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Youdao
(NYSE:DAO)
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Rating:55Neutral
Price Target:
$10.00
▼(-40.44% Downside)
Action:Reiterated
Date:01/13/26
The score is held back primarily by financial quality concerns (negative equity and weak cash flow) and a high valuation (P/E 76.52). Technicals are supportive with a strong uptrend, but momentum appears overextended (RSI ~72, Stoch ~91). The latest earnings call was mixed, with strong online marketing growth and improved cash outflow offset by a sharp operating profit decline and weakness in Learning Services and Smart Devices.
Positive Factors
Healthy Gross Margin
A near-49% gross margin on core products indicates durable unit economics for digital and software offerings. This margin provides structural cushion to absorb SG&A and R&D spending, supporting sustainable investment in AI and product development while preserving long-term profitability potential.
Negative Factors
Negative Shareholders' Equity
A large negative equity balance signals accumulated losses or balance sheet impairment, limiting financial flexibility and borrowing capacity. This structural weakness raises refinancing risk and constrains ability to fund strategic investments without dilutive or costly external financing.
Read all positive and negative factors
Positive Factors
Negative Factors
Healthy Gross Margin
A near-49% gross margin on core products indicates durable unit economics for digital and software offerings. This margin provides structural cushion to absorb SG&A and R&D spending, supporting sustainable investment in AI and product development while preserving long-term profitability potential.
Read all positive factors
Youdao Key Performance Indicators (KPIs)
Any
Gross Profit by Segment
Measures profit after direct costs for each business line, highlighting which segments deliver higher margins and which are cost-heavy. Differences in gross profit reveal where the company has pricing power and scalable advantages versus areas that may need cost control, helping investors judge whether revenue growth will translate into sustainable earnings.
Measures profit after direct costs for each business line, highlighting which segments deliver higher margins and which are cost-heavy. Differences in gross profit reveal where the company has pricing power and scalable advantages versus areas that may need cost control, helping investors judge whether revenue growth will translate into sustainable earnings.
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The Fly
The FlyYoudao (DAO) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$2.03B
Dividend YieldN/A
Average Volume (3M)128.14K
Price to Earnings (P/E)81.8
Beta (1Y)0.81
Revenue Growth10.03%
EPS Growth-27.61%
CountryUS
Employees3,595
SectorConsumer Defensive
Sector Strength42
IndustryEducation & Training Services
Share Statistics
EPS (TTM)1.35
Shares Outstanding32,646,270
10 Day Avg. Volume111,582
30 Day Avg. Volume128,141
Financial Highlights & Ratios
PEG Ratio2.58
Price to Book (P/B)-4.22
Price to Sales (P/S)1.41
P/FCF Ratio0.00
Enterprise Value/Market Cap<0.01
Enterprise Value/Revenue<0.01
Enterprise Value/Gross Profit<0.01
Enterprise Value/Ebitda<0.01
Forecast
1Y Price Target
$22.00Price Target Upside31.03% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering1
EPS Forecast (FY)1.65
Revenue Forecast (FY)$6.45B
Youdao Business Overview & Revenue Model
Company Description
Youdao, Inc. is a Chinese internet technology company that delivers online services focused on content, community engagement, communication platforms, and e-commerce. Its operations are structured into three core divisions: Learning Services, Smar...
How the Company Makes Money
Youdao generates revenue through multiple streams, including subscription fees from its online education services and language learning apps. The company also earns money through the sale of its educational software products and digital content. A...
Youdao Earnings Call Summary
Earnings Call Date:Aug 20, 2026
(Q2-2026)
| % Change Since: |
Next Earnings Date:Nov 12, 2026
Earnings Call Sentiment Positive
The earnings call conveyed a predominantly positive operational and financial trajectory: revenue and gross profit grew, the company delivered a clear net income turnaround, operating profit and cash flow strengthened materially, and AI product advances (Confucius 4, Confucius4-TTS, AI agents) drove meaningful user engagement and learning revenue growth. Key negatives included a steep decline and margin pressure in the smart devices segment and a year-over-year revenue decline in online marketing (offset partially by margin improvement). Overall, the positive improvements in profitability, cash generation, AI-driven learning growth and product momentum outweigh the device- and ad-revenue headwinds.Positive Updates
Solid Top-Line Growth
Total net revenues for Q2 2026 were RMB 1.5 billion, up 3.5% year-over-year; first-half 2026 net revenues were RMB 2.8 billion, up 3.6% year-over-year.
Negative Updates
Smart Devices Revenue Decline
Smart devices net revenues fell to RMB 86.8 million in Q2, a 31.5% year-over-year decline, driven by weaker demand for smart learning hardware.
Read all updates
Q2-2026 Updates
Positive
Negative
Solid Top-Line Growth
Total net revenues for Q2 2026 were RMB 1.5 billion, up 3.5% year-over-year; first-half 2026 net revenues were RMB 2.8 billion, up 3.6% year-over-year.
