Youdao's Q1 2025 Earnings Call: Contradictions in Revenue Growth, AI Innovation, and Strategic Direction

Revenue growth expectations, AI advertising innovation, revenue growth and expectations for learning services, online marketing services revenue growth projections, and AI integration and product development in smart devices are the key contradictions discussed in Youdao's latest 2025Q1 earnings call.



Profitability and Operating Income Growth:
- Youdao reported an operating income of RMB 104.0 million in Q1, surging 247.7% year-over-year.
- The growth was attributed to the successful execution of AI native strategy and product development, which enhanced operational efficiency.

Learning Services Revenue Decline and Narrowing Decline Rate:
- Net revenues from the Learning Services segment declined by 16.1% year-over-year, although the rate of decline narrowed by approximately 5 percentage points compared to the previous quarter.
- This was due to a strategic approach to customer acquisition, prioritizing high ROI engagements, which is expected to enhance overall business resilience and operational efficiency.

AI Model Development and Deployment:
- Youdao open-sourced Confucius-o1, a lightweight 14 billion parameter reasoning model, and enhanced its flagship translation model.
- The improvements in AI models are driven by a dual approach of combining open and proprietary technologies, which enhances user experiences and accelerates technology growth.

Smart Devices Revenue Growth:
- Smart Devices segment delivered RMB 190.5 million in Q1 revenues, representing a 5.1% year-over-year growth.
- The growth was driven by the introduction of Youdao SpaceOne, an AI-powered large-screen tutoring pen, which contributed to over 20% year-over-year growth in dictionary pen revenue.