Youdao, Inc. (NYSE:DAO), the digital learning arm of NetEase, came under pressure Thursday after the company delivered third-quarter results that failed to meet analyst expectations. Shares slid 2.26% in premarket trading following the announcement.
The company reported adjusted earnings of RMB0.08 per share, far below the consensus estimate of RMB0.76. Revenue totaled RMB1.63 billion, missing forecasts of RMB1.68 billion, though still marking 3.6% year-over-year growth.
Despite maintaining profitability for a fifth straight quarter, the shortfall on both the top and bottom line weighed on investor sentiment. Operating profit reached RMB28.3 million, while operating cash outflow improved by 31.4% compared with the same period last year.
“We are confident in achieving the rapid improvement in operating profit set at the beginning of the year and annual operating cash-flow breakeven for the first time,” said Feng Zhou, Youdao’s Chief Executive Officer.
Among business segments, online marketing services remained the largest contributor, generating RMB0.74 billion, an increase of 51.1% YoY. Learning services brought in RMB0.64 billion, while the company’s AI subscription services approached RMB100 million, growing more than 40% year over year and marking a new high.
AI-powered tools continue to expand rapidly. The company said its AI simultaneous interpretation solution saw sales jump nearly 200%, with total users surpassing 20 million. In August, Youdao launched its next-generation AI tutoring pen, SpaceX.
Youdao has also developed three proprietary AI engines to bolster its marketing solutions: iMagicBox, an AI-driven creative tool; an influencer marketing platform; and an AI Ad Placement Optimizer designed to improve campaign efficiency.
Even with the earnings miss, Youdao highlighted its steady operational progress, noting that operating profit for the first nine months of 2025 increased nearly 150% YoY, underscoring meaningful efficiency gains.