Youdao Reports First Quarter 2025 Unaudited Financial Results

Rhea-AI Summary

Youdao (NYSE: DAO) reported its Q1 2025 financial results, showing mixed performance. Total net revenues decreased 6.7% YoY to RMB1.3 billion (US$178.9M), with learning services revenue down 16.1%. However, smart devices and online marketing services saw growth of 5.1% and 2.6% respectively. The company achieved significant profitability improvements, with operating income reaching RMB104.0M, up 247.7% YoY. Net income rose over sixfold to RMB76.7M. Gross margin slightly declined to 47.3% from 49.0%. The company's AI initiatives showed promise, with AI College Admission Advisers driving 25% YoY growth in Youdao Lingshi gross billings, and AI subscription services growing 40% YoY. Youdao continues to receive financial support from NetEase Group, with RMB878.0M in short-term loans and access to a US$300.0M revolving facility.

Positive

• Operating income increased 247.7% YoY to RMB104.0M, with margin improving to 8.0% from 2.1%
• Net income rose over sixfold to RMB76.7M from RMB12.4M YoY
• Smart devices revenue grew 5.1% YoY with improved gross margin of 52.3%
• AI subscription services showed strong growth with 40% YoY increase in total sales
• Significant reduction in operating expenses, down to RMB510.2M from RMB651.6M

Negative

• Total net revenues declined 6.7% YoY to RMB1.3B
• Learning services revenue decreased 16.1% YoY
• Gross margin declined to 47.3% from 49.0% YoY
• Cash position decreased to RMB424.5M from RMB662.6M in December 2024
• Net cash used in operating activities was RMB255.5M

Insights

Financial Analyst

Youdao dramatically improved profitability despite revenue decline, with operating income surging 247.7% YoY through strategic cost optimization.

Youdao's Q1 2025 results present a compelling story of strategic profitability enhancement despite top-line pressure. While total revenues declined 6.7% year-over-year to RMB1.3 billion, operating income surged by 247.7% to reach RMB104.0 million – a significant improvement that showcases management's successful pivot toward operational efficiency.

The company's deliberate approach to prioritize high-ROI customer engagements has temporarily impacted learning services revenue, which fell 16.1%, but this strategic discipline has clearly strengthened overall profitability. Operating margin expanded impressively from 2.1% to 8.0%, while net income attributable to shareholders increased more than sixfold to RMB76.7 million.

Looking at segment performance, smart devices achieved modest 5.1% growth, driven by continued strength in Dictionary Pen sales. The segment's gross margin improved dramatically from 32.6% to 52.3%, reflecting enhanced profitability from newer products launched in H2 2024. Online marketing services grew 2.6% but experienced margin compression (from 34.3% to 30.5%) due to strategic client base expansion.

Cost discipline has been exceptional across all operating expense categories: sales and marketing expenses decreased 21.5%, R&D expenses fell 21.3%, and G&A expenses dropped 25.0%. This comprehensive cost optimization approach has transformed Youdao's financial profile.

The cash position decreased to RMB424.5 million from RMB662.6 million at year-end, with RMB255.5 million used in operations during Q1. This remains an area to monitor, though NetEase's committed financial support provides a significant backstop. The company's active share repurchase program (having bought back US$33.8 million of its US$40 million authorization) signals management's confidence in Youdao's intrinsic value and future prospects.

Management's outlook for 2025 is particularly encouraging, with CEO Dr. Zhou projecting sustained profit growth momentum and full-year operating cash flow breakeven – which would mark a significant milestone for the company following its first full year of operating profit in 2024.

HANGZHOU, China, May 15, 2025 /PRNewswire/ -- Youdao, Inc. ("Youdao" or the "Company") (NYSE: DAO), an AI-powered solutions provider specializing in artificial intelligence applications for the learning and advertising verticals, today announced its unaudited financial results for the first quarter ended March 31, 2025.

