For investor and media inquiries, please contact:

In China:

Jeffrey Wang

Youdao, Inc.

Tel: +86-10-8255-8163 ext. 89980

E-mail: IR@rd.netease.com

Piacente Financial Communications

Helen Wu

Tel: +86-10-6508-0677

E-mail: youdao@thepiacentegroup.com

In the United States:

Piacente Financial Communications

Brandi Piacente

Tel: +1-212-481-2050

E-mail: youdao@thepiacentegroup.com

Youdao Reports Third Quarter 2025 Unaudited Financial Results

Hangzhou, China –November 20, 2025 – Youdao, Inc. (“Youdao” or the “Company”) (NYSE: DAO), an AI-powered solutions provider specializing in artificial intelligence applications for the learning and advertising verticals, today announced its unaudited financial results for the third quarter ended September 30, 2025.

Third Quarter 2025 Financial Highlights

“We continued to advance our AI-Native Strategy in the third quarter, strengthening our technological capabilities and translating innovation into meaningful user and business value. Building on the solid operating profit in the first half of the year, we strategically increased investments in Youdao Lingshi and our online marketing services to unlock their long-term growth potential. Youdao Lingshi expanded its customer acquisition channels, driving over 40% year-over-year growth in gross billings. Our online marketing services accelerated, with net revenues rising 51.1% year-over-year to a record RMB739.7 million, fueled by strong demand from the NetEase group and overseas markets. In addition, total sales of AI-driven subscription services also reached a new high of approximately RMB100 million in the third quarter, representing over 40% year-over-year growth, supported by ongoing upgrades to existing applications and the rollout of new ones,” said Dr. Feng Zhou, Chief Executive Officer and Director of Youdao.

“Looking ahead, we will continue executing on our AI-Native Strategy, deepening the application of and innovating with our large language model, Confucius, across both our learning and advertising businesses to consistently create customer value. Financially, we remain confident in meeting our full-year targets, delivering strong year-over-year improvements in operating profit and achieving annual operating cash-flow breakeven for the first time,” Dr. Zhou concluded.

Third Quarter 2025 Financial Results

Net Revenues

Net revenues for the third quarter of 2025 were RMB1,628.5 million (US$228.8 million), representing a 3.6% increase from RMB1,572.5 million for the same period of 2024.

Net revenues from learning services were RMB643.1 million (US$90.3 million) for the third quarter of 2025, representing a 16.2% decrease from RMB767.9 million for the same period of 2024. The year-over-year decrease was mainly because we continued to take a disciplined, strategic approach to customer acquisition, which places greater emphasis on higher ROI (return on investment) engagements. We believe this strategy has enhanced the overall resilience and operational efficiency of our business, despite the short-term revenue decline.

Net revenues from smart devices were RMB245.8 million (US$34.5 million) for the third quarter of 2025, representing a 22.1% decrease from RMB315.3 million for the same period of 2024, primarily due to the declined demands of smart learning devices in the third quarter of 2025.

Net revenues from online marketing services were RMB739.7 million (US$103.9 million) for the third quarter of 2025 representing a 51.1% increase from RMB489.4 million for the same period of 2024. The year-over-year increase was mainly attributable to the increased demands from the NetEase group and overseas markets, which was driven by our continued investments in AI technology.

Gross Profit and Gross Margin

Gross profit for the third quarter of 2025 was RMB687.9 million (US$96.6 million), representing a 12.9% decrease from RMB789.5 million for the same period of 2024. Gross margin was 42.2% for the third quarter of 2025, compared with 50.2% for the same period of 2024. The decrease was mainly due to the declined gross profit margin of online marketing services.

Gross margin for learning services was 58.5% for the third quarter of 2025, compared with 62.1% for the same period of 2024. The decrease was mainly due to the decline in economies of scale as a result of the decreased revenues from learning services.

Gross margin for smart devices increased to 50.3% for the third quarter of 2025 from 42.8% for the same period of 2024. The improvement was mainly attributable to the higher gross margin arising from the newly launched Youdao Dictionary Pen in 2025.