Read all positive updates
Company Guidance
Management guided that they expect continued margin and profitability improvement in H2 2026 driven by deeper AI/LLM integration and new AI agents (multiple model/agent launches planned in September), noting Q2 results to frame the outlook: total net revenue of RMB 1.5 billion (+3.5% YoY; RMB 2.8 billion H1, +3.6% YoY), Q2 operating profit of RMB 111.5 million (nearly 4x YoY) and operating margin of 7.6% (vs 2% a year ago), net income attributable of RMB 73.8 million (non‑GAAP RMB 90.6 million), Q2 net cash from operations RMB 334.2 million (+80.7% YoY; H1 operating cash flow RMB 241.1 million vs a RMB 70.5 million outflow a year ago); segment metrics they expect to improve include online‑marketing (Q2 revenue RMB 584.4 million, -7.7% YoY; Q2 margin 28.7%, +~3 pp YoY with Q3 margin expected to continue improving), learning services (Q2 revenue RMB 795.6 million, +20.9% YoY; Q2 gross margin 65.5% vs 59.8% a year ago; Lingshi retention >75%; AI subscriptions ~RMB100 million in Q2, +>20% YoY; essay grading and simultaneous interpretation usage +100% YoY), and smart devices (Q2 revenue RMB 86.8 million, -31.5% YoY; Q2 margin 32.8% and H1 ~37%, with management targeting >40% margin in H2), while continuing to add customers (100+ new advertisers in Q2) and prioritize higher‑ROI, higher‑margin opportunities to drive further operating‑profit gains.Youdao Financial Statement Overview
Summary
Income Statement
65
Positive
Balance Sheet
50
Neutral
Cash Flow
40
Negative
| Breakdown | TTM | Dec 2025 | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 6.00B | 5.91B | 5.63B | 5.39B | 5.01B | 4.02B |
| Gross Profit | 2.71B | 2.62B | 2.75B | 2.77B | 2.59B | 1.99B |
| EBITDA | 235.69M | 200.01M | 183.28M | -439.92M | -638.11M | -857.70M |
| Net Income | 160.52M | 107.35M | 82.21M | -549.93M | -727.03M | -995.65M |
Balance Sheet | ||||||
| Total Assets | 1.96B | 1.98B | 1.81B | 1.67B | 2.28B | 2.63B |
| Cash, Cash Equivalents and Short-Term Investments | 846.31M | 738.02M | 655.78M | 526.66M | 1.02B | 826.88M |
| Total Debt | 1.71B | 1.85B | 1.85B | 1.60B | 1.48B | 1.25B |
| Total Liabilities | 3.76B | 3.91B | 3.90B | 3.80B | 3.75B | 3.36B |
| Stockholders Equity | -1.85B | -1.97B | -2.14B | -2.19B | -1.54B | -807.07M |
Cash Flow | ||||||
| Free Cash Flow | 0.00 | 0.00 | -79.70M | -456.00M | -672.88M | -1.41B |
| Operating Cash Flow | 0.00 | 0.00 | -67.91M | -438.14M | -603.12M | -1.35B |
| Investing Cash Flow | 0.00 | 0.00 | -13.59M | 125.57M | 125.82M | 47.07M |
| Financing Cash Flow | 0.00 | 0.00 | 228.51M | -18.94M | 184.65M | 1.78B |
Youdao Technical Analysis
Neutral
16.79
Price Trends
15.00
Positive
13.16
Positive
11.62
Positive
Market Momentum
0.42
Positive
49.90
Neutral
19.63
Positive
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For DAO, the sentiment is Neutral. The current price of 16.79 is below the 20-day moving average (MA) of 17.22, above the 50-day MA of 15.00, and above the 200-day MA of 11.62, indicating a neutral trend. The MACD of 0.42 indicates Positive momentum. The RSI at 49.90 is Neutral, neither overbought nor oversold. The STOCH value of 19.63 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for DAO.
Youdao Risk Analysis
Youdao disclosed 97 risk factors in its most recent earnings report. Youdao reported the most risks in the "Finance & Corporate" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Youdao Peers Comparison
UnderperformOutperform
Sector (62)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
79 Outperform | $5.63B | 2.37 | 24.59% | ― | 32.55% | 846.04% | |
74 Outperform | $9.13B | 19.33 | 11.96% | 2.44% | 15.64% | 32.37% | |
62 Neutral | $20.33B | 14.63 | -3.31% | 3.23% | 1.93% | -12.26% | |
55 Neutral | $2.03B | 81.77 | -8.24% | ― | 10.03% | -27.61% | |
54 Neutral | $98.64M | -0.09 | 61.87% | ― | 82.80% | -243.73% | |
53 Neutral | $392.71M | -10.96 | -30.05% | ― | 24.86% | 48.69% | |
51 Neutral | $23.32M | -1.03 | -46.01% | ― | 1.78% | 31.44% |
* Consumer Defensive Sector Average
DAO
Youdao
16.44
7.51
84.10%
EDU
New Oriental Education Tech
57.94
11.83
25.66%
COE
China Online Education Group
15.71
-20.49
-56.60%
TAL
TAL Education Group
11.72
0.91
8.42%
GOTU
Gaotu Techedu
1.82
-2.16
-54.27%
YQ
17 Education & Technology Group
2.12
0.17
8.72%
Youdao Corporate Events
Youdao Q1 2026 Results Show Modest Revenue Growth but Sharply Lower Profit as AI Push and NetEase Support Underpin Strategy
May 21, 2026
Youdao reported unaudited results for the first quarter ended March 31, 2026, showing total net revenues of RMB1.3 billion, up 3.8% year on year, driven by growth in learning services and a 20.9% jump in online marketing services, despite a 42.6% ...
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.