NetEase Inc's second quarter of 2025 marked a monumental shift in the company's financial trajectory. With Youdao, Inc., a prominent part of NetEase, showcasing noteworthy advancements in integrating AI technologies into its core services, the period heralded both strategic victories and challenges, underscoring NetEase's commitment to maintaining robust growth amid an evolving market landscape.
NetEase Inc Earnings Summary
Youdao, Inc., a subsidiary of NetEase, reported a commendable second quarter in 2025 with significant financial improvements driven by its AI innovations. The company recorded its first-ever profitable second quarter, thanks to robust earnings that reflected the successful execution of its AI Native Strategy.
NetEase Inc Financial Results
Here's a closer look at Youdao, Inc.'s key financial metrics for the second quarter of 2025:
| Metric | Q2 2025 (in RMB) | Q2 2025 (in USD) | Q2 2024 (in RMB) | Year-over-Year Change |
|---|---|---|---|---|
| Total Net Revenues | 1.4 billion | 197.9 million | 1.3 billion | +7.2% |
| Income from Operations | 28.8 million | 4.0 million | (72.6 million) | Turned Profitable |
| Net (Loss)/Income Attributable to Shareholders | (17.8 million) | (2.5 million) | (99.5 million) | Improved |
| Non-GAAP Net Income Attributable to Shareholders | 12.5 million | 1.7 million | (96.0 million) | Improved |
These results reflect a striking recovery from the loss recorded in the same period of the previous year, transitioning to profitability due to optimized operational efficiencies and strategic technology deployments.
Revenue Breakdown by Segments
The table below illustrates Youdao, Inc.’s segmented revenue performance in the second quarter of 2025:
| Segment | Revenue in Q2 2025 (RMB) | Revenue in Q2 2025 (USD) | Q2 2024 (RMB) | Year-over-Year Change |
|---|---|---|---|---|
| Learning Services | 657.8 million | 91.8 million | 643.8 million | +2.2% |
| Smart Devices | 126.8 million | 17.7 million | 166.7 million | -23.9% |
| Online Marketing Services | 632.9 million | 88.3 million | 511.2 million | +23.8% |
In-depth Analysis of Segment Performance
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Learning Services : This segment registered modest growth as it garnered RMB657.8 million ($91.8 million), ascending by 2.2% year-over-year. The sustainability and slight uptick in learning services revenue are attributed to Youdao's newly implemented AI Essay Grading function, which enhanced user retention.
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Smart Devices : Despite a significant dip of 23.9%, resulting in RMB126.8 million ($17.7 million), this sector saw improved gross margins as a result of the high-performance Youdao Dictionary Pen launched in late 2024.
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Online Marketing Services : Displaying the most growth, revenues from this segment surged to RMB632.9 million ($88.3 million), a 23.8% year-over-year rise fueled by increased demands within the gaming industry and international markets, spurred by AI advancements.
Key Developments
Several strategic initiatives and operational developments were unveiled this quarter. Youdao launched the AI Essay Grading function in its Lingshi app, boasting a high retention rate. Its AI Ad Placement Optimizer also entered the market, promising enhanced decision-making for online marketing services, paving the path for substantial client engagement despite initial low margins.
Comments from Company Officers
Dr. Feng Zhou, CEO and Director of Youdao, highlighted the positive impact of the company’s AI Native Strategy: “Our latest advancements signify not only technological leadership but also an uptick in profitability. Moving forward, we are optimistic about expanding our AI-driven offerings to further improve productivity and returns.”
Dividends and Share Repurchases
The company remains committed to its share repurchase program, initially authorized in November 2022 and expanded to $40 million in August 2023. As of June 30th, 2025, about 7.5 million ADSs were repurchased, totaling approximately $33.8 million, reflecting NetEase’s confidence in its long-term growth potential.
NetEase Inc Stock Forecast
Given Youdao's trajectory and NetEase's strategic investments, stock projections indicate a potential bullish trend. Analysts project a high stock price of $3.50 if the company sustains its performance improvement and growth strategies. Conversely, a more conservative low projection stands at $2.75, dependent on market volatility and external economic factors.
In conclusion, NetEase Inc's latest quarterly performance suggests a promising era of growth facilitated by its affiliates' innovative strides, reinforcing its market position and potential for long-term shareholder value creation.
