EDU’s AI Push and Japan Bet Challenge Slowdown Fears

Forward-Looking Analysis

New Oriental (EDU) is projected to report strong earnings in Q2 2026, driven by its 47% ROE (trailing twelve months) and a 33% net income growth over five years. Analysts forecast a 49% ROE for 2026, with a 17% payout ratio indicating continued reinvestment in growth. The company’s focus on AI-driven education, highlighted by founder Yuan Minhong at the 2026 Chongli Forum, positions it to capitalize on shifting demand from knowledge delivery to emotional companionship in learning. Additionally, New Oriental’s expansion into online Japanese language courses aligns with growing global demand, as noted in Japanese language learning market reports. However, slower earnings growth is expected as the market absorbs these innovations.

Historical Performance Review

In Q1 2026, New Oriental reported revenue of $1.52 billion, net income of $247.52 million, EPS of $0.15, and gross profit of $885.18 million. These results reflect stable performance, with gross profit margins supporting profitability and reinvestment into AI and international education initiatives.

Additional News

Yuan Minhong emphasized AI’s role in transforming education, noting that 50% of primary/secondary teachers in China risk obsolescence under future AI standards. New Oriental’s AI integration and Japanese language course expansion align with market trends, as highlighted in Japanese language learning reports. Competitor comparisons show EDU’s 47% ROE outperforms peers like TAL (-3.63%) and LOPE (31.06%), while its 26.6% 1Y price performance (vs. TAL’s -19.3%) underscores investor confidence. Recent institutional ownership (32% insider stake) and reasonable CEO compensation ($3.9M) further support alignment with shareholders.

Summary & Outlook

New Oriental’s robust ROE, AI-driven education model, and strategic market expansion position it for sustained growth. Q1 results highlight strong profitability and gross margins, while forward-looking initiatives in AI and Japanese language learning address evolving demand. Risks include slower earnings growth and competitive pressures, but the company’s financial health and strategic alignment with market trends warrant a bullish outlook. Investors should monitor AI adoption rates and international course uptake as key catalysts.