On May 23, Youdao, Inc. (NYSE: DAO), an intelligent
learning company with industry-leading technology in
China, announced its unaudited financial results for the
first quarter ended March 31, 2024. During
the period, Youdao's generative AI applications rapidly
accelerated its commercialization under its dual-drive strategy of
"AI+education content," bringing steady growth across multiple
financial metrics.
Youdao reported that its total net revenues for the
first quarter reached RMB 1.4billion, representing a 19.7%
increase year over year. On the heels of its profitable
2023 fourth quarter, Youdao reported an income from operations of
RMB 29.9 million in the first quarter, marking the first time it
has posted two consecutive quarters of profitability.
Non-GAAP net income attributable to Youdao’s ordinary
shareholders turned positive, compared with the first quarter of
last year, reaching RMB 20.3 million. The
Company is also spending less on its operations with net cash used
in operating activities improving by 10.5% compared with the same
period last year.
Youdao's CEO Dr. Feng Zhou stated, "We will stay
focused on our in digital content services, online marketing
services and AI-driven subscription services. By leveraging our AI
technology expertise and profound understanding of education, we
will continue to explore more application scenarios for our
proprietary large language model, Ziyue, in education and
advertising. As we implement our products and applications at an
accelerated pace, our goal is to help users improve learning and
working efficiency more effectively."
The dual-drive strategy of "AI + education" has
proven effective, significantly improving the health of the
business
After launching China's first large language model for
education, "Ziyue," Youdao has accelerated the commercial
deployment of its LLM in its education and advertising businesses.
Meanwhile, Youdao continues to adhere to its strategy of producing
high-quality content and providing users with personalized and
superior learning content services.
During the first quarter, Net revenues from learning services
reached RMB 718.0million, remaining largely unchanged from the same
period last year. The digital content services continued to show
strong momentum, with net revenues in the first quarter reaching
RMB 500 million, an increase of 11.0% year-on-year. Youdao's gross
profit margin has remained above 70% for three consecutive
quarters.
Net revenues from online marketing services reached a record
high of RMB 492.7 million in the first quarter, increasing by
125.9% year-on-year and marking the sixth consecutive quarter of
this business's net revenue growth exceeding 50%.
To support its online marketing services customers, accelerate
their overseas expansion efforts, Youdao Ads also quickly launched
the country's first one-stop overseas marketing platform in the
first quarter, enabling companies to utilize Youdao's rich
ecosystem of over 5 million KOLs worldwide. Currently, Youdao Ads
has assisted multiple Chinese enterprises in going global,
including NetEase Games, miHoYo, BYD, Huawei, Xiaomi and
others.
Net revenues from smart devices reached RMB
181.2 million in the first quarter. This includes Youdao's
Dictionary Pen, which continues to be a leader in innovation.
Youdao successively released its latest Dictionary pen iterations
in the first quarter, the A6 Pro and S6 Pro. The A6 Pro topped
Douyin's sales chart on the day of its debut and quickly became the
top-selling single product on JD.com after its launch. Similarly,
S6 Pro has consistently ranked in the upper echelons of JD.com's
single product sales following its launch and secured the No. 1
selling single product spot on both JD.com and Tmall platforms in
May.
Generative AI accelerates deployment, focused on
three major application scenarios with high growth potential where
Youdao holds competitive advantages
Focusing on advantageous applications and scenarios, Youdao has
been accelerating the deployment of its generative AI in diverse
settings. Currently, Youdao has launched more than 10 native
applications based on its LLM.
In the first quarter, Youdao's AI-driven subscription services
saw a significant boost. These services includes Youdao Dictionary,
Youdao Desktop Translation, Hi Echo, and international apps. The
total sales of these services approached RMB 50 million in the
first quarter, increasing by over 140% year-on-year, marking the
fifth consecutive quarter that this business has grown by over
50%.
Youdao is deeply immersed in the translation field and has honed
its skills over many years. According to QuestMobile data, the
number of monthly active users of Youdao Desktop Translation
exceeds 100 million, making it the 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 word
lookup, word memorization, translation, and other processes,
providing users with a more professional, personalized, and
powerful language learning and translation experience.
With a deep understanding of overseas markets, Youdao has
launched several apps based on LLM capabilities in the
international market and has achieved impressive results. In the
first quarter, the total sales of Youdao's international apps
doubled compared to the same period last year. The newly launched
software covers areas such as audio transcription, translation, and
AI entertainment. Among them, the audio transcription app iRecord
ranks among the top two in the North American audio recording
tracks.
Focusing on its core strengths, Youdao's business centers on
three primary segments: digital content services, online marketing
services and AI-driven subscription services. Dr. Feng Zhou stated,
"Our strategy is to concentrate on businesses and products with
high growth potential and where we have significant competitive
advantages."
"Consumer-facing products currently represent the largest growth
opportunity for AI, making AI-driven subscription services a
natural path for AI development. We are still in the early stages
and moving forward, we will accelerate our products' reach and
scale, increase user subscriptions, and continue to improve returns
on our investments. We are confident in our development pathway and
the growth of our business," said Dr. Feng Zhou.
Jeffrey Wang
Youdao, Inc.
ir at rd.netease.com
Youdao (NYSE:DAO)
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