In the post-"Double Reduction" era where the education and training industry is generally striving to "survive," Gaotu Techedu Inc.'s (GOTU) Q3 2025 earnings call sent a clear signal: the competitive paradigm for education companies is shifting from "burning cash for growth" to "efficiency for profitability."
This time, Gaotu not only validated its new business model but also proactively hit the "brakes," placing profitability at the strategic core—a move that may mark the beginning of a "rational prosperity" phase for China’s education and training sector.
**Moving Beyond "Growth at All Costs": Strategic Slowdown for Healthy Unit Economics** Over the past two years, Gaotu’s revenue more than doubled (53.8% growth in FY2024, projected 35% in FY2025). However, management took the rare step of lowering growth expectations for the next fiscal year—FY2026 revenue is now projected to grow just 15%. This seemingly "conservative" guidance reflects strategic discipline.
CFO Shen Nan emphasized, "We no longer prioritize speed as the sole objective but focus on whether each business unit’s economic model is healthy." This signals Gaotu’s shift from "casting a wide net" to "digging deep wells": scaling proven business models (e.g., high school planning, postgraduate exam prep for college students) to boost margins, while refining product quality and teacher training for nascent competency-based courses rather than chasing blind expansion.
This "tiered management, precision investment" strategy is a hallmark of mature enterprises distinguishing themselves from startups.
**Profitability Is No Accident: Three Business Lines Turn Profitable** The standout this quarter wasn’t revenue figures but a structural shift in profitability: - Non-academic online services turned profitable for the first time in a single quarter, with full-year "meaningful margins" expected. - The adult and college education segment saw nearly 50% revenue growth and high double-digit net profit growth, returning to positive territory. - Traditional high school tutoring improved per-employee efficiency by 20% and reduced refund rates by double digits, reflecting operational optimization.
The simultaneous profitability of these three core businesses demonstrates Gaotu’s diversified model now generates organic cash flow, eliminating reliance on a single engine or capital infusions. Notably, offline learning services surpassed 10% of revenue, proving its OMO (Online-Merge-Offline) model has evolved from "concept" to "contribution" as a stable cash flow source.
**AI Beyond Hype: Driving Efficiency and Experience** While "AI empowerment" was repeatedly highlighted in the call, Gaotu translated it into measurable outcomes: 20% higher team efficiency, lower refund rates, and faster localized course deployment. This indicates AI is deeply embedded in teaching delivery, service matching, and operations—serving as a foundational tool for unit economics, not just marketing buzz.
**Industry Takeaway: Education’s "Second Curve" Must Be Profitable** Once, education firms relied on fundraising narratives and losses to buy market share. Gaotu’s results prove that even under regulatory scrutiny and fragmented demand, sustainable models can be built through product strength, operational efficiency, and user trust.
For FY2026, as "profitability" becomes Gaotu’s keyword, it signals not just a financial goal but a return to core values—education’s essence lies in service and outcomes, not traffic or valuation. For the industry, this may mark a long-overdue awakening and the starting point of a new high-quality growth cycle.
Gaotu’s transformation mirrors the broader evolution of China’s education sector—from reckless expansion to rational maturity. When a company dares to slow down and focus on profits, it’s often preparing to go further.
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