Sunlands Technology Group (NYSE:STG) reported first-quarter 2026 results on Tuesday, posting adjusted earnings per share of RMB11.48 and revenue of RMB440.7 million, down 9.6% from RMB487.6 million in the same period last year.
Shares of the company fell 6.11% in premarket trading following the earnings announcement.
Second-quarter guidance disappoints investors
Investor sentiment weakened after Sunlands issued softer-than-expected revenue guidance for the second quarter of 2026.
The company forecast net revenue between RMB410 million and RMB430 million, implying a year-over-year decline of between 20.2% and 23.9%.
The midpoint of the forecast, RMB420 million, suggested continued pressure on revenue as the company deals with difficult market conditions.
Company delivers 20th consecutive profitable quarter
Net income for the first quarter increased slightly to RMB76.8 million from RMB75.2 million a year earlier, marking Sunlands’ 20th straight profitable quarter.
Net income margin improved to 17.4%, compared with 15.4% in the prior-year period.
“We opened 2026 with net revenues of RMB440.7 million and net income of RMB76.8 million, our 20th consecutive profitable quarter,” said Tongbo Liu, Chief Executive Officer of Sunlands. “These results reflect choices we have been making consistently: raising the bar on learner quality, letting AI compound across the acquisition and delivery workflow, and improving retention in our senior-learning business.”
Operating expenses and marketing costs decline sharply
Operating expenses fell 16.7% year-over-year to RMB284.3 million.
Sales and marketing expenses dropped 19.5% to RMB241.9 million, representing the largest quarterly reduction the company has recorded in recent years.
Student enrollments and billings continue to weaken
Gross billings declined to RMB304.8 million from RMB412.3 million in the same quarter last year.
New student enrollments also fell sharply, dropping to 102,127 from 169,083 in the first quarter of 2025.
Cash reserves remain solid despite deferred revenue decline
As of March 31, 2026, Sunlands held RMB545.7 million in cash and cash equivalents, along with RMB236.0 million in short-term investments.
Deferred revenue totaled RMB500.5 million, down from RMB585.3 million at the end of 2025.