Gaotu Techedu Q1 Earnings Call Highlights

Key Points

• Gaotu Techedu returned to profitability in Q1 2026, with revenue up 13.2% year over year to about RMB 1.7 billion and non-GAAP net income of RMB 41.4 million. Management said disciplined spending and improved operating efficiency helped support the result.
• Learning services remained the core growth engine, contributing more than 95% of net revenue, while non-academic tutoring and traditional learning services drove most of the business. Offline and one-on-one tutoring also posted strong growth, and deferred revenue rose 24.1% year over year to nearly RMB 1.8 billion.
• AI integration and offline expansion are key strategic priorities for future growth. The company is using AI to improve curriculum, tutoring, and employee productivity, while continuing to expand offline services cautiously, with plans to extend its model to Wuhan in 2026.

Gaotu Techedu NYSE: GOTU reported first-quarter 2026 revenue growth and a return to profitability on a non-GAAP basis, as management emphasized disciplined spending, artificial intelligence integration and expansion of offline learning services during the company’s earnings call.

Founder, Chairman and Chief Executive Officer Larry Chen said the quarter represented “another important step” in strengthening the company’s operational quality under its profitable growth strategy. He said revenue rose 13.2% year over year to approximately RMB 1.7 billion, while non-GAAP operating profit reached RMB 13.8 million and non-GAAP net profit totaled RMB 41.4 million.

Chen said that, excluding the impact of share repurchases, Gaotu’s cash position increased by RMB 69.7 million year over year, which he said provides support for continued investment in products, technology and talent.

Management Highlights Profitable Growth Strategy

Chen said Gaotu is focused on building profitability as a more stable operating capability rather than relying on periodic results. He said the company’s mature online business continued to show resilient profitability during the quarter, supported by operations, teaching services, user engagement and organizational collaboration.

Chief Operating Officer Bin Luo, who was referred to as Robin during the call, said Gaotu achieved first-quarter profitability for the second consecutive year. He also said research and development expenses and general and administrative expenses as a percentage of revenue declined by 0.7 percentage points year over year, reflecting improvements in management efficiency and organizational collaboration.

Luo said deferred revenue totaled nearly RMB 1.8 billion, up 24.1% year over year, which he said provides visibility into revenue recognition in coming quarters. He noted that education services are subject to seasonality tied to student learning cycles and course schedules, and said the later timing of Chinese New Year shifted the delivery mix between winter and spring classes across quarters.

Learning Services Drive Revenue

Luo said learning services contributed more than 95% of net revenue in the first quarter. He said non-academic tutoring services and traditional learning services, described as Gaotu’s core segments, generated more than 85% of total revenue.

In new initiatives focused on online and offline non-academic tutoring services, gross billings increased more than 20% year over year and contributed more than 35% of total gross billings, Luo said. Revenue in the segment grew more than 15% year over year and accounted for nearly 40% of total revenue. He said the online portion of the segment maintained first-quarter profitability for the second consecutive year.

Luo said another business area accounted for more than 45% of total revenue and maintained healthy growth in the quarter. He said Gaotu’s one-on-one tutoring business posted year-over-year growth of more than 20% in both revenue and gross billings, supported by professional capabilities, service engagement and supply stability.

Educational services for college students and adults also continued to grow, according to Luo. He said gross billings in that area increased more than 15% year over year and contributed more than 25% of total gross billings, while revenue accounted for 10% of total revenue. Within educational services for college students, both gross billings and revenue grew by more than 20% year over year, and operating cash flow improved year over year.

AI Integration Remains a Priority

Chen described AI as a core capability for Gaotu’s scalable growth and organizational transformation. He said the company has been integrating AI into curriculum development, content creation, operational collaboration and learning services.

Chen said AI is being used to enhance question banks and knowledge graphs, support teaching and formative assessment, and assist teachers and curriculum teams with repetitive standardized tasks. On the user side, he said Gaotu is exploring AI-powered learning tools, AI-enhanced one-on-one tutoring scenarios and AI-integrated online large-class courses.

Luo said AI is also improving personalized learning services by helping tutors consolidate and analyze learning data, identify knowledge gaps and create more personalized plans. During the question-and-answer session, management said AI tools and AI agents are being deployed to employees to improve productivity and operating efficiency.

Offline Expansion Advances With Discipline

Chen said Gaotu’s offline service offerings are progressing in line with expectations and are showing value in user engagement, brand equity and long-term value creation. He cited offline educational services for college students across seven cities and said the company’s Zhengzhou Dream Center has been validating an integrated service model that combines learning, daily life services and personal development. Gaotu plans to extend that model to Wuhan in 2026, he said.

In response to a question from CLSA analyst Elsie Sheng, Head of Strategy Mike Xu said offline operations are an important part of Gaotu’s long-term learning service strategy and are intended to build local trust and create a “meaningful second growth curve over time.” Xu said the company has been developing localized curricula, local teams, operating talent and data systems.

Xu said retention has been improving, classroom utilization is moving in the right direction, and cities where Gaotu has operated longer are benefiting from brand recognition and word of mouth. He said offline gross billings and revenue were tracking within the company’s expected range during the first five months of the year, and management expects offline billings and revenue to maintain relatively strong growth in the first half.

Xu said Gaotu will continue to expand offline services with discipline, evaluating user demand, classroom utilization, retention, teacher supply and operating efficiency before scaling further.

Financial Results and Outlook

Senior Finance Director Willa Yao said cost of revenue was RMB 514.8 million in the quarter. Gross profit increased 12.9% year over year to nearly RMB 1.2 billion, with gross margin of 69.5%.

Total operating expenses rose 16.1% year over year to nearly RMB 1.2 billion. Selling expenses increased 19.0% to RMB 844.1 million, or 50.0% of net revenue. Research and development expenses rose 5.7% to RMB 159.0 million, or 9.4% of net revenue. General and administrative expenses increased 12.9% to RMB 164.7 million, or 9.7% of net revenue.

Income from operations was RMB 6.9 million, with an operating margin of 0.4%. Net income was RMB 34.5 million, with a net income margin of 2.0%. On a non-GAAP basis, operating income was RMB 13.8 million and net income was RMB 41.4 million.

Yao said net operating cash outflow increased 73.6% year over year to RMB 828.4 million. As of March 31, 2026, Gaotu held RMB 691.2 million in cash equivalents and restricted cash, RMB 2.1 billion in short-term investments and RMB 501.4 million in long-term investments, for a total of nearly RMB 3.3 billion. Deferred revenue was around RMB 1.8 billion.

As of June 1, 2026, the company had repurchased approximately 33.1 million American depositary shares on the open market for nearly RMB 704 million.

For the second quarter of 2026, Gaotu expects total net revenue of RMB 1.578 billion to RMB 1.598 billion, representing year-over-year growth of 13.6% to 15.0%.

About Gaotu Techedu NYSE: GOTU

Gaotu Techedu Inc NYSE: GOTU, formerly known as GSX Techedu, is a Beijing-based provider of online education services in China. Since its founding in 2014, the company has built a technology-driven platform that delivers live, interactive tutoring sessions to students primarily in the K-12 segment. Gaotu Techedu's rebranding in 2021 underscored its commitment to leveraging cutting-edge digital tools to expand access to quality instruction across core academic subjects.

The company's main offerings include small-group and one-on-one classes in mathematics, Chinese, English, physics and chemistry, as well as targeted test preparation for high-stakes national and local examinations.

This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.