Youdao (DAO) AI Stock Analysis

• Market Cap: $1.09B
• Dividend Yield: N/A
• Average Volume (3M): 134.28K
• Price to Earnings (P/E): 55.2
• Beta (1Y): 0.65
• Revenue Growth: -0.65%
• EPS Growth: 153.79%
• 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: 171,898
• 30 Day Avg. Volume: 134,285
• 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: 1.27
• Enterprise Value/Revenue: 0.25
• Enterprise Value/Gross Profit: 0.52
• Enterprise Value/Ebitda: 4.66
• 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: 46 Neutral
• Price Target: $9.50 ▲(4.40% Upside)

The overall stock score reflects significant financial risks due to high leverage and cash flow challenges, compounded by weak technical indicators and high valuation. While there are growth areas in AI and online marketing, these are overshadowed by broader financial and operational concerns.

Positive Factors

AI-Driven Subscription Growth

Strong growth in AI-driven subscriptions indicates robust demand and potential for future revenue expansion, leveraging AI technology to enhance educational offerings.

Online Marketing Services Surge

The significant increase in online marketing services revenue suggests a successful strategy in diversifying income streams and capitalizing on digital marketing trends.

Strong Performance in AI and Translation Services

Certification of the AI translation model enhances Youdao's competitive edge in language services, potentially attracting more users and partnerships.

Negative Factors

High Leverage and Negative Equity

High leverage and negative equity indicate financial instability, posing risks to long-term sustainability and limiting strategic flexibility.

Operating Profit Decline

The sharp decline in operating profit suggests challenges in cost management and profitability, potentially impacting future investment and growth capabilities.

Cash Flow Challenges

Zero operating and free cash flow highlight inefficiencies in cash generation, which could hinder the company's ability to fund operations and growth initiatives.

Youdao Business Overview & Revenue Model

Company Description

Youdao (DAO) is a prominent education technology company based in China, primarily focused on providing innovative learning solutions through digital platforms. The company operates in several sectors including online education, artificial intelligence, and educational software development. Youdao's core products include digital dictionaries, language learning applications, and AI-powered educational tools, catering to students, professionals, and educators seeking to enhance their language skills and learning experiences.

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

Youdao's financial performance is mixed, with strengths in revenue growth and gross profitability. However, challenges in net profitability, high leverage with negative equity, and cash flow generation 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	5.60B	5.71B	5.39B	5.10B	3.96B	2.39B
Gross Profit	2.64B	2.79B	2.77B	2.63B	1.96B	1.05B
EBITDA	295.77M	185.71M	-440.06M	-649.49M	-852.57M	-708.51M
Net Income	227.63M	83.38M	-549.86M	-739.80M	-982.76M	-1.66B
Balance Sheet
Total Assets	1.84B	1.81B	1.67B	2.28B	2.63B	2.07B
Cash, Cash Equivalents and Short-Term Investments	610.92M	655.78M	526.66M	1.02B	826.88M	1.19B
Total Debt	1.83B	1.85B	1.60B	1.48B	1.25B	987.73M
Total Liabilities	3.85B	3.90B	3.80B	3.75B	3.36B	3.48B
Stockholders Equity	-2.06B	-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: Negative
• Last Price: 9.10
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Positive
• MACD: Positive
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For DAO, the sentiment is Negative. The current price of 9.1 is below the 20-day moving average (MA) of 10.00, below the 50-day MA of 10.18, and above the 200-day MA of 9.08, indicating a neutral trend. The MACD of -0.32 indicates Positive momentum. The RSI at 38.94 is Neutral, neither overbought nor oversold. The STOCH value of 32.49 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for DAO.

Youdao Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
AFYA	79 Outperform	$1.35B	10.62	15.51%	<0.01%	3.48%	12.63%
COUR	63 Neutral	$1.32B	―	-7.43%	―	8.10%	43.35%
Sector *	62 Neutral	$20.33B	14.63	-3.31%	3.23%	1.93%	-12.26%
UDMY	60 Neutral	$727.49M	―	-1.78%	―	2.53%	95.79%
GOTU	49 Neutral	$584.58M	―	-21.21%	―	48.81%	61.64%
DAO	46 Neutral	$1.09B	55.18	―	―	-0.65%	153.79%
KLC	46 Neutral	$459.08M	―	-11.88%	―	2.20%	-229.99%

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.

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.