Youdao, Inc. announced its unaudited financial results for the first quarter ended March 31, 2025, reporting a record-high operating income for a first quarter of RMB104.0 million (US$14.3 million). This represents a substantial 247.7% increase year-over-year from RMB29.9 million in Q1 2024, demonstrating significant improvement in profitability.
Net revenues for the quarter were RMB1.3 billion (US$178.9 million), a 6.7% decrease year-over-year, primarily due to a disciplined, strategic approach to customer acquisition in learning services. Despite this, smart devices revenue increased by 5.1% year-over-year to RMB190.5 million, and online marketing services revenue grew by 2.6% year-over-year to RMB505.4 million. The gross margin for smart devices significantly improved to 52.3% from 32.6% in Q1 2024, driven by newly launched Youdao Dictionary Pens.
The company's AI-driven subscription services generated nearly RMB70 million in sales, growing over 40% year-over-year. Youdao also open-sourced Confucius-o1, a lightweight 14B parameter reasoning model, and launched Youdao SpaceOne, an AI-powered large-screen tutoring pen. Strategic partnerships were strengthened with official Google Partner certification and increased collaboration with NetEase Games, driving over 50% year-over-year growth in gaming advertising revenue. Management reiterated its target for stronger profit growth and full-year operating cash flow breakeven in 2025.
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