First Quarter 2025 Financial Highlights

• Total net revenues were RMB1.3 billion (US$178.9 million), representing a 6.7% decrease from the same period in 2024.
  - Net revenues from learning services were RMB602.4 million (US$83.0 million), representing a 16.1% decrease from the same period in 2024.
  - Net revenues from smart devices were RMB190.5 million (US$26.3 million), representing a 5.1% increase from the same period in 2024.
  - Net revenues from online marketing services were RMB505.4 million (US$69.6 million), representing a 2.6% increase from the same period in 2024.
• Gross margin was 47.3%, compared with 49.0% for the same period in 2024. 
• Income from operations was RMB104.0 million (US$14.3 million), representing a 247.7% increase from the same period in 2024.
• Basic and diluted net income per American depositary share ("ADS") attributable to ordinary shareholders was RMB0.65 (US$0.09) and RMB0.64 (US$0.09), respectively, compared with RMB0.11 and RMB0.10 for the same period of 2024.

"In the first quarter, we significantly improved our profitability, driving operating income to a first-quarter record high of RMB104.0 million, up 247.7% year-over-year. On the product front, our upgraded AI College Admission Advisers drove over 25% year-over-year growth in gross billings for Youdao Lingshi. We also accelerated international market expansion and deepened collaboration with NetEase Group in online marketing services, strengthening the long-term growth of our advertising business. Meanwhile, AI subscription services upgraded existing applications and introduced new offerings like Youdao AI Podcast Assistant, expanding our portfolio and driving over 40% year-over-year growth in total sales," said Dr. Feng Zhou, Chief Executive Officer and Director of Youdao.

"Looking ahead, we will accelerate the deployment of our large language model, Confucius, across learning and advertising verticals as part of our AI-native strategy — enhancing user experience while further boosting profitability. Having achieved our first full year of operating profit in 2024, we are well-positioned to sustain this momentum and deliver stronger profit growth and full-year operating cash flow breakeven in 2025," Dr. Zhou concluded.

First Quarter 2025 Financial Results

Net Revenues 

Net revenues for the first quarter of 2025 were RMB1.3 billion (US$178.9 million), representing a 6.7% decrease from RMB1.4 billion for the same period of 2024.

Net revenues from learning services were RMB602.4 million (US$83.0 million) for the first quarter of 2025, representing a 16.1% decrease from RMB718.0 million for the same period of 2024. The year-over-year decrease was mainly because we continued to take a disciplined, strategic approach to customer acquisition, which places greater emphasis on high-ROI (return on investment) engagements. We believe despite the short-term revenue decline, this strategy has enhanced the overall resilience and operational efficiency of our business.

Net revenues from smart devices were RMB190.5 million (US$26.3 million) for the first quarter of 2025, representing a 5.1% increase from RMB181.2 million for the same period of 2024, primarily driven by the continued increase in sales of Youdao Dictionary Pen in the first quarter of 2025.

Net revenues from online marketing services were RMB505.4 million (US$69.6 million) for the first quarter of 2025, representing a 2.6% increase from RMB492.7 million for the same period of 2024.

Gross Profit and Gross Margin

Gross profit for the first quarter of 2025 was RMB614.2 million (US$84.6 million), representing a 9.9% decrease from RMB681.5 million for the same period of 2024. Gross margin was 47.3% for the first quarter of 2025, compared with 49.0% for the same period of 2024.

Gross margin for learning services was 59.8% for the first quarter of 2025, compared with 63.1% for the same period of 2024. The decrease was mainly due to the decline in economies of scale as a result of the decreased revenues from learning services.

Gross margin for smart devices increased to 52.3% for the first quarter of 2025 from 32.6% for the same period of 2024. The improvement was mainly attributable to the higher gross margin arising from the newly launched Youdao Dictionary Pen since the second half of 2024.

Gross margin for online marketing services was 30.5% for the first quarter of 2025, compared with 34.3% for the same period of 2024. The decrease was mainly attributable to our strategic expansion of our client base for advertising services. As the collaboration with new clients remains in its nascent stage, the gross margin for these clients holds potential for future improvement.

Operating Expenses

Total operating expenses for the first quarter of 2025 were RMB510.2 million (US$70.3 million), compared with RMB651.6 million for the same period of last year.

Sales and marketing expenses for the first quarter of 2025 were RMB357.6 million (US$49.3 million), representing a decrease of 21.5% from RMB455.4 million for the same period of 2024. This decrease was attributable to the reduced marketing expenditures, as well as declined payroll related expenses in learning services and smart devices in the first quarter of 2025.

Research and development expenses for the first quarter of 2025 were RMB115.5 million (US$15.9 million), representing a decrease of 21.3% from RMB146.7 million for the same period of 2024. The decrease was primarily due to the decreased headcount for research and development employees, leading to payroll savings in the first quarter of 2025.