Gross margin for online marketing services was 25.4% for the third quarter of 2025, compared with 36.3% for the same period of 2024. The decrease was mainly attributable to our strategic expansion of our client base for advertising services. As the collaboration with new clients remains in its nascent stage, the gross margin for these clients holds potential for future improvement.

Operating Expenses

Total operating expenses for the third quarter of 2025 were RMB659.6 million (US$92.7 million), compared with RMB682.2 million for the same period of last year.

Sales and marketing expenses for the third quarter of 2025 were RMB487.7 million (US$68.5 million), representing a decrease of 6.1% from RMB519.6 million for the same period of 2024. This decrease was attributable to the reduced marketing expenditures in learning services and smart devices in the third quarter of 2025.

Research and development expenses for the third quarter of 2025 were RMB127.8 million (US$18.0 million), representing an increase of 6.9% from RMB119.6 million for the same period of 2024. The increase was primarily due to the increased headcount for research and development employees in online marketing services, leading to higher payroll-related expenses in the third quarter of 2025.

General and administrative expenses for the third quarter of 2025 were RMB44.1 million (US$6.2 million), kept flat the same period of 2024.

Income from Operations

As a result of the foregoing, income from operations for the third quarter of 2025 was RMB28.3 million (US$4.0 million), representing a 73.7% decrease from RMB107.3 million for the same period in 2024. The margin of income from operations was 1.7%, compared with 6.8% for the same period of last year.

Net Income Attributable to Youdao’s Ordinary Shareholders

Net income attributable to Youdao’s ordinary shareholders for the third quarter of 2025 was RMB0.1 million (US$0.0 million), compared with RMB86.3 million for the same period of last year. Non-GAAP net income attributable to Youdao’s ordinary shareholders for the third quarter of 2025 was RMB9.2 million (US$1.3 million), compared with RMB88.7 million for the same period of last year.

Basic and diluted net income per ADS attributable to ordinary shareholders for the third quarter of 2025 was near zero, compared with RMB0.74 for the same period of 2024. Non-GAAP basic and diluted net income per ADS attributable to ordinary shareholders was RMB0.08 (US$0.01), compared with RMB0.76 for the same period of 2024.

Other Information

As of September 30, 2025, Youdao’s cash, cash equivalents, current and non-current restricted cash, and short-term investments totaled RMB557.7 million (US$78.3 million), compared with RMB662.6 million as of December 31, 2024. For the third quarter of 2025, net cash used in operating activities was RMB58.6 million (US$8.2 million). Youdao’s ability to continue as a going concern is dependent on management’s ability to implement an effective business plan amid a changing regulatory environment, generate operating cash flows, and secure external financing for future development. To support Youdao’s future business, NetEase Group has agreed to provide financial support for ongoing operations in the next thirty-six months starting from May 2024. As of September 30, 2025, Youdao has received various forms of financial support from the NetEase Group, including, among others, RMB878.0 million in short-term loan, and US$131.1 million in long-term loans maturing on March 31, 2027 drawn from the US$300.0 million revolving loan facility.

As of September 30, 2025, the Company’s contract liabilities, which mainly consisted of deferred revenues generated from Youdao’s learning services, were RMB751.1 million (US$105.5 million), compared with RMB961.0 million as of December 31, 2024.

Share Repurchase Program

On November 17, 2022, the Company announced that its board of directors had authorized the Company to adopt a share repurchase program in accordance with applicable laws and regulations for up to US$20 million of its Class A ordinary shares (including in the form of ADSs) during a period of up to 36 months beginning on November 18, 2022. This amount was subsequently increased to US$40.0 million in August 2023. In November 2025, the Board approved an amendment to this Program to extend its original expiration date by one year to November 17, 2026. As of September 30, 2025, the Company had repurchased a total of approximately 7.5 million ADSs for a total consideration of approximately US$33.8 million in the open market under the share repurchase program.

Conference Call

Youdao’s management team will host a teleconference call with simultaneous webcast at 5:00 a.m. Eastern Time on Thursday, November 20, 2025 (Beijing/Hong Kong Time: 6:00 p.m., Thursday, November 20, 2025). Youdao’s management will be on the call to discuss the financial results and answer questions.

Dial-in details for the earnings conference call are as follows:

A live and archived webcast of the conference call will be available on the Company’s investor relations website at http://ir.youdao.com.

