Youdao Reports Second Quarter 2026 Unaudited Financial Results
Rhea-AI Summary
Youdao (NYSE: DAO) reported second quarter 2026 net revenues of RMB1.5 billion (up 3.5% year over year), driven by a 20.9% rise in learning services to RMB795.6 million, while smart devices fell 31.5% to RMB86.8 million and online marketing services declined 7.7% to RMB584.4 million.
Gross profit rose 17.6% to RMB716.9 million, lifting gross margin to 48.9% from 43.0%. Income from operations reached RMB111.5 million (margin 7.6%), nearly 2.9 times a year earlier. Net income attributable to shareholders was RMB73.8 million versus a prior-year loss, with non-GAAP net income at RMB90.6 million, more than seven times the 2025 level.
As of June 30, 2026, cash, restricted cash and short-term investments totaled RMB849.3 million, with operating cash flow of RMB334.2 million in the quarter. Youdao also highlighted ongoing financial support from NetEase Group, including a RMB878.0 million short-term loan and US$118.9 million of long-term loans. Under its share repurchase program (authorized up to US$40 million and extended to November 17, 2027), Youdao had bought back about 7.5 million ADSs for roughly US$33.8 million. The company announced that William Lei Ding resigned from its board on August 18, 2026 and Jinhai Chen, a NetEase Cloud Music vice president, was appointed as director on the same date.
Positive
- Total net revenues RMB1.5 billion, up 3.5% year over year
- Learning services revenue RMB795.6 million, up 20.9% year over year
- Gross margin improved to 48.9% from 43.0% year over year
- Income from operations RMB111.5 million, nearly 2.9x prior-year RMB28.8 million
- Net income RMB73.8 million versus prior-year net loss of RMB17.8 million
- Non-GAAP net income RMB90.6 million, more than sevenfold last year’s RMB12.5 million
- Operating cash flow RMB334.2 million in Q2 2026
- Cash, restricted cash and short-term investments RMB849.3 million versus RMB743.2 million at year-end 2025
- Share repurchases about 7.5 million ADSs for approximately US$33.8 million
Negative
- Smart devices revenue down 31.5% year over year to RMB86.8 million
- Smart devices gross margin declined to 32.8% from 41.5% year over year
- Online marketing services revenue down 7.7% year over year to RMB584.4 million
- Shareholders’ deficit RMB1.84 billion as of June 30, 2026
- High reliance on NetEase Group financing with RMB878.0 million short-term loan and US$118.9 million long-term loans outstanding
- Contract liabilities fell to RMB835.1 million from RMB847.7 million at December 31, 2025
News Explained
The release adds funding-dependence disclosure alongside a June 30 shareholders’ deficit of RMB1,806,790 thousand.
The new material disclosure is that Youdao’s ability to continue as a going concern depends on executing a business plan, generating operating cash flow, and securing external financing.
A going-concern qualification concerns whether a company can fund operations for the next 12 months; the release applies that wording to Youdao’s stated dependence on those funding requirements.
At June 30, 2026, Youdao reported liabilities of RMB3,763,375 thousand against assets of RMB1,956,585 thousand, leaving a shareholders’ deficit of RMB1,806,790 thousand; that balance-sheet position reinforces the release’s funding dependence disclosure.
Key Figures
Previous Earnings Reports
| Date | Event | Sentiment | 24h Move | Catalyst |
|---|---|---|---|---|
| May 21 | Q1 earnings report | Positive | -2.1% | Revenue grew, but gross margin and operating income declined year over year. |
| May 21 | Q1 earnings report | Positive | -2.1% | NetEase reported revenue, profit, cash flow and shareholder-return metrics. |
| Feb 11 | FY25 earnings report | Positive | -4.1% | Revenue increased and operating cash flow turned positive for the full year. |
| Feb 11 | FY25 earnings report | Positive | -4.1% | NetEase reported annual revenue, profit, cash and repurchase-program updates. |
| Nov 20 | Q3 earnings report | Neutral | +0.4% | Revenue increased, while margins and operating income declined year over year. |
24h Move is the share-price change in the day after each event; other market factors may also have contributed.
The tag-specific earnings record showed predominantly negative 24-hour reactions despite mixed-to-positive reported results.
Key Terms
non-gaap financial
going concern financial
revolving loan facility financial
AI-generated analysis. How Rhea-AI works. Not financial advice.
