Youdao hits first annual cash flow profit as AI marketing offsets hardware slump

Youdao (NYSE:DAO) achieved a significant financial milestone in fiscal year 2025, recording its first full year of positive operating cash flow as the company’s pivot toward AI-driven digital services began to pay dividends.

The intelligent learning company, a subsidiary of NetEase, reported fourth-quarter revenue of RMB 1.6 billion, a 16.8% increase from the same period a year earlier.

For the full year, revenue climbed 5% to RMB 5.9 billion.

The growth was primarily fueled by a robust performance in online marketing services, which surged 28.5% year-over-year, and continued adoption of its AI-driven subscription products.

These gains were critical in offsetting weakness in the company’s smart devices and tutoring segments, both of which saw revenue declines during the period.

Despite the top-line growth, profitability metrics showed mixed results.

Gross margin for the full year contracted to 44.3% from 48.9% in 2024, reflecting a shift in revenue mix toward lower-margin marketing services.

However, disciplined cost management allowed Youdao to mark its sixth consecutive quarter of operating profitability.