2024-05-27
BEIJING, China, May 27, 2024 (GLOBE NEWSWIRE) — On May 23, Youdao, Inc. (NYSE: DAO), China's leading technology-driven intelligent learning company, announced its unaudited financial performance for the first quarter ended March 31, 2024. During the period, Youdao's generative AI application rapidly accelerated commercialization under its dual-drive strategy of “AI + education content”, resulting in steady growth across multiple financial indicators.
Youdao announced that its total net revenue for the first quarter reached RMB1.4 billion, up 19.7% year-on-year. Following a profitable Q4 2023, Youdao reported operating profit of RMB29.9 million in the first quarter, marking the first time it has posted two consecutive profitable quarters. Youdao's non-GAAP net income attributable to common shareholders turned positive compared to the same period last year, reaching RMB20.3 million. The company also saw its net cash used in operating activities increase 10.5% year-on-year as it reduced its operating expenditures.
Dr. Feng Zhou, CEO of Youdao, said, “We will focus on digital content services, online marketing services and AI-driven subscription services. We will leverage our expertise in AI technology and deep understanding of education to explore further application scenarios for our proprietary large-scale language model, Ziyue, in education and advertising. Our goal is to more effectively improve users' learning and work efficiency while accelerating the implementation of our products and applications.”
The dual promotion strategy of “AI + Education” has proven effective and significantly improved the health of the business.
Since launching China's first large-scale educational language model “Ziyue”, Youdao has been accelerating the commercial deployment of LLM in education and advertising businesses. At the same time, Youdao continues to adhere to its strategy of producing high-quality content and providing users with personalized and excellent learning content services.
In the first quarter, net revenue from learning services reached RMB 718 million, roughly unchanged from the same period in 2018. Digital content services continued to perform well, with net revenue reaching RMB 500 million in the first quarter, up 11.0% year-on-year. Youdao's gross profit margin has exceeded 70% for three consecutive quarters.
Net revenue from online marketing services reached a record high of RMB492.7 million in the first quarter, up 125.9% year-on-year, marking the sixth consecutive quarter that the business's net revenue growth rate has exceeded 50%.
To support its online marketing service customers and accelerate their overseas expansion, Youdao Ads quickly launched China's first one-stop overseas marketing platform in the first quarter, allowing businesses to tap into Youdao's rich ecosystem of over 5 million KOLs worldwide. Currently, Youdao Ads has helped multiple Chinese businesses expand overseas, including NetEase Games, miHoYo, BYD, Huawei, and Xiaomi.
Net revenue from smart devices in the first quarter reached RMB 181.2 million, including Youdao's Dictionary Pen, which continues to be a leader in innovation. Youdao successively released the latest versions of its Dictionary Pen, the A6 Pro and the S6 Pro, in the first quarter. The A6 Pro topped Douyin's sales charts on its debut day and became the best-selling single product on JD.com soon after its release. Similarly, the S6 Pro has consistently ranked among JD.com's top single product sales since its launch, and was the No. 1 best-selling single product on both the JD.com and Tmall platforms in May.
Generative AI will accelerate adoption by focusing on three key application scenarios with high growth potential where Youdao has a competitive advantage:
Youdao is accelerating the deployment of generative AI in various settings, focusing on advantageous applications and scenarios. Currently, Youdao has released more than 10 native applications based on LLM.
In the first quarter, Youdao's AI-powered subscription services experienced significant growth. These services include Youdao Dictionary, Youdao Desktop Translation, Hi Echo, and international apps. Total revenue from these services approached RMB 50 million in the first quarter, up more than 140% year-on-year, marking the fifth consecutive quarter of growth of more than 50% for this business.
Youdao is deeply involved in the translation field and has been honing its technology for many years. According to QuestMobile data, Youdao desktop translation has more than 100 million monthly active users, making it a leader in the domestic dictionary translation market. Youdao Dictionary underwent a comprehensive AI transformation in the first quarter, fully integrating the new AI learning assistant Mr. P AI Tutor into processes such as word search, word memorization and translation, providing users with a more professional, personalized and powerful language learning and translation experience.
With a deep understanding of overseas markets, Youdao has launched many apps based on its LLM function in international markets and achieved remarkable results. In the first quarter, Youdao's total international app sales doubled compared to the same period last year. The newly released software covers areas such as voice transcription, translation, and AI entertainment. Among them, the voice transcription app iRecord ranks in the top two in North America's voice recording track.
Focusing on its core strengths, Youdao's business is concentrated in three main segments: digital content services, online marketing services, and AI-driven subscription services. Dr. Feng Zhou said, “Our strategy is to focus on businesses and products with high growth potential and significant competitive advantages.”
“Consumer products are currently the largest growth opportunity for AI, and AI-driven subscription services have become a natural path for AI development. We are still in the early stage. Going forward, we will accelerate product adoption and scale, increase user subscriptions, and continuously improve return on investment. We are confident in our development path and business growth,” said Dr. Feng Zhou.
CONTACT: Jeffrey Wang Youdao, Inc. ir at rd.netease.com
