17 Education & Technology Group Inc. (YQ) reported third‑quarter 2025 results that saw net revenues fall 66.4% to RMB 20.0 million (US$2.8 million) from RMB 59.6 million in the same period a year earlier, while the company posted a net loss of RMB 44.5 million (US$6.3 million) versus a net loss of RMB 17.4 million in Q3 2024. The sharp revenue drop reflects the company’s transition away from district‑level project contracts toward a higher‑margin, subscription‑based model for schools, which has a longer revenue recognition cycle and lower upfront fees.
Gross profit for the quarter was RMB 10.2 million, giving a gross margin of 51.2%—down from 60.9% in Q3 2024. The margin compression is largely attributable to the mix shift: district‑level projects, which carried higher gross margins, have been replaced by subscription revenue that, while more predictable, carries lower gross margins in the short term. The company’s cost structure remains largely unchanged, so the decline in margin is driven by the lower‑margin mix rather than rising costs.
Operating expenses rose to RMB 56.9 million, with research and development spending increasing 19.2% to RMB 15.2 million as the firm invests in its new AI‑powered platform. Despite the higher R&D outlay, overall operating expenses grew only modestly, reflecting disciplined cost management. Cash reserves stood at RMB 341.9 million as of September 30, 2025, providing a comfortable runway for the transition and further product development.
The quarter also marked the launch of the company’s new AI‑driven learning platform, Yiqi Aixue. Acting CFO Sishi Zhou highlighted that the platform “marks a new milestone in the company’s AI transformation” and that the firm will continue to enhance product capabilities to improve learning efficiency. The launch signals a strategic pivot toward recurring subscription revenue and positions the company to capture the growing demand for AI‑enabled education solutions in China.
Overall, the results underscore a short‑term hit to revenue and margins as the company re‑balances its business model, but the continued investment in AI, disciplined cost control, and strong cash position suggest a focus on long‑term growth. The company’s guidance remains unchanged, indicating confidence that the subscription shift will eventually lift profitability as the new revenue streams mature.
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