New Oriental’s Q3 Earnings: Growth Accelerates, Diversification Pays Off

New Oriental Education & Technology Group Inc. (EDU) delivered a robust fiscal third-quarter (Q3) 2025 earnings report, marking its strongest growth in years. With revenue surging 30.5% year-over-year to $1.435 billion, the company has proven its ability to navigate macroeconomic headwinds while expanding into non-traditional sectors like tourism and private-label e-commerce. This article dissects the key takeaways, risks, and opportunities for investors.

Executive Summary

New Oriental’s Q3 results reflect a strategic pivot toward diversification, balancing its core education business with emerging revenue streams. While its East Buy e-commerce venture and tourism initiatives contributed to top-line growth, they also highlighted the challenges of scaling new businesses. The company’s financial resilience—bolstered by $4.9 billion in cash reserves—positions it to capitalize on opportunities while weathering volatility.

Revenue Growth: Core Strengths and New Frontiers

The 30.5% revenue increase was driven by:
- Core Education: Overseas test prep revenue rose 21%, while adult education surged 35% year-over-year, fueled by demand for skill-based training.
- New Initiatives:
- Tourism: Revenue jumped 233% year-over-year, driven by study tours and senior-focused travel.
- East Buy: Though excluded from core revenue calculations, its 600 SKUs of private-label products expanded its e-commerce reach.

This visualization would show the acceleration in growth, with Q3’s 30.5% outpacing Q2’s 19.4%.

Profitability: A Balancing Act

While revenue soared, profitability faced headwinds:
- Operating Income: Rose 42.9% to $293.2 million, but excluding East Buy’s losses, it grew 58.4% to $303.1 million.
- Net Income: Jumped 48.4% to $245.4 million, benefiting from cost discipline in core operations.

The inclusion of East Buy’s losses underscores the risks of diversification. However, management emphasized that the venture is a long-term play to capture China’s growing e-commerce market, which is projected to hit $12.8 trillion by 2026.

Strategic Priorities: Tourism and Technology as Growth Engines

• Tourism: With a 233% revenue surge in Q2, New Oriental aims to leverage its educational networks to expand into K-12 study tours and senior travel. This aligns with China’s post-pandemic recovery in leisure and educational travel.
• AI and Intelligent Learning: Investments in AI-driven tutoring platforms are expected to boost scalability. Pilot programs in 60 cities achieved a 43% revenue increase, suggesting strong demand for tech-enhanced education.

This comparison highlights the company’s financial flexibility to fund R&D and acquisitions without over-leverage.

Risks and Challenges

1. Macroeconomic Sensitivity: High-end education services remain vulnerable to economic downturns. Management noted reduced demand for premium tutoring and overseas test prep in Q3.
2. Regulatory Uncertainty: While no major policy changes are anticipated, compliance costs could rise as China tightens oversight of private education and tourism sectors.
3. East Buy’s Scaling Pains: The e-commerce venture’s operating losses highlight execution risks in competing with giants like Alibaba and JD.com.

Outlook: Q4 Guidance and Long-Term Vision

New Oriental guided for Q4 revenue (excluding East Buy) of $851.4–871.8 million, implying 25–28% YoY growth. This conservative target reflects cautious optimism amid lingering macroeconomic uncertainty.

Long-term, the company plans to:
- Expand learning centers by 20–25% annually, focusing on high-growth cities.
- Use its $4.9 billion cash hoard for strategic acquisitions in education tech and tourism.
- Maintain a dividend policy, having distributed $100 million in a special dividend last year.

Conclusion: A Resilient Play for Patient Investors

New Oriental’s Q3 results underscore its transformation from a traditional test-prep provider to a diversified education and lifestyle conglomerate. With revenue growth outpacing peers and a fortress balance sheet, the stock appears attractively priced at a P/E of 12.4x (based on trailing earnings).

However, investors must weigh short-term risks—such as East Buy’s losses and macroeconomic volatility—against long-term tailwinds like China’s education tech boom and tourism recovery. The company’s ability to execute on its strategic roadmap will determine whether this Q3 surge is a one-off or the start of a new growth era.

This comparison would likely show EDU outperforming benchmarks due to its diversified model and strong cash flows.

In sum, New Oriental offers a compelling risk-reward profile for investors willing to bet on its evolution into a multi-sector education leader.