Youdao (DAO) AI Stock Analysis

• Market Cap: $1.11B
• Dividend Yield: N/A
• Average Volume (3M): 104.10K
• Price to Earnings (P/E): 34.8
• Beta (1Y): 0.72
• Revenue Growth: -1.66%
• EPS Growth: N/A
• Country: US
• Employees: 3,750
• Sector: Consumer Defensive
• Sector Strength: 42
• Industry: Education & Training Services
• EPS (TTM): -0.02
• Shares Outstanding: 31,280,890
• 10 Day Avg. Volume: 79,870
• 30 Day Avg. Volume: 104,098
• PEG Ratio: -0.67
• Price to Book (P/B): -2.96
• Price to Sales (P/S): 1.13
• P/FCF Ratio: -79.59
• Enterprise Value/Market Cap: 1.07
• Enterprise Value/Revenue: 0.22
• Enterprise Value/Gross Profit: 0.44
• Enterprise Value/Ebitda: 4.86
• 1Y Price Target: $9.00
• Price Target Upside: -3.12% Downside
• Rating Consensus: Hold
• Number of Analyst Covering: 0

• Rating: 58 Neutral
• Price Target: $9.00 ▼(-3.12% Downside)

Youdao's overall score is driven by its first profitable quarter and strong revenue growth, particularly in online marketing services. However, significant risks remain due to high leverage, cash flow challenges, and valuation concerns.

Youdao Business Overview & Revenue Model

Company Description

Youdao, Inc., an internet technology company, provides online services in the field of content, community, communication, and commerce in China. It operates through three segments: Learning Services, Smart Devices, and Online Marketing Services. The company provides various learning content, applications, and solutions, which cover topics and target people from various age groups for their learning needs through its websites and mobile applications. It offers online knowledge tools, which include Youdao and other dictionaries and translation tools; learning services consisting of tutoring, fee-based premium, and other services; STEAM courses, adult and vocational courses, and other courses, such as China University MOOC; smart devices, such as Youdao Dictionary Pen, Youdao Listening Pod, Youdao Smart Lamp, Youdao Pocket Translator, and Youdao Super Dictionary; education digitalization solutions comprising technologies and solutions licensed to schools or enterprise customers, such as Youdao Smart Learning Terminal, and Youdao Smart Cloud; and online marketing services. In addition, the company provides online courses comprising Youdao Premium Courses and NetEase Cloud Classroom, as well as technical support to the variable interest entities (VIEs). Youdao, Inc. was founded in 2006 and is headquartered in Hangzhou, China. Youdao, Inc. is a subsidiary of NetEase, Inc.

How the Company Makes Money

Youdao generates revenue through multiple streams, including subscription fees from its online learning services, sales of its smart learning devices, and advertising revenue from its digital platforms. The subscription model allows users to access premium content and personalized learning experiences. Additionally, Youdao partners with educational institutions and corporate clients, providing tailored learning solutions that contribute to its earnings. The company also benefits from strategic collaborations with technology firms and educational organizations, enhancing its product offerings and market reach.

Youdao Financial Statement Overview

Summary

Youdao's financial performance shows strengths in revenue growth and gross profitability, but faces challenges with net profitability, high leverage, and cash flow generation. The negative equity and cash flow issues present significant risks.

Income Statement

Youdao has shown a consistent revenue growth over the years, with the most recent annual increase of 4.39% from 2023 to 2024. The gross profit margin for 2024 stands at 48.86%, indicating a healthy profitability at the gross level. However, despite improving from a net loss in previous years, the net profit margin is 1.46% in 2024, showing that profitability at the net level remains a challenge. The EBIT and EBITDA margins are low but show a positive trend, reflecting operational improvements.

Balance Sheet

The company's balance sheet reflects high leverage, with a negative stockholders' equity of -$2.14 billion, resulting in an uncalculated debt-to-equity ratio. This indicates potential financial instability. The equity ratio is also negative due to the negative equity. Despite these concerns, the company has substantial cash reserves of $655.79 million, offering some liquidity cushion.

Cash Flow

The cash flow statement reveals challenges in cash generation, with operating cash flow and free cash flow both at $0 for 2024, indicating potential operational inefficiencies. Earlier years show negative free cash flow, highlighting consistent cash outflows. The lack of positive free cash flow growth and operating cash flow to net income ratio raises concerns about the company's ability to generate cash sustainably.

Breakdown	TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	5.53B	5.63B	5.39B	5.01B	4.02B	3.17B
Gross Profit	2.68B	2.75B	2.77B	2.59B	1.99B	1.45B
EBITDA	244.73M	178.46M	-439.92M	-680.33M	-856.37M	-749.42M
Net Income	146.52M	82.21M	-549.93M	-739.78M	-926.09M	-1.75B
Balance Sheet
Total Assets	1.54B	1.81B	1.67B	2.28B	2.63B	2.07B
Cash, Cash Equivalents and Short-Term Investments	418.28M	655.78M	526.66M	1.02B	826.88M	1.19B
Total Debt	1.82B	1.85B	1.60B	1.44B	1.21B	957.75M
Total Liabilities	3.54B	3.90B	3.80B	3.75B	3.36B	3.48B
Stockholders Equity	-2.05B	-2.14B	-2.19B	-1.54B	-807.07M	-1.41B
Cash Flow
Free Cash Flow	0.00	-79.70M	-456.00M	-672.88M	-1.41B	-358.42M
Operating Cash Flow	0.00	-67.91M	-438.14M	-603.12M	-1.35B	-321.56M
Investing Cash Flow	0.00	-13.59M	125.57M	125.82M	47.07M	760.97M
Financing Cash Flow	0.00	228.51M	-18.94M	184.65M	1.78B	26.56M

Youdao Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 9.29
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Positive
• MACD: Negative
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For DAO, the sentiment is Positive. The current price of 9.29 is above the 20-day moving average (MA) of 8.89, above the 50-day MA of 8.92, and above the 200-day MA of 8.44, indicating a bullish trend. The MACD of 0.08 indicates Negative momentum. The RSI at 58.64 is Neutral, neither overbought nor oversold. The STOCH value of 78.75 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for DAO.

Youdao Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
AFYA	77 Outperform	1.48B	12.20	15.10%	<0.01%	1.02%	9.06%
COUR	70 Neutral	1.93B	-36.40	-13.31%	―	7.10%	49.18%
UDMY	64 Neutral	1.05B	-33.62	-13.13%	―	3.93%	63.52%
DAO	58 Neutral	$1.11B	34.77	25.15%	―	-1.66%	―
GOTU	52 Neutral	826.06M	-8.53	-54.25%	―	56.38%	-16.84%
KLC	52 Neutral	810.32M	-12.35	-10.74%	―	3.85%	-208.51%
Sector *	62 Neutral	$20.33B	14.63	-3.31%	3.23%	1.93%	-12.26%

Youdao Corporate Events

Youdao Achieves First Profitable Q2 with AI Strategy

On August 14, 2025, Youdao, Inc. announced its unaudited financial results for the second quarter ending June 30, 2025. The company reported a 7.2% increase in total net revenues to RMB1.4 billion, with significant growth in online marketing services and a notable decrease in smart device revenues. The quarter marked Youdao’s first-ever profitable second quarter, driven by the successful execution of its AI Native Strategy, including the release of new AI products and services. Despite a decrease in gross margin, Youdao achieved an income from operations of RMB28.8 million, a significant improvement from the previous year’s loss. The company continues to focus on advancing its AI capabilities to enhance customer value and strengthen its financial metrics.