Second Quarter 2026 Financial Highlights
- Total net revenues were
RMB1.5 billion (US ), representing a$216.2 million 3.5% increase from the same period in 2025.
- Net revenues from learning services wereRMB795.6 million (US ), representing a$117.3 million 20.9% increase from the same period in 2025.
- Net revenues from smart devices wereRMB86.8 million (US ), representing a$12.8 million 31.5% decrease from the same period in 2025.
- Net revenues from online marketing services wereRMB584.4 million (US ), representing a$86.1 million 7.7% decrease from the same period in 2025. - Gross margin was
48.9% , compared with43.0% for the same period in 2025. - Income from operations was
RMB111.5 million (US ), increasing by nearly 2.9 times from the same period in 2025.$16.4 million - Basic and diluted net income per American depositary share ("ADS") attributable to ordinary shareholders were
RMB0.62 (US ) and$0.09 RMB0.61 (US ), respectively, compared with basic and diluted net loss per ADS attributable to ordinary shareholders of$0.09 RMB0.15 for the same period of 2025. Non-GAAP basic and diluted net income per ADS attributable to ordinary shareholders wereRMB0.76 (US ) and$0.11 RMB0.75 (US ), respectively, compared with$0.11 RMB0.11 andRMB0.10 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 Results
Net Revenues
Net revenues for the second quarter of 2026 were
Net revenues from learning services were
Net revenues from smart devices were
Net revenues from online marketing services were
Gross Profit and Gross Margin
Gross profit for the second quarter of 2026 was
Gross margin for learning services was
Gross margin for smart devices was
Gross margin for online marketing services was
Operating Expenses
Total operating expenses for the second quarter of 2026 were
Sales and marketing expenses for the second quarter of 2026 were
Research and development expenses for the second quarter of 2026 were
General and administrative expenses for the second quarter of 2026 were
Income from Operations
As a result of the foregoing, income from operations for the second quarter of 2026 was
Net Income/(Loss) Attributable to Youdao's Ordinary Shareholders
Net income attributable to Youdao's ordinary shareholders for the second quarter of 2026 was
Basic and diluted net income per ADS attributable to ordinary shareholders for the second quarter of 2026 were
Other Information
As of June 30, 2026, Youdao's cash, cash equivalents, current and non-current restricted cash, and short-term investments totaled
As of June 30, 2026, the Company's contract liabilities, which mainly consisted of deferred revenues generated from Youdao's learning services, were
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
Announcement on Change in Management
The 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 Call
Youdao's management team will host a teleconference call with a simultaneous webcast at 6:00 a.m. Eastern Time on Thursday, August 20, 2026 (
Dial-in details for the earnings conference call are as follows:
+1-888-346-8982 | |
International: | +1-412-902-4272 |
Mainland | 400-120-1203 |
800-905-945 | |
Conference ID: | 2290552 |
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 August 27, 2026:
United States: | +1-855-669-9658 |
International: | +1-412-317-0088 |
Replay Access Code: | 2290552 |
About 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 Measures
Youdao 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 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 RMB6.7851 to US
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 June 30, | As of June 30, | ||||
2025 | 2026 | 2026 | ||||
RMB | RMB | USD (1) | ||||
Assets | ||||||
Current assets: | ||||||
Cash and cash equivalents | 439,731 | 568,568 | 83,797 | |||
