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Youdao's AI Surge: Profit Soars on Language Models
28 Aug
Summary
- Youdao achieved record operating profit in Q2, marking eighth consecutive quarter.
- Learning services revenue grew 20.9%, driven by AI features.
- AI-driven online marketing revenue offset smart device sales decline.
Youdao reported record operating profit in the second quarter of 2026, achieving its eighth consecutive quarter of profitability. Net revenues increased by 3.5% year-over-year to RMB 1.5 billion, with operating profit reaching RMB 111.5 million.
The company's strong performance was attributed to growth in its learning services, which rose 20.9% to RMB 795.6 million, and AI-driven online marketing, despite a 31.5% decline in smart device revenues. Youdao's proprietary Large Language Model, Confucius, was upgraded to version 4.0, enhancing multimodal, voice, and translation capabilities.
AI continues to be a central driver across Youdao's business segments. The company is actively translating LLM advancements into practical products and applications, including a growing portfolio of AI agents showcased at the 2026 World AI Conference. Executives emphasized disciplined spending and a focus on higher return on investment engagements contributing to expanded margins.
