477795,607117,2581,260,2521,423,084 Smart devices126,821109,40586,82212,796317,319196,227 Online marketing services632,882611,140584,43286,1351,138,2321,195,572Total net revenues1,417,5411,348,0221,466,861216,1892,715,8032,814,883Cost of revenues (2)(808,181)(745,729)(749,986)(110,534)(1,492,216)(1,495,715)Gross profit609,360602,293716,875105,6551,223,5871,319,168Operating expenses: Sales and marketing expenses (2)(401,826)(382,183)(424,104)(62,505)(759,467)(806,287) Research and development expenses (2)(128,321)(115,371)(142,043)(20,935)(243,795)(257,414) General and administrative expenses (2)(50,414)(47,238)(39,182)(5,775)(87,485)(86,420)Total operating expenses(580,561)(544,792)(605,329)(89,215)(1,090,747)(1,150,121)Income from operations28,79957,501111,54616,440132,840169,047 Interest income6289359071341,1451,842 Interest expense(16,566)(13,609)(12,073)(1,779)(32,670)(25,682) Others, net(29,118)3,483(11,376)(1,677)(30,078)(7,893)(Loss)/Income before tax(16,257)48,31089,00413,11871,237137,314 Income tax expenses(4,279)(4,497)(11,601)(1,710)(14,174)(16,098)Net (loss)/income(20,536)43,81377,40311,40857,063121,216 Net loss/(income) attributable to noncontrolling interests2,773(5,236)(3,616)(533)1,917(8,852)Net (loss)/income attributable to ordinary shareholders of the Company(17,763)38,57773,78710,87558,980112,364Basic net (loss)/income per ADS(0.15)0.330.620.090.500.95Diluted net (loss)/income per ADS(0.15)0.320.610.090.490.93Shares used in computing basic net (loss)/income per ADS117,868,295118,671,804118,907,994118,907,994117,732,413118,790,556Shares used in computing diluted net (loss)/income per ADS117,868,295120,444,180120,626,317120,626,317119,583,256120,535,906Note 1:The conversion of Renminbi (RMB) into United States dollars (USD) is based on the noon buying rate of USD1.00=RMB6.7851 on the last trading day of June (June 30, 2026) as set forth in the H.10 statistical release of the U.S. Federal Reserve Board.Note 2:Share-based compensation in each category: Cost of revenues15230031747764617 Sales and marketing expenses8401,3001,4152091,5682,715 Research and development expenses2,8984,7817,3501,0835,25012,131 General and administrative expenses2,6952,2413,3894994,2335,630YOUDAO, INC.UNAUDITED ADDITIONAL INFORMATION(RMB and USD in thousands)Three Months EndedSix Months EndedJune 30,March 31,June 30,June 30,June 30,June 30,202520262026202620252026RMBRMBRMBUSDRMBRMBNet revenues Learning services657,838627,477795,607117,2581,260,2521,423,084 Smart devices126,821109,40586,82212,796317,319196,227 Online marketing services632,882611,140584,43286,1351,138,2321,195,572Total net revenues1,417,5411,348,0221,466,861216,1892,715,8032,814,883Cost of revenues Learning services264,734250,027274,80640,501506,845524,833 Smart devices74,13565,71358,3468,599164,986124,059 Online marketing services469,312429,989416,83461,434820,385846,823Total cost of revenues808,181745,729749,986110,5341,492,2161,495,715Gross margin Learning services59.8 %60.2 %65.5 %65.5 %59.8 %63.1 % Smart devices41.5 %39.9 %32.8 %32.8 %48.0 %36.8 % Online marketing services25.8 %29.6 %28.7 %28.7 %27.9 %29.2 %Total gross margin43.0 %44.7 %48.9 %48.9 %45.1 %46.9 %YOUDAO, INC.UNAUDITED RECONCILIATION OF GAAP AND NON-GAAP RESULTS(RMB and USD in thousands, except share and per ADS data)Three Months EndedSix Months EndedJune 30,March 31,June 30,June 30,June 30,June 30,202520262026202620252026RMBRMBRMBUSDRMBRMBNet (loss)/income attributable to ordinary shareholders of the Company(17,763)38,57773,78710,87558,980112,364Add: share-based compensation6,5858,62212,4711,83811,81521,093 impairment of long-term investments25,730-6,03188925,7306,031Less: gain from fair value change of long-term investment(1,765)(1,339)--(1,765)(1,339)Less: GAAP to non-GAAP reconciling item for the loss/(income) attributable to noncontrolling interests(272)(970)(1,706)(251)(569)(2,676)Non-GAAP net income attributable to ordinary shareholders of the Company12,51544,89090,58313,35194,191135,473Non-GAAP basic net income per ADS0.110.380.760.110.801.14Non-GAAP diluted net income per ADS0.100.370.750.110.791.12Shares used in computing non-GAAP basic net income per ADS117,868,295118,671,804118,907,994118,907,994117,732,413118,790,556Shares used in computing non-GAAP diluted net income per ADS119,660,859120,444,180120,626,317120,626,317119,583,256120,535,906