Q2 2026 Youdao Inc Earnings Call Transcript
Key Points
- Youdao Inc (DAO) achieved a record-high operating profit of RMB111.5 million in Q2 2026, marking its 8th consecutive quarter of profitability and a nearly fourfold year-over-year increase.
- Net cash inflow from operating activities surged 80.7% year-over-year to RMB334.2 million, reflecting strong cash generation and improved financial health.
- Learning services revenue grew 20.9% year-over-year to RMB795.6 million, driven by strong performance of Youdao Lingshi, which maintained a high retention rate of over 75%.
- AI-driven subscription products generated approximately RMB100 million in sales during Q2, up over 20% year-over-year, with Hi Echo gross billings growing more than 100%.
- The launch of Confucius 4, featuring significant upgrades in multimodal voice, translation, and math reasoning, reduced inference costs and increased translation speed by 80%, positioning Youdao Inc (DAO) for future AI-driven growth.
- Smart devices revenue declined 31.5% year-over-year to RMB86.8 million, reflecting weak demand and a drop in gross margin from 41.5% to 32.8% due to rising memory costs.
- Online marketing services revenue decreased 7.7% year-over-year to RMB584.4 million, as the company deliberately prioritized higher-margin opportunities, potentially limiting top-line growth.
- Gross margin for smart devices fell significantly, down approximately 11 percentage points year-over-year in the first half of 2026, with memory costs expected to remain elevated in the near term.
- Total operating expenses increased to RMB605.3 million from RMB580.6 million, driven by higher sales and marketing and R&D costs, which could pressure future profitability if not offset by revenue growth.
- Contract liabilities decreased to RMB835.1 million from RMB847.7 million at the end of 2025, indicating a potential slowdown in deferred revenue from learning services.
Good day and welcome to Youdao's second-quarter 2026 earnings conference call. (Operator Instructions) Please note, this event is being recorded.
I would now like to turn the conference over to Mr. Jeffrey Wang, Investor Relations Director of Youdao. Please go ahead.
Thank you, operator. Please note that the discussion today will contain forward-looking statements related to the future performance of the company, which are intended to qualify for the Safe Harbor fund liability as established by the US Private Securities Litigation Reform Act. Such statements are now guarantees of the future performance and are subject to certain risks and uncertainties, assumptions and other factors.
Some of these risks are beyond the company's control and could cause actual results to differ materially from those mentioned in today's press release and this discussion. A general discussion of the risk factors that could affect Youdao's business and financial results is included in certain company filings
| Access to All Earning Calls and Stock Analysis | |
| 30-Year Financial on one screen | |
| All-in-one Stock Screener with unlimited filters | |
| Customizable Stock Dashboard | |
| Real Time Insider Trading Transactions | |
| 8,000+ Institutional investors’ 13F holdings | |
| Powerful Excel Add-in and Google sheets Add-on | |
| All data downloadable | |
| Quick customer support | |
| And much more... |
Trustpilot
We'd love to learn more about your experiences on GuruFocus.com and how we can improve!
Take Survey
