Chinese edtech firm Youdao's Q3 revenue rises on strong marketing growth

Overview

• Youdao Q3 2025 total net revenue grows 3.6% yr/yr, driven by online marketing services

• Company's gross margin declines to 42.2%, mainly due to lower margins in marketing services

• Income from operations falls 73.7% yr/yr, reflecting increased strategic investments

Outlook

• Company remains confident in meeting full-year targets, including operating cash-flow breakeven

• Youdao to deepen AI-Native Strategy, focusing on large language model Confucius

Result Drivers

• ONLINE MARKETING GROWTH - Revenue from online marketing services rose 51.1% yr/yr, driven by demand from NetEase group and overseas markets

• LEARNING SERVICES DECLINE - Revenue from learning services fell 16.2% yr/yr due to strategic focus on high ROI engagements

• SMART DEVICES DEMAND DROP - Revenue from smart devices decreased 22.1% yr/yr due to declined demand for smart learning devices

Key Details

Analyst Coverage

• The current average analyst rating on the shares is "buy" and the breakdown of recommendations is 6 "strong buy" or "buy", 2 "hold" and no "sell" or "strong sell"

• The average consensus recommendation for the software peer group is "buy"

• Wall Street's median 12-month price target for Youdao Inc is $12.20, about 20.1% above its November 19 closing price of $9.75

• The stock recently traded at 31 times the next 12-month earnings vs. a P/E of 29 three months ago

Press Release: ID:nPncgvmfJa

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(This story was created using Reuters automation and AI based on LSEG and company data. It was checked and edited by a Reuters journalist prior to publication.)