Key Points – Revenue and profitability improved modestly in Q1 2026, with net revenue up 3.8% year over year to RMB 1.3 billion and operating profit of RMB 57.5 million.
Youdao also posted its seventh straight quarter of operating profitability, while net operating cash outflow narrowed sharply. – AI remained the company’s main growth driver, with new launches including Confucius4, EmotiVoice 2, Confucius Translation 4, LobsterAI and Youdao Baoku
Management said Youdao is focusing on education, productivity and advertising opportunities built around AI models, tools and agents. – Learning services and advertising were strong, while smart devices lagged: learning services revenue rose 4.2% and online marketing services jumped 20.9%, but smart devices revenue fell 42.6%. The company said it is prioritizing profitability and inventory discipline in devices, while advertising is becoming a key operating profit contributor. Youdao (NYSE:DAO) reported a modest increase in first-quarter 2026 revenue while maintaining operating profitability for a seventh consecutive quarter, as management said the company continued to invest in artificial intelligence products and infrastructure.
CEO Feng Zhou said net revenue for the quarter was RMB 1.3 billion, up 3.8% from a year earlier. Operating profit was RMB 57.5 million, with operating margin improving sequentially by 0.5 percentage points to 4.3%. Zhou said operating profit declined 44.7% year over year, primarily due to investments in strategic initiatives including AI, as well as a high comparison base from the restructuring of learning services in the prior-year period.