Youdao, Inc., an AI-powered solutions provider specializing in artificial intelligence applications for the learning and advertising verticals, 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.
Source: Youdao, Inc. May 15, 2025, 04:30 ET Photo: China Daily
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