Youdao Reports First Quarter 2025 Unaudited Financial Results

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:

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:

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