Youdao (NYSE:DAO) Posts Quarterly Earnings Results, Beats Expectations By $0.09 EPS

Key Points

• Youdao reported quarterly EPS of $0.11, beating estimates by $0.09, although revenue of $215.91 million fell short of the $229.02 million consensus.
• Profitability and cash flow improved sharply: operating profit nearly quadrupled year over year to RMB 111.5 million, while operating cash inflow rose 80.7% to RMB 334.2 million. Learning-services revenue increased 20.9%, supported by AI-powered products and strong course retention.
• Smart-device revenue declined 31.5% and online-marketing revenue fell 7.7% amid weaker demand and the exit from lower-return opportunities. Analysts maintain a consensus “Hold” rating on the stock.

Youdao (NYSE:DAO - Get Free Report) released its earnings results on Thursday. The company reported $0.11 EPS for the quarter, topping analysts' consensus estimates of $0.02 by $0.09, FiscalAI reports. The company had revenue of $215.91 million for the quarter, compared to analysts' expectations of $229.02 million. Youdao had a negative return on equity of 4.51% and a net margin of 1.19%.

Here are the key takeaways from Youdao's conference call:

• Profitability and cash flow improved sharply: Q2 operating profit reached RMB 111.5 million, nearly four times higher year over year, marking the eighth consecutive profitable quarter. Operating cash inflow rose 80.7% to RMB 334.2 million.
• Learning services revenue increased 20.9% to RMB 795.6 million, supported by Youdao Lingshi and AI-powered features such as essay grading, personalized recommendations, and college-admission advising. Lingshi and programming courses each reported retention above 75%, while AI-driven subscription sales grew more than 20% year over year.
• Management plans multiple AI model and agent launches in September, with a focus on voice, multilingual translation, mathematics, and advertising. HiEcho billings and simultaneous-interpretation engagement each grew more than 100% year over year, while Confucius 4 delivered improved reasoning and lower inference costs.
• Smart-device revenue fell 31.5% year over year to RMB 86.8 million, pressured by weaker demand, higher memory costs, and reduced hardware scale. Online marketing revenue also declined 7.7% as Youdao deliberately exited lower-ROI opportunities, although margins improved and management expects further improvement in Q3.

Youdao Stock Up 0.9%

NYSE DAO opened at $16.80 on Friday. The stock's 50-day simple moving average is $14.51 and its two-hundred day simple moving average is $12.03. Youdao has a twelve month low of $8.30 and a twelve month high of $18.94. The company has a market capitalization of $2.02 billion, a price-to-earnings ratio of 186.67 and a beta of 0.59.

Institutional Trading of Youdao

A hedge fund recently raised its stake in Youdao stock. Public Employees Retirement System of Ohio lifted its holdings in shares of Youdao, Inc. Unsponsored ADR (NYSE:DAO - Free Report) by 35.9% during the 3rd quarter, according to the company in its most recent filing with the SEC. The fund owned 29,286 shares of the company's stock after purchasing an additional 7,729 shares during the period. Public Employees Retirement System of Ohio's holdings in Youdao were worth $291,000 as of its most recent filing with the SEC. 21.91% of the stock is owned by hedge funds and other institutional investors.

Analysts Set New Price Targets

Several brokerages have commented on DAO. Weiss Ratings raised shares of Youdao from a "sell (d)" rating to a "sell (d+)" rating in a research report on Friday, July 17th. Wall Street Zen downgraded Youdao from a "buy" rating to a "hold" rating in a research report on Saturday, May 23rd. One investment analyst has rated the stock with a Buy rating and one has assigned a Sell rating to the company. According to MarketBeat, the stock has a consensus rating of "Hold".

Youdao Company Profile

Youdao, Inc NYSE: DAO, established in 2006 as a subsidiary of NetEase, is headquartered in Beijing, China. The company went public on the New York Stock Exchange in October 2019, marking a significant milestone in its development as an intelligent learning and knowledge service provider. Since its inception, Youdao has combined cloud computing, artificial intelligence and big data analytics to create an adaptive learning ecosystem designed to meet the needs of individual learners and organizations.

At the core of Youdao's offerings is its suite of digital dictionaries and translation tools, including the flagship Youdao Dictionary app and translation engine.

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