General and administrative expenses for the first quarter of 2025 were RMB37.1 million (US$5.1 million), representing a decrease of 25.0% from RMB49.4 million for the same period of 2024. The decrease was mainly attributable to a decrease in expected credit losses on our accounts receivables in the first quarter of 2025.

Income from Operations

As a result of the foregoing, income from operations for the first quarter of 2025 was RMB104.0 million (US$14.3 million), representing a 247.7% increase from RMB29.9 million for the same period in 2024. The margin of income from operations was 8.0%, compared with 2.1% for the same period of last year.

Net Income Attributable to Youdao's Ordinary Shareholders

Net income attributable to Youdao's ordinary shareholders for the first quarter of 2025 was RMB76.7 million (US$10.6 million), increased over sixfold from RMB12.4 million for the same period of last year. Non-GAAP net income attributable to Youdao's ordinary shareholders for the first quarter of 2025 was RMB81.7 million (US$11.3 million), quadrupled from RMB20.3 million for the same period of last year.

Basic and diluted net income per ADS attributable to ordinary shareholders for the first quarter of 2025 was RMB0.65 (US$0.09) and RMB0.64 (US$0.09), respectively, compared with RMB0.11 and RMB0.10, respectively, for the same period of 2024. Non-GAAP basic and diluted net income per ADS attributable to ordinary shareholders was RMB0.69 (US$0.10) and RMB0.68 (US$0.09), respectively, compared with RMB0.17 for the same period of 2024.

Other Information

As of March 31, 2025, Youdao's cash, cash equivalents, current and non-current restricted cash, and short-term investments totaled RMB424.5 million (US$58.5 million), compared with RMB662.6 million as of December 31, 2024. For the first quarter of 2025, net cash used in operating activities was RMB255.5 million (US$35.2 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. To support Youdao's future business, NetEase Group has agreed to provide financial support for ongoing operations in the next thirty-six months starting from May 2024. As of March 31, 2025, Youdao has received various forms of financial support from the NetEase Group, including, among others, RMB878.0 million in short-term loan, and US$128.5 million in long-term loans maturing on March 31, 2027 drawn from the US$300.0 million revolving loan facility.

As of March 31, 2025, the Company's contract liabilities, which mainly consisted of deferred revenues generated from Youdao's learning services, were RMB711.2 million (US$98.0 million), compared with RMB961.0 million as of December 31, 2024.

Share Repurchase Program

On 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 million of its Class A ordinary shares (including in the form of ADSs) during a period of up to 36 months. This amount was subsequently increased to US$40.0 million in August 2023. As of March 31, 2025, the Company had repurchased a total of approximately 7.5 million ADSs for a total consideration of approximately US$33.8 million in the open market under the share repurchase program.

Conference Call

Youdao's management team will host a teleconference call with simultaneous webcast at 6:00 a.m. Eastern Time on Thursday, May 15, 2025 (Beijing/Hong Kong Time: 6:00 p.m., Thursday, May 15, 2025). 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):	+1-888-346-8982
International:	+1-412-902-4272
Mainland China (toll free):	400-120-1203
Hong Kong (toll free):	800-905-945
Hong Kong:	+852-3018-4992
Conference ID:	8344592

A 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 May 22, 2025:

United States:			+1-877-344-7529
International:			+1-412-317-0088
Replay Access Code:			8344592

About Youdao, Inc. 

Youdao, Inc. (NYSE: DAO) is strategically positioned as an AI-powered solutions provider specializing in artificial intelligence applications for the learning and advertising verticals. Youdao now 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 Measures

Youdao considers and uses non-GAAP financial measures, such as non-GAAP net income/(loss) attributable to the Company's ordinary shareholders and non-GAAP basic and diluted net income/(loss) 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/(loss) attributable to the Company's ordinary shareholders as net income/(loss) attributable to the Company's ordinary shareholders excluding share-based compensation expenses and adjustment for GAAP to non-GAAP reconciling item for the income/(loss) attributable to noncontrolling interests. Non-GAAP net income/(loss) 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 Information

This 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 RMB7.2567 to US$1.00, the exchange rate on March 31, 2025 set forth in the H.10 statistical release of the Federal Reserve Board. The Company makes no representation that the RMB or US$ amounts referred could be converted into US$ or RMB, as the case may be, at any particular rate or at all.