Restricted cash | 1,990 | 1,540 | 227 | |||
Short-term investments | 298,290 | 275,904 | 40,663 | |||
Accounts receivable, net | 381,243 | 332,255 | 48,968 | |||
Inventories | 140,776 | 114,043 | 16,808 | |||
Amounts due from NetEase Group | 321,359 | 261,066 | 38,476 | |||
Prepayment and other current assets | 139,117 | 141,119 | 20,799 | |||
Total current assets | 1,722,506 | 1,694,495 | 249,738 | |||
Non-current assets: | ||||||
Property, equipment and software, net | 44,603 | 37,837 | 5,576 | |||
Operating lease right-of-use assets, net | 46,943 | 60,493 | 8,916 | |||
Long-term investments | 19,811 | 15,025 | 2,214 | |||
Goodwill | 109,944 | 109,944 | 16,204 | |||
Other assets, net | 31,238 | 38,791 | 5,717 | |||
Total non-current assets | 252,539 | 262,090 | 38,627 | |||
Total assets | 1,975,045 | 1,956,585 | 288,365 | |||
Liabilities and Shareholders' Deficit | ||||||
Current liabilities: | ||||||
Accounts payables | 110,003 | 65,844 | 9,704 | |||
Payroll payable | 294,824 | 235,696 | 34,737 | |||
Amounts due to NetEase Group | 22,818 | 18,712 | 2,758 | |||
Contract liabilities | 847,707 | 835,112 | 123,080 | |||
Taxes payable | 43,515 | 57,118 | 8,418 | |||
Accrued liabilities and other payables | 738,045 | 809,296 | 119,277 | |||
Short-term loan from NetEase Group | 878,000 | 878,000 | 129,401 | |||
Total current liabilities | 2,934,912 | 2,899,778 | 427,375 | |||
Non-current liabilities: | ||||||
Long-term lease liabilities | 18,840 | 27,447 | 4,045 | |||
Long-term loans from NetEase Group | 926,588 | 807,000 | 118,937 | |||
Other non-current liabilities | 28,802 | 29,150 | 4,296 | |||
Total non-current liabilities | 974,230 | 863,597 | 127,278 | |||
Total liabilities | 3,909,142 | 3,763,375 | 554,653 | |||
Shareholders' deficit: | ||||||
Youdao's shareholders' deficit | (1,974,058) | (1,844,677) | (271,871) | |||
Noncontrolling interests | 39,961 | 37,887 | 5,583 | |||
Total shareholders' deficit | (1,934,097) | (1,806,790) | (266,288) | |||
Total liabilities and shareholders' deficit | 1,975,045 | 1,956,585 | 288,365 | |||
Note 1: The conversion of Renminbi (RMB) into | ||||||
YOUDAO, INC. | ||||||||||||
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||
(RMB and USD in thousands, except share and per ADS data) | ||||||||||||
Three Months Ended | Six Months Ended | |||||||||||
June 30, | March 31, | June 30, | June 30, | June 30, | June 30, | |||||||
2025 | 2026 | 2026 | 2026 | 2025 | 2026 | |||||||
RMB | RMB | RMB | USD (1) | RMB | RMB | |||||||
Net revenues: | ||||||||||||
Learning services | 657,838 | 627,477 | 795,607 | 117,258 | 1,260,252 | 1,423,084 | ||||||
Smart devices | 126,821 | 109,405 | 86,822 | 12,796 | 317,319 | 196,227 | ||||||
Online marketing services | 632,882 | 611,140 | 584,432 | 86,135 | 1,138,232 | 1,195,572 | ||||||
Total net revenues | 1,417,541 | 1,348,022 | 1,466,861 | 216,189 | 2,715,803 | 2,814,883 | ||||||
Cost of revenues (2) | (808,181) | (745,729) | (749,986) | (110,534) | (1,492,216) | (1,495,715) | ||||||
Gross profit | 609,360 | 602,293 | 716,875 | 105,655 | 1,223,587 | 1,319,168 | ||||||
Operating 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 operations | 28,799 | 57,501 | 111,546 | 16,440 | 132,840 | 169,047 | ||||||
Interest income | 628 | 935 | 907 | 134 | 1,145 | 1,842 | ||||||
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) | 48,310 | 89,004 | 13,118 | 71,237 | 137,314 | ||||||
Income tax expenses | (4,279) | (4,497) | (11,601) | (1,710) | (14,174) | (16,098) | ||||||
Net (loss)/income | (20,536) | 43,813 | 77,403 | 11,408 | 57,063 | 121,216 | ||||||
Net loss/(income) attributable to noncontrolling | 2,773 | (5,236) | (3,616) | (533) | 1,917 | (8,852) | ||||||
Net (loss)/income attributable to ordinary shareholders | (17,763) | 38,577 | 73,787 | 10,875 | 58,980 | 112,364 | ||||||