A replay of the conference call will be accessible by phone one hour after the conclusion of the live call at the following numbers, until November 27, 2025:

About Youdao, Inc.  

Youdao, Inc. (NYSE: DAO) is strategically positioned as an AI-powered solutions provider specializing in artificial intelligence applications for the learning and advertising verticals. Youdao mainly offers learning services, online marketing services and smart devices – all powered by advanced technologies. Youdao was founded in 2006 as part of NetEase, Inc. (NASDAQ: NTES; HKEX: 9999), a leading internet technology company in China.

For more information, please visit: http://ir.youdao.com.

Non-GAAP Measures

Youdao considers and uses non-GAAP financial measures, such as non-GAAP net income/(loss) attributable to the Company’s ordinary shareholders and non-GAAP basic and diluted net income/(loss) per ADS, as supplemental metrics in reviewing and assessing its operating performance and formulating its business plan. The presentation of non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

Youdao defines non-GAAP net income/(loss) attributable to the Company’s ordinary shareholders as net income/(loss) attributable to the Company’s ordinary shareholders excluding share-based compensation expenses, impairment of long-term investments, gain from fair value change of long-term investment and adjustment for GAAP to non-GAAP reconciling item for the income/(loss) attributable to noncontrolling interests. Non-GAAP net income/(loss) attributable to the Company’s ordinary shareholders enables Youdao’s management to assess its operating results without considering the impact of these items, which are non-cash charges in nature. Youdao believes that these non-GAAP financial measures provide useful information to investors in understanding and evaluating the Company’s current operating performance and prospects in the same manner as management does, if they so choose.

Non-GAAP financial measures are not defined under U.S. GAAP and are not presented in accordance with U.S. GAAP. Non-GAAP financial measures have limitations as analytical tools, which possibly do not reflect all items of expense that affect our operations. In addition, the non-GAAP financial measures Youdao uses may differ from the non-GAAP measures uses by other companies, including peer companies, and therefore their comparability may be limited.

For more information on these non-GAAP financial measures, please see the table captioned “Unaudited Reconciliation of GAAP and Non-GAAP Results” set forth at the end of this release.

The accompanying table has more details on the reconciliation between our GAAP financial measures that are mostly directly comparable to non-GAAP financial measures. Youdao encourages you to review its financial information in its entirety and not rely on a single financial measure.

Exchange Rate Information

This announcement contains translations of certain RMB amounts into U.S. dollars (“US$”) at specified rates solely for the convenience of the reader. Unless otherwise stated, all translations from RMB to US$ were made at the rate of RMB7.1190 to US$1.00, the exchange rate on September 30, 2025 set forth in the H.10 statistical release of the Federal Reserve Board. The Company makes no representation that the RMB or US$ amounts referred could be converted into US$ or RMB, as the case may be, at any particular rate or at all.

Safe Harbor Statement

This press release contains forward-looking statements. These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. Statements that are not historical facts, including statements about the Company’s beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties, and a number of factors could cause actual results to differ materially from those contained in any forward-looking statement. In some cases, forward-looking statements can be identified by words or phrases such as “may,” “will,” “expect,” “anticipate,” “target,” “aim,” “estimate,” “intend,” “plan,” “believe,” “potential,” “continue,” “is/are likely to” or other similar expressions. The Company may also make written or oral forward-looking statements in its reports filed with, or furnished to, the U.S. Securities and Exchange Commission, in its annual reports to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Further information regarding such risks, uncertainties or factors is included in the Company’s filings with the SEC. All information provided in this press release is as of the date of this press release, and the Company does not undertake any duty to update such information, except as required under applicable law.

Note 1:

The conversion of Renminbi (RMB) into United States dollars (USD) is based on the noon buying rate of USD1.00=RMB7.1190 on the last trading day of September (September 30, 2025) as set forth in the H.10 statistical release of the U.S. Federal Reserve Board. 

Note 1:

The conversion of Renminbi (RMB) into United States dollars (USD) is based on the noon buying rate of USD1.00=RMB7.1190 on the last trading day of September (September 30, 2025) as set forth in the H.10 statistical release of the U.S. Federal Reserve Board.