Safe Harbor Statement

This 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 Wang
Youdao, Inc.
Tel: +86-10-8255-8163 ext. 89980
E-mail: IR@rd.netease.com 

Piacente Financial Communications
Helen Wu
Tel: +86-10-6508-0677
E-mail: youdao@thepiacentegroup.com 

In the United States:
Piacente Financial Communications
Brandi Piacente
Tel: +1-212-481-2050
E-mail: youdao@thepiacentegroup.com 

 

YOUDAO, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(RMB and USD in thousands)
		As of December 31,		As of March 31,		As of March 31,
		2024		2025		2025
		RMB		RMB		USD (1)
Assets
Current assets:
Cash and cash equivalents		592,721		335,892		46,287
Restricted cash		3,567		3,027		417
Short-term investments		63,064		82,384		11,353
Accounts receivable, net		418,644		417,315		57,508
Inventories		174,741		155,651		21,449
Amounts due from NetEase Group		79,700		63,490		8,749
Prepayment and other current assets		154,331		170,439		23,487
Total current assets		1,486,768		1,228,198		169,250
Non-current assets:
Property, equipment and software, net		46,725		42,687		5,882
Operating lease right-of-use assets, net		68,494		59,042		8,136
Long-term investments		72,380		68,862		9,489
Goodwill		109,944		109,944		15,151
Other assets, net		30,084		30,475		4,201
Total non-current assets		327,627		311,010		42,859
Total assets		1,814,395		1,539,208		212,109
Liabilities and Shareholders' Deficit
Current liabilities:
Accounts payables		145,148		102,122		14,073
Payroll payable		264,520		144,894		19,967
Amounts due to NetEase Group		21,997		34,636		4,773
Contract liabilities		961,024		711,221		98,009
Taxes payable		37,603		53,064		7,312
Accrued liabilities and other payables		638,660		651,993		89,847
Short-term loan from NetEase Group		878,000		878,000		120,992
Total current liabilities		2,946,952		2,575,930		354,973
Non-current liabilities:
Long-term lease liabilities		25,566		18,828		2,595
Long-term loans from NetEase Group		913,000		926,652		127,696
Other non-current liabilities		18,189		20,129		2,773
Total non-current liabilities		956,755		965,609		133,064
Total liabilities		3,903,707		3,541,539		488,037
Shareholders' deficit:
Youdao's shareholders' deficit		(2,139,958)		(2,053,833)		(283,025)
Noncontrolling interests		50,646		51,502		7,097
Total shareholders' deficit		(2,089,312)		(2,002,331)		(275,928)
Total liabilities and shareholders' deficit		1,814,395		1,539,208		212,109
Note 1:
The conversion of Renminbi (RMB) into United States dollars (USD) is based on the noon buying rate of USD1.00=RMB7.2567 on the last trading day of March (March 31, 2025) 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 Ended
		March 31,		December 31,		March 31,		March 31,
		2024		2024		2025		2025
		RMB		RMB		RMB		USD (1)
Net revenues:
Learning services		717,996		617,673		602,414		83,015
Smart devices		181,198		240,444		190,498		26,251
Online marketing services		492,665		481,681		505,350		69,639
Total net revenues		1,391,859		1,339,798		1,298,262		178,905
Cost of revenues (2)		(710,356)		(699,045)		(684,035)		(94,263)
Gross profit		681,503		640,753		614,227		84,642
Operating expenses:
Sales and marketing expenses (2)		(455,440)		(381,815)		(357,641)		(49,283)
Research and development expenses (2)		(146,723)		(120,694)		(115,474)		(15,913)
General and administrative expenses (2)		(49,416)		(54,068)		(37,071)		(5,109)
Total operating expenses		(651,579)		(556,577)		(510,186)		(70,305)
Income from operations		29,924		84,176		104,041		14,337
Interest income		975		970		517		71
Interest expense		(20,334)		(16,828)		(16,104)		(2,219)
Others, net		2,892		1,594		(960)		(132)
Income before tax		13,457		69,912		87,494		12,057
Income tax benefits/(expenses)		1,028		2,386		(9,895)		(1,364)
Net income		14,485		72,298		77,599		10,693
Net (income)/loss attributable to noncontrolling interests		(2,053)		10,705		(856)		(118)
Net income attributable to ordinary shareholders of the Company		12,432		83,003		76,743		10,575
Basic net income per ADS		0.11		0.71		0.65		0.09
Diluted net income per ADS		0.10		0.70		0.64		0.09
Shares used in computing basic net income per ADS		118,317,220		117,259,091		117,594,976		117,594,976
Shares used in computing diluted net income per ADS		118,928,848		118,705,233		119,504,097		119,504,097
Note 1:
The conversion of Renminbi (RMB) into United States dollars (USD) is based on the noon buying rate of USD1.00=RMB7.2567 on the last trading day of March (March 31, 2025) 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 revenues		778		1,025		612		84
Sales and marketing expenses		1,136		1,069		728		100
Research and development expenses		3,503		2,402		2,352		324
General and administrative expenses		2,479		4,285		1,538		213

