Youdao (DAO) AI Stock Analysis

• Market Cap: $1.24B
• Dividend Yield: N/A
• Average Volume (3M): 128.14K
• Price to Earnings (P/E): 63.1
• Beta (1Y): 0.64
• Revenue Growth: -1.51%
• EPS Growth: 155.73%
• Country: US
• Employees: 3,750
• Sector: Consumer Defensive
• Sector Strength: 42
• Industry: Education & Training Services
• EPS (TTM): 0.01
• Shares Outstanding: 31,280,890
• 10 Day Avg. Volume: 111,582
• 30 Day Avg. Volume: 128,141
• PEG Ratio: -0.66
• Price to Book (P/B): -2.96
• Price to Sales (P/S): 1.11
• P/FCF Ratio: -79.59
• Enterprise Value/Market Cap: 7.98
• Enterprise Value/Revenue: 1.74
• Enterprise Value/Gross Profit: 3.88
• Enterprise Value/Ebitda: 46.34
• 1Y Price Target: N/A
• Price Target Upside: N/A
• Rating Consensus: N/A
• Number of Analyst Covering: 0
• EPS Forecast (FY): N/A
• Revenue Forecast (FY): N/A

• Rating: 55 Neutral
• Price Target: $11.00 ▼(-12.77% Downside)

The score is held back primarily by financial quality concerns (negative equity and weak cash flow) and a high valuation (P/E 76.52). Technicals are supportive with a strong uptrend, but momentum appears overextended (RSI ~72, Stoch ~91). The latest earnings call was mixed, with strong online marketing growth and improved cash outflow offset by a sharp operating profit decline and weakness in Learning Services and Smart Devices.

Positive Factors

High gross margin

A near-49% gross margin indicates durable unit economics in core digital learning and software offerings. High gross profitability provides structural capacity to fund R&D and AI initiatives, absorb customer acquisition costs, and sustain product investment even if operating leverage is uneven.

Online marketing services expansion

Rapid, sustainable growth in online marketing diversifies revenue beyond cyclic learning products. Strong demand from NetEase and overseas clients suggests scalable B2B sales, steadier cash inflows, and higher-margin revenue that can offset volatility in consumer learning segments over the next several quarters.

AI product momentum and certification

Certified AI capabilities and fast-growing AI subscriptions signal meaningful tech differentiation. Certification of Confucius 3 and >40% subscription growth support a long-term shift to AI-native services, improving customer retention potential and enabling higher lifetime value as products mature and scale.

Negative Factors

Negative shareholders' equity

Material negative equity reflects accumulated deficits and elevates solvency risk, limiting borrowing capacity and strategic flexibility. Over months this can constrain M&A, R&D spending, and capital-intensive initiatives unless earnings translate into meaningful retained profits or balance-sheet remediation occurs.

Weak cash generation

An inability to consistently convert revenue to positive operating and free cash flow undermines self-funded growth. Persistent zero/negative cash generation increases reliance on external financing, raises refinancing risk, and limits the company's capacity to sustain investment cycles or weather macroeconomic stress.

Profit compression and core segment declines

Sharp operating profit drop and declining revenues in core Learning Services and Smart Devices weaken the company's foundational revenue base. If investments (AI, marketing) don't drive durable offsetting returns, margin recovery could be prolonged, pressuring long-term profitability and free cash flow conversion.

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 education services and language learning apps. The company also earns money through the sale of its educational software products and digital content. Additionally, Youdao has established partnerships with educational institutions and organizations, which contribute to its revenue through collaborative programs and services. Advertising and promotional activities within its platforms further supplement its earnings, allowing the company to capitalize on its user base and increase revenue from educational content and services.

Youdao Financial Statement Overview

Summary

Mixed fundamentals: revenue growth and a solid 2024 gross margin (48.86%) are positives, but financial risk is elevated due to negative stockholders’ equity (-$2.14B) and weak cash generation (2024 operating cash flow and free cash flow at $0). Net profitability remains thin (1.46% net margin in 2024).

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	5.69B	5.71B	5.39B	5.10B	3.96B	2.39B
Gross Profit	2.55B	2.79B	2.77B	2.63B	1.96B	1.05B
EBITDA	214.10M	185.71M	-440.06M	-649.49M	-852.57M	-708.51M
Net Income	143.39M	83.38M	-549.86M	-739.80M	-982.76M	-1.66B
Balance Sheet
Total Assets	1.74B	1.81B	1.67B	2.28B	2.63B	2.07B
Cash, Cash Equivalents and Short-Term Investments	552.18M	655.78M	526.66M	1.02B	826.88M	1.19B
Total Debt	1.82B	1.85B	1.60B	1.48B	1.25B	987.73M
Total Liabilities	3.72B	3.90B	3.80B	3.75B	3.36B	3.48B
Stockholders Equity	-2.04B	-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: Neutral
• Last Price: 12.61
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Positive
• MACD: Positive
• RSI: Neutral
• STOCH: Positive

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For DAO, the sentiment is Neutral. The current price of 12.61 is above the 20-day moving average (MA) of 11.52, above the 50-day MA of 10.20, and above the 200-day MA of 9.48, indicating a neutral trend. The MACD of 0.13 indicates Positive momentum. The RSI at 44.78 is Neutral, neither overbought nor oversold. The STOCH value of 8.45 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for DAO.

Youdao Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
AFYA	79 Outperform	$1.36B	10.65	15.51%	<0.01%	3.48%	12.63%
UDMY	68 Neutral	$694.78M	-179.48	-1.78%	―	2.53%	95.79%
Sector *	62 Neutral	$20.33B	14.63	-3.31%	3.23%	1.93%	-12.26%
COUR	61 Neutral	$1.02B	-21.30	-7.43%	―	8.10%	43.35%
DAO	55 Neutral	$1.24B	63.11	―	―	-1.51%	155.73%
KLC	51 Neutral	$552.55M	-7.45	-11.88%	―	2.20%	-229.99%
GOTU	49 Neutral	$550.48M	-10.62	-21.21%	―	48.81%	61.64%

Youdao Corporate Events

Youdao, Inc. Announces Annual General Meeting for December 2025

Youdao, Inc. announced it will hold its annual general meeting of shareholders on December 16, 2025, in Beijing, China. The meeting will serve as an open forum for shareholders and beneficial owners of the Company’s American Depositary Shares to discuss company affairs with management, with no proposals submitted for approval. The record date for determining eligible shareholders to attend is set for December 1, 2025.

The most recent analyst rating on (DAO) stock is a Hold with a $9.50 price target. To see the full list of analyst forecasts on Youdao stock, see the DAO Stock Forecast page.

Youdao Reports Q3 2025 Financial Results with Growth in Online Marketing

Youdao, Inc. reported its unaudited financial results for the third quarter of 2025, showing a 3.6% increase in total net revenues compared to the same period in 2024, reaching RMB1,628.5 million. Despite a decline in revenues from learning services and smart devices, the company saw a significant 51.1% increase in online marketing services revenues, driven by strong demand from the NetEase group and overseas markets. The company’s gross margin decreased to 42.2% from 50.2% in 2024, and income from operations fell by 73.7%. CEO Dr. Feng Zhou highlighted the strategic investments in AI technology and the expansion of Youdao Lingshi, which contributed to over 40% growth in AI-driven subscription services. Looking forward, Youdao aims to continue executing its AI-Native Strategy to drive customer value and achieve financial targets.

The most recent analyst rating on (DAO) stock is a Hold with a $9.50 price target. To see the full list of analyst forecasts on Youdao stock, see the DAO Stock Forecast page.