Basic net (loss)/income per ADS | (0.15) | 0.33 | 0.62 | 0.09 | 0.50 | 0.95 | ||||||
Diluted net (loss)/income per ADS | (0.15) | 0.32 | 0.61 | 0.09 | 0.49 | 0.93 | ||||||
Shares used in computing basic net (loss)/income per ADS | 117,868,295 | 118,671,804 | 118,907,994 | 118,907,994 | 117,732,413 | 118,790,556 | ||||||
Shares used in computing diluted net (loss)/income per ADS | 117,868,295 | 120,444,180 | 120,626,317 | 120,626,317 | 119,583,256 | 120,535,906 | ||||||
Note 1: The conversion of Renminbi (RMB) into | ||||||||||||
Note 2: | ||||||||||||
Share-based compensation in each category: | ||||||||||||
Cost of revenues | 152 | 300 | 317 | 47 | 764 | 617 | ||||||
Sales and marketing expenses | 840 | 1,300 | 1,415 | 209 | 1,568 | 2,715 | ||||||
Research and development expenses | 2,898 | 4,781 | 7,350 | 1,083 | 5,250 | 12,131 | ||||||
General and administrative expenses | 2,695 | 2,241 | 3,389 | 499 | 4,233 | 5,630 | ||||||
YOUDAO, INC. | ||||||||||||
UNAUDITED ADDITIONAL INFORMATION | ||||||||||||
(RMB and USD in thousands) | ||||||||||||
Three Months Ended | Six Months Ended | |||||||||||
June 30, | March 31, | June 30, | June 30, | June 30, | June 30, | |||||||
2025 | 2026 | 2026 | 2026 | 2025 | 2026 | |||||||
RMB | RMB | RMB | USD | RMB | RMB | |||||||
Net revenues | ||||||||||||
Learning services | 657,838 | 627,477 | 795,607 | 117,258 | 1,260,252 | 1,423,084 | ||||||
Smart devices | 126,821 | 109,405 | 86,822 | 12,796 | 317,319 | 196,227 | ||||||
Online marketing services | 632,882 | 611,140 | 584,432 | 86,135 | 1,138,232 | 1,195,572 | ||||||
Total net revenues | 1,417,541 | 1,348,022 | 1,466,861 | 216,189 | 2,715,803 | 2,814,883 | ||||||
Cost of revenues | ||||||||||||
Learning services | 264,734 | 250,027 | 274,806 | 40,501 | 506,845 | 524,833 | ||||||
Smart devices | 74,135 | 65,713 | 58,346 | 8,599 | 164,986 | 124,059 | ||||||
Online marketing services | 469,312 | 429,989 | 416,834 | 61,434 | 820,385 | 846,823 | ||||||
Total cost of revenues | 808,181 | 745,729 | 749,986 | 110,534 | 1,492,216 | 1,495,715 | ||||||
Gross margin | ||||||||||||
Learning services | 59.8 % | 60.2 % | 65.5 % | 65.5 % | 59.8 % | 63.1 % | ||||||
Smart devices | 41.5 % | 39.9 % | 32.8 % | 32.8 % | 48.0 % | 36.8 % | ||||||
Online marketing services | 25.8 % | 29.6 % | 28.7 % | 28.7 % | 27.9 % | 29.2 % | ||||||
Total gross margin | 43.0 % | 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 Ended | Six Months Ended | |||||||||||
June 30, | March 31, | June 30, | June 30, | June 30, | June 30, | |||||||
2025 | 2026 | 2026 | 2026 | 2025 | 2026 | |||||||
RMB | RMB | RMB | USD | RMB | RMB | |||||||
Net (loss)/income attributable to ordinary shareholders | (17,763) | 38,577 | 73,787 | 10,875 | 58,980 | 112,364 | ||||||
Add: share-based compensation | 6,585 | 8,622 | 12,471 | 1,838 | 11,815 | 21,093 | ||||||
impairment of long-term investments | 25,730 | - | 6,031 | 889 | 25,730 | 6,031 | ||||||
Less: 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) | (272) | (970) | (1,706) | (251) | (569) | (2,676) | ||||||
Non-GAAP net income attributable to ordinary | 12,515 | 44,890 | 90,583 | 13,351 | 94,191 | 135,473 | ||||||
Non-GAAP basic net income per ADS | 0.11 | 0.38 | 0.76 | 0.11 | 0.80 | 1.14 | ||||||
Non-GAAP diluted net income per ADS | 0.10 | 0.37 | 0.75 | 0.11 | 0.79 | 1.12 | ||||||
Shares used in computing non-GAAP basic net income per ADS | 117,868,295 | 118,671,804 | 118,907,994 | 118,907,994 | 117,732,413 | 118,790,556 | ||||||
Shares used in computing non-GAAP diluted net income per ADS | 119,660,859 | 120,444,180 | 120,626,317 | 120,626,317 | 119,583,256 | 120,535,906 | ||||||
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SOURCE Youdao, Inc.