Youdao's Q4 2024: Dissecting Contradictions in AI Strategy, Revenue Growth, and Market Expansion

These are the key contradictions discussed in Youdao's latest 2024Q4 earnings call, specifically including: AI strategy and implementation, revenue growth expectations, AI subscription service monetization strategy, Smart Device revenue improvement plan, Online Marketing Services growth strategies, and AI integration for Subscription Services:



Revenue and Profitability Improvement:
- Youdao reported net revenues of RMB1.3 billion for Q4 2024, down 9.5% year-on-year.
- The company achieved income from operations of RMB84.2 million, up 10.3% year-over-year, and improved operating cash inflow to RMB158.2 million.
- The decline in revenues was driven by a decrease in learning services revenue, but the company proactively focused on high-demand courses and maintained financial discipline.

Learning Services and AI Subscription Growth:
- Net revenues from learning services reached RMB617.7 million, down 21.2% year-on-year.
- AI-driven subscription services generated over RMB200 million, representing over 130% year-on-year growth.
- The decline in learning services revenue was due to a strategic focus on fewer but higher-return courses, while AI subscription growth was driven by strong demand and innovative AI products.

Smart Devices Revenue Growth:
- Revenue from smart devices was RMB240.4 million, up 8.1% year-on-year.
- The growth was driven by increased sales of the Youdao Dictionary Pen, which achieved a 20% year-on-year increase in revenues, reaching cumulative sales of 10 million units.

Online Marketing Services Performance:
- Online marketing services revenue reached RMB481.7 million, up 1.6% year-on-year.
- Growth was driven by domestic performance-based advertising, particularly in sectors like gaming and AI tools, as well as a strategic partnership with Google for international advertising.

AI Innovation and Integration:
- Youdao launched China's first step-by-step exposition reasoning model, Confucius-o1, and integrated it into products like Mr. P AI Tutor.
- The significant trend in AI-driven innovation aimed to enhance product offerings, improve customer experiences, and drive growth across education and marketing segments.