Youdao Inc Adr Class A ((DAO)) has held its Q4 earnings call. Read on for the main highlights of the call.
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The recent earnings call of Youdao Inc Adr Class A revealed a balanced sentiment with both positive achievements and notable challenges. While the company celebrated record profitability and robust growth in AI-driven services and smart devices, it faced hurdles with declining revenue in learning services and a decrease in overall Q4 revenue. However, the strategic emphasis on AI and operational efficiency suggests a positive future outlook.
Record Profitability Achieved
For the first time, Youdao Inc reported full-year operating profitability, turning around from a previous loss of RMB466.3 million in 2023 to an income from operations of RMB148.8 million. This significant financial turnaround marks a pivotal achievement for the company.
AI-Driven Subscription Services Growth
AI-driven subscription services flourished, generating sales over RMB200 million and marking a year-over-year increase of more than 130%. This highlights the increasing demand and effectiveness of Youdao’s AI-driven solutions.
Smart Devices Segment Performance
The smart devices segment saw net revenues reach RMB240.4 million in Q4, reflecting an 8.1% year-over-year growth. The success of the Youdao Dictionary Pen was a key driver of this performance, underscoring the potential in smart educational tools.
Online Marketing Services Growth
Online marketing services experienced substantial growth, with net revenues reaching RMB2 billion for the full year, marking a 48.3% year-over-year increase. This growth signifies Youdao’s expanding influence in the digital advertising space.
Successful Launch of New AI Model
The launch of Confucius-o1, a new reasoning model, represents a strategic advancement for Youdao. This open-sourced model supports deployment on consumer-grade GPUs and fosters innovation in the educational sector.
Learning Services Revenue Decline
Despite successes in other areas, learning services revenues fell to RMB617.7 million in Q4, a 21.2% year-over-year decrease. This decline contributed to an overall 12.7% drop in full-year revenue for this segment.
Total Revenue Decrease in Q4
Total net revenues for Q4 were RMB1.3 billion, representing a 9.5% decrease from the same period in 2023. This decline highlights challenges in some of the company’s traditional revenue streams.
Reduced Gross Margin in Learning Services
The gross margin for learning services dropped to 60% in Q4 2024, down from 63.6% in the same period of 2023. This reduction indicates ongoing cost pressures in this segment.
Forward-Looking Guidance
Looking ahead, Youdao has set its sights on moderate revenue growth for 2025, with a continued focus on profitability. The company plans to leverage advancements in AI across its business lines, aiming to enhance its offerings in education and online marketing. The strategic emphasis is on expanding global advertising efforts and boosting products like the Youdao Dictionary Pen.
In summary, the earnings call of Youdao Inc Adr Class A painted a complex picture of achievements and challenges. While the company has made significant strides in profitability and AI-driven services, it faces ongoing revenue challenges in certain sectors. Nonetheless, the strategic focus on AI and operational improvements bodes well for its future prospects.
