Youdao (NYSE:DAO) reported fourth-quarter 2025 net revenues of RMB 1.6 billion, up 16.8% year over year, as management highlighted improving cash flow and continued profitability alongside accelerating momentum in learning services and online marketing. Net cash provided by operating activities was RMB 184.2 million in the quarter, up 16.4% from the prior year period, while operating profit reached RMB 60.2 million, marking the company’s sixth consecutive quarter of operating profitability.
Full-year results: revenue growth, higher operating profit, and first annual operating cash inflow
For full-year 2025, Youdao said total net revenues rose 5% year over year to RMB 5.9 billion. Operating profit increased 48.7% to RMB 221.3 million. Management also emphasized that 2025 was the first year the company generated positive net operating cash flow on an annual basis, with RMB 55.2 million of cash provided by operating activities compared with RMB 67.9 million of cash used in 2024.
Learning services return to growth as AI-driven subscriptions scale
In the fourth quarter, learning services net revenues grew 17.7% year over year to RMB 727.2 million, which CEO Feng Zhou attributed to the segment returning to a growth trajectory following the completion of strategic restructuring. Within the segment, digital content services contributed RMB 436.1 million, up 12.2% year over year.
Management highlighted Youdao Lingshi’s performance, saying revenue rose more than 40% year over year and retention rates exceeded 75%, improving by about 5 percentage points. Zhou said the company plans to introduce an English AI essay grading tool following the launch of a Chinese AI essay grading feature, noting it will be powered by the company’s “Confucius” large language model and aligned with examination standards.
AI-driven subscription services were a key growth driver. Management said fourth-quarter sales exceeded RMB 100 million, up more than 80% year over year, and full-year sales approached RMB 400 million, a record level with annual growth exceeding 50%.
The company described two growth avenues in subscription services:
- New applications: Youdao launched ScholarAI, an AI-powered plagiarism detection and writing refinement tool. Management said fourth-quarter sales doubled quarter over quarter and noted an official partnership with Turnitin that it expects will accelerate adoption.
- Enhancements to core apps: The AI simultaneous interpretation feature in Youdao Dictionary and Youdao Desktop Translation posted more than 100% year-over-year sales growth in the fourth quarter, and management said the products received multiple industry awards.
Looking to 2026, President Lei Jin said learning services are expected to return to “around double-digit” year-over-year growth, supported by continued product innovation in Youdao Premium Courses and expansion of AI-driven subscription offerings. In response to an analyst question, management said it views 2026 as an important year for “AI agents,” which it described as more advanced systems capable of completing complex tasks.
Online marketing services post strong growth, with overseas and AI-app demand in focus
Online marketing services net revenues increased 37.2% year over year to RMB 660.9 million in the fourth quarter. Management attributed the growth to increased demand from the NetEase Group and overseas markets, supported by continued investment in AI technology.
Zhou said growth was broad-based across verticals, including gaming and marketing demand from AI applications. He said gaming advertising revenue rose 50% year over year, driven by closer collaboration with NetEase Group and expansion of third-party clients. He also cited over 50% revenue growth tied to demand from “high-growth AI apps,” as rapid advances in large language models fueled marketing spend.
Internationally, management said overseas KOL (key opinion leader) revenues rose more than 50% year over year in the fourth quarter and that campaigns were executed in more than 50 countries during 2025. The company noted TikTok for Business recognized Youdao Ads on its 2025 influencer agency list for the game industry.
Segment gross margin was 27.8% in the fourth quarter, up 2 percentage points sequentially but lower than the prior-year period. Zhou said the year-over-year decline reflected a push for client acquisition—new clients represented about 30% of advertisers in the quarter—and lower onboarding margins, alongside early benefits from technology upgrades such as a second-generation AI ad placement optimizer integrating automated creative production.
Discussing 2026 priorities, management said it plans to focus on growth areas including AI applications, gaming, and short-form drama content, and to roll out additional tools such as a version 2 release of its AI ad placement optimizer, “iMagic Box,” programmatic advertising, and KOL solutions. Lei Jin also outlined plans to “double down” on the international KOL business and explore overseas programmatic advertising as a potential longer-term growth driver.
Smart devices decline, while company highlights product engagement and channel performance
Smart devices net revenues were RMB 176.5 million in the fourth quarter, down 26.6% year over year. Management said it is focused on improving the segment’s operational health, while noting that the Youdao Dictionary Pen remained the top-selling product on JD.com and Tmall during the November 11 shopping festival for the sixth consecutive year.
The company also highlighted progress for the Youdao Tutoring Pen, launched in 2025, including new features such as “intelligent knowledge cards” and upgraded AI-powered video explanations. Management said the system generated more than 600,000 videos since launch and that active users accessed tutoring features more than 10 times per day in the fourth quarter.
On the balance sheet, Youdao reported cash, cash equivalents, restricted cash, and short-term investments of RMB 743.2 million as of December 31, 2025. Contract liabilities, primarily deferred revenue from learning services, were RMB 847.7 million, down from RMB 961.0 million a year earlier.
In closing remarks, management reiterated its commitment to an “AI-native” strategy, with continued investment in vertical large language models and exploration of AI agents across business lines, including advertising optimization and learning and productivity applications.
About Youdao (NYSE:DAO)
Youdao, Inc (NYSE: DAO), established in 2006 as a subsidiary of NetEase, is headquartered in Beijing, China. The company went public on the New York Stock Exchange in October 2019, marking a significant milestone in its development as an intelligent learning and knowledge service provider. Since its inception, Youdao has combined cloud computing, artificial intelligence and big data analytics to create an adaptive learning ecosystem designed to meet the needs of individual learners and organizations.
At the core of Youdao’s offerings is its suite of digital dictionaries and translation tools, including the flagship Youdao Dictionary app and translation engine.