 

 

YOUDAO, INC.
UNAUDITED ADDITIONAL INFORMATION
(RMB and USD in thousands)
		Three Months Ended
		March 31,		December 31,		March 31,		March 31,
		2024		2024		2025		2025
		RMB		RMB		RMB		USD
Net revenues
Learning services		717,996		617,673		602,414		83,015
Smart devices		181,198		240,444		190,498		26,251
Online marketing services		492,665		481,681		505,350		69,639
Total net revenues		1,391,859		1,339,798		1,298,262		178,905
Cost of revenues
Learning services		264,759		247,059		242,111		33,364
Smart devices		122,060		134,896		90,851		12,520
Online marketing services		323,537		317,090		351,073		48,379
Total cost of revenues		710,356		699,045		684,035		94,263
Gross margin
Learning services		63.1 %		60.0 %		59.8 %		59.8 %
Smart devices		32.6 %		43.9 %		52.3 %		52.3 %
Online marketing services		34.3 %		34.2 %		30.5 %		30.5 %
Total gross margin		49.0 %		47.8 %		47.3 %		47.3 %

 

 

YOUDAO, INC.
UNAUDITED RECONCILIATION OF GAAP AND NON-GAAP RESULTS
(RMB and USD in thousands, except share and per ADS data)
		Three Months Ended
		March 31,		December 31,		March 31,		March 31,
		2024		2024		2025		2025
		RMB		RMB		RMB		USD
Net income attributable to ordinary shareholders of the Company		12,432		83,003		76,743		10,575
Add: share-based compensation		7,896		8,781		5,230		721
Less: GAAP to non-GAAP reconciling item for the income attributable to          noncontrolling interests		-		-		(297)		(41)
Non-GAAP net income attributable to ordinary shareholders of the Company		20,328		91,784		81,676		11,255
Non-GAAP basic net income per ADS		0.17		0.78		0.69		0.10
Non-GAAP diluted net income per ADS		0.17		0.77		0.68		0.09
Shares used in computing non-GAAP basic net income per ADS		118,317,220		117,259,091		117,594,976		117,594,976
Shares used in computing non-GAAP diluted net income per ADS		118,928,848		118,705,233		119,504,097		119,504,097

 

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SOURCE Youdao, Inc.

FAQ

What were Youdao's (DAO) key financial results for Q1 2025?

Youdao reported total revenues of RMB1.3B (down 6.7% YoY), operating income of RMB104.0M (up 247.7% YoY), and net income of RMB76.7M (up over sixfold YoY). EPS was RMB0.65 per ADS.

How did Youdao's (DAO) different business segments perform in Q1 2025?

Learning services revenue decreased 16.1% to RMB602.4M, smart devices revenue grew 5.1% to RMB190.5M, and online marketing services increased 2.6% to RMB505.4M.

What is Youdao's (DAO) financial outlook for 2025?

Management expects to sustain profit growth momentum and achieve full-year operating cash flow breakeven in 2025, following their first full year of operating profit in 2024.

How much financial support is Youdao (DAO) receiving from NetEase Group?

NetEase Group provided RMB878.0M in short-term loans and US$128.5M in long-term loans from a US$300.0M revolving facility, with committed support for the next 36 months from May 2024.

What progress has Youdao (DAO) made with its AI initiatives in Q1 2025?

AI College Admission Advisers drove 25% YoY growth in Youdao Lingshi gross billings, while AI subscription services grew 40% YoY. The company is deploying its Confucius large language model across learning and advertising verticals.