While the after-school tutoring industry continues to search for its transformation path, Gaotu Techedu Inc. (NYSE: GOTU) has taken the lead by presenting a promising possibility through a robust financial report.
Results for the first quarter of the 2026 fiscal year, released on June 2nd, show that the company's revenue reached 1.69 billion yuan, a year-over-year increase of 13.2%. Its adjusted net profit was 41.42 million yuan, marking a second consecutive year of profitability in the first quarter. More critically, the forward-looking indicator of deferred revenue grew by 24.1% year-over-year to 1.79 billion yuan, indicating strong momentum for growth in the next quarter.
"True resilience through cycles has never been solely about scale growth itself, but more about the underlying organizational capabilities, product strength, and user trust that are built up over time." This statement by Larry Xiangdong Chen, founder and chairman of Gaotu, perhaps best annotates this earnings report. Against a backdrop of widespread industry anxiety over the 'pains of transformation,' Gaotu's consecutive profitability demonstrates that the long-term value of education is finally being reflected in financial performance.
A Triple-Barrelled Proof of Quality: Profit, Cash, and Efficiency All Improve
The quality of financial data serves as a touchstone for corporate value. Analyzing Gaotu's Q1 report reveals significant improvements across three key dimensions.
Profit quality continues to improve. This quarter, the company reported an operating profit of 6.87 million yuan, a net profit of 34.51 million yuan, and a Non-GAAP net profit of 41.42 million yuan. A particularly landmark achievement was the K-12 online business crossing the breakeven point for the first time. This profit was not generated simply by cost-cutting, but rather through a positive cycle driven by supply-side reforms: enhanced suitability of teaching products and optimized customer acquisition efficiency, leading to endogenous, self-sustaining capabilities. Larry Chen explicitly stated that this profitable growth is transitioning from a "phase-specific achievement" to a "sustainable operational capability."
The cash flow foundation remains solid. As of the end of the quarter, the company's combined cash and cash equivalents, restricted cash, and short-term investments exceeded 3.2 billion yuan. Cash receipts for the period were 1.0 billion yuan, up 12.1% year-over-year. This genuine inflow of cash confirms market recognition of the company's products. Concurrently, the company's share repurchase program is progressing steadily, with cumulative repurchases exceeding 700 million yuan as of June 1, 2026. "A robust cash reserve provides strong support for the long-term strategic layout in product, technology, and talent," stated Larry Chen.
Operational efficiency and predictability are rising. The combined ratio of R&D and general & administrative expenses decreased by 0.7 percentage points year-over-year. The significant growth in deferred revenue, coupled with the company's Q2 revenue growth guidance of 13.6% to 15.0%, indicates increasing maturity in the business model. The shift from "scale expansion" to "profitable growth" means Gaotu's value benchmark has changed from "how fast it runs" to "how far it can go."
Lifelong Companionship: The Logic of "Monetizing Trust" Across Multiple Business Lines
Behind the high growth lies deep operational engagement across the user lifecycle. Gaotu has now formed a multi-business matrix covering K-12 literacy education, high school tutoring, university and civil service exam preparation, and overseas study services. While seemingly independent, these lines share a common logic: supply-side reforms to boost efficiency and service refinement to increase user stickiness.
The profitability breakthrough in the K-12 literacy business stems from "extracting efficiency from the supply side." Unlike the industry's common "cost-cutting profitability" approach (slashing marketing and squeezing costs), Gaotu chose to delve into provincial markets, developing localized teaching systems tailored to the specific exam situations and learning conditions of different regions. This has improved class renewal rates while lowering customer acquisition costs, charting a path of "efficiency-enhancing profitability."
The K-12 literacy business also converts previously accumulated trust into brand equity. According to COO Luo Bin, Q1 collections for this segment grew over 20%, with its revenue contribution exceeding 35%. Its online business has been profitable for two consecutive corresponding periods. The traffic effect brought by celebrity endorsements has further lowered customer acquisition barriers, directly converting "trust" into "retention."
The core of the high school business is "upgrading the granularity of service." Within the large-class setting, Gaotu introduced a "one-on-one dedicated service by teaching assistants," leveraging an AI-based learning diagnosis system to create personalized study plans for each student. The university and civil service segment achieved over 15% growth in cash receipts and a revenue contribution of 10% by optimizing its product portfolio and operational efficiency.
From K-12 to adult education, Gaotu is extending the relationship from a "one-time customer acquisition" to "lifelong companionship." As word-of-mouth builds like a snowball, the dual harvest of financial performance and user trust becomes inevitable.
AI as the Solution: How Technology Unlocks Education's "Impossible Trinity"
Supporting this business system is the AI DNA that Gaotu has honed over 12 years. The education industry has long grappled with an "impossible trinity": the difficulty of simultaneously achieving high quality, large scale, and personalization. Gaotu's approach to solving this puzzle involves a three-tiered implementation under its "All with AI, Always AI" strategy.
First, AI for scaling efficiency. AI has permeated the entire chain from teaching content generation and customer conversion to operational management. For example, AI automatically generates teaching feedback, shortening the content iteration cycle by over 30%. Following the integration of the DeepSeek large language model in 2025, team collaboration efficiency and the scientific rigor of subject selection planning saw significant improvement. The "Daniel Wu AI Oral English Course" launched that same year, featuring immersive dialogue and personalized learning reports, became a viral product for a time.
Second, AI standardizes "teaching according to aptitude." Gaotu deconstructs the learning process into parts that can be "taken over by AI" and those that "require human leadership": repetitive tasks like learning diagnosis and path planning are handled by AI, allowing teachers to focus on emotional encouragement and intellectual inspiration. In 2025, a collaboration with Feishu embedded multi-dimensional table capabilities into the entire chain of "teaching research, instruction, and service," enabling the scalable delivery of "tailor-made for each individual" teaching.
Third, defining the boundary where "AI serves people." Amidst industry debates on whether "AI will replace teachers," Gaotu has maintained a steady focus: "AI is a tool; people are the core." Technology acts only as an efficiency amplifier, while the warmth of education is always safeguarded by teachers. This clear-headed understanding has driven Gaotu to establish an AI Smart Education Laboratory in collaboration with Renmin University of China, co-develop a personalized education large model with Fudan University, and set up an AI R&D center in Shanghai's Xuhui District, forming a closed loop of "industry, academia, research, and application."
From a self-developed live-streaming platform supporting large classes of tens of thousands, to the implementation of AI grading and intelligent quality inspection systems, and now to a "human-machine co-intelligence" model for the entire learning journey—over 12 years, Gaotu has demonstrated that technology will not overturn education, but education companies that master technology will ultimately reshape the industry landscape.
Looking back at Gaotu's 12-year journey, one consistent theme remains: reverence for teachers and adherence to the mission of "making learning better." While the industry chased short-term traffic, the company focused on developing localized teaching research. Amidst the proliferation of AI hype, it chose to "go deep before going wide." This discipline and focus have ultimately crystallized into the user trust, organizational capability, and technological moat reflected in its financial reports.
Education is a marathon with no finish line. For Gaotu, consecutive profitability is not the destination, but another milestone validating the correctness of a long-term philosophy. As Larry Chen stated, "Persist in doing the right things, and time will give you everything you desire." On the new track of smart education, the growth ceiling for this company may have just begun to rise.
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