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 Highlights
-- Total 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 Results
Net 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 Margin
Gross 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 Expenses
Total 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 Operations
As 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 Shareholders
Net 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 Information
As 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 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$20.0 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 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 (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): +1-888-346-8982 International: +1-412-902-4272 Mainland China (toll free): 400-120-1203 Hong Kong (toll free): 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$1.00, the exchange rate on June 30, 2026 set forth in the H.10 statistical release of the Federal Reserve Board. The Company makes no representation that the RMB or US$ amounts referred to could be converted into US$ or RMB, as the case may be, at any particular rate or at all.
Safe Harbor 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 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 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
interests 2,773 (5,236) (3,616) (533) 1,917 (8,852)
----------- ----------- ----------- ----------- ----------- -----------
Net (loss)/income
attributable to
ordinary
shareholders of
the Company (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 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 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 of
the Company (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)
attributable to
noncontrolling
interests (272) (970) (1,706) (251) (569) (2,676)
----------- ----------- ----------- ----------- ----------- -----------
Non-GAAP net income
attributable to
ordinary
shareholders of
the Company 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.