Latest performance reports of New Oriental, TAL, Youdao and Gaotu: widespread revenue growth, diverging profitability, and AI rewriting the growth logic

Recently, Chinese concept education stocks have successively released their latest quarterly financial reports. The financial results and operational updates of four major players, namely New Oriental, TAL, NetEase Youdao and Gaotu, show that under the appearance of widespread revenue growth, their actual operational performances vary significantly: New Oriental maintains steady core business with continuously improving profit quality; TAL sees a surge in book net profit mainly driven by floating investment gains; Youdao has recorded operating profits for 8 consecutive quarters with its profit base gradually stabilizing; Gaotu is still in the loss zone but its self-sustaining cash generation capability has been enhanced. Meanwhile, AI is becoming an invisible mainline running through all four companies, quietly rewriting the growth logic of the education and training sector.

New Oriental: Steady Core Education Business, Live-stream E-commerce and New Businesses Progress in Tandem

The financial report released by New Oriental shows that both revenue and profit have increased, and the profit quality has been continuously improved. For the 2026 fiscal year ending May 31, 2026, the company achieved a net revenue of 5.661 billion US dollars, up 15.5% year on year; net profit attributable to shareholders reached 475 million US dollars, up 27.8% year on year; operating profit hit 643 million US dollars, surging 50.2% year on year. What is more valuable is the improvement of profit quality: the full-year Non-GAAP operating margin reached 13.0%, up 170 basis points year on year; even in the seasonally pressured fourth quarter, the Non-GAAP operating margin also reached 7.2%, rising 60 basis points year on year.

Breaking down the revenue structure, "new education business" has become the main growth engine. In the fourth quarter, overseas examination preparation and overseas consulting business increased by 3.6% year on year, domestic examination preparation business for adults and college students increased by 29.1% year on year, and the new education business (including non-academic tutoring, smart learning systems, etc.) increased by 24.8% year on year. By the end of the quarter, non-academic tutoring courses covered about 60 cities, attracting about 1.072 million registered students; smart learning systems and devices entered about 60 cities, with about 326,000 paying active users. The newly built integrated customer service platform "New Oriental Home" has served more than 950,000 families in 69 cities, demonstrating its transformation from "one-time transaction" operation to "customer lifetime value" operation.

Another highlight is still East Buy. After experiencing the turmoil of core anchor lineup adjustment in recent years, East Buy released an impressive positive profit warning on July 23: it is expected that the full-year revenue will be between 5.6 billion yuan and 5.8 billion yuan, up 27.3% to 31.8% year on year; net profit will be between 520 million yuan and 550 million yuan, surging about 86 times (85.7 times to 90.7 times) year on year. The management attributes the growth to the enrichment of self-operated brand products, the expansion of multi-channel matrix and the increase of member repurchase rate. However, hidden risks still exist: the GMV of self-operated and live-stream e-commerce in the first half of the year decreased by 14.6% year on year, the number of paid orders on Douyin platform dropped from 50.1 million to 42.1 million, and the effect of "reducing dependence on top anchors" still needs longer-term verification.

Looking ahead to the 2027 fiscal year, New Oriental has set a revenue growth guidance of 14% to 18% (6.454 billion to 6.680 billion US dollars), and will continue to deliver positive shareholder returns: it plans to distribute about 300 million US dollars in cash dividends in the 2027 fiscal year, and launch a new 200 million US dollar share repurchase plan. In addition to strengthening its core education business, AI has become an organizational priority. The deep integration of OMO teaching system and artificial intelligence is laying a solid foundation for its long-term efficiency improvement.

TAL: "Book Factors" Behind 12-fold Surge in Net Profit and Solid Core Fundamentals

The most eye-catching part of TAL's first-quarter report for fiscal 2027 is that its net profit attributable to shareholders surged 1204.3% year on year to 408 million US dollars. However, a closer look at the financial report shows that this amazing growth rate is mostly driven by one-off book factors: "other income" in the current quarter soared from 9.5 million US dollars in the same period of last year to 405 million US dollars, mainly due to the fair value change of investments. By the end of the quarter, the company's long-term investment balance reached 1.736 billion US dollars, nearly doubling from 828 million US dollars in the same period of last year.

At the performance exchange meeting, Peng Zhuangzhuang, President and CFO of TAL, voluntarily "cooled down" the market expectation: "The growth of other income is driven by market fluctuations, which may not be sustainable in the future." In other words, the 408 million US dollars net profit cannot be simply equated to the leap of TAL's operational capability.

Apart from the floating investment gains, TAL's core business is actually equally solid. The net revenue in the first quarter was 758 million US dollars, up 31.9% year on year; operating profit was 137 million US dollars, up 856.4% year on year, indicating that the business itself is in a stage of rapid expansion. Its growth comes from two pillars: first, Xueersi offline learning services operate more than 600 learning centers in 44 cities in Chinese mainland and some international markets, the revenue of quality-oriented small-class tutoring achieves double-digit year-on-year growth, and the renewal rate remains above 80%; second, the number of weekly active devices of its learning device business exceeds 2 million, with an activity rate of about 80%, and each device is used for about 1 hour per day on average, which has become a high-frequency rigid demand entry.

In terms of products, TAL released the flagship model of Xueersi Learning Machine T6 series (T6, T6 International Edition, T6 Max, with an initial price of 6899 yuan to 11999 yuan) on June 30, focusing on "Peak Training AI Tutor", which integrates and upgrades AI diagnosis, interactive classes and hardware. On May 20, Huawei Tablets reached an exclusive strategic cooperation with Xueersi, and the "Xueersi Learning Center" entered the HarmonyOS ecosystem, combining 22 years of education accumulation with system-level entries. From content to hardware, from offline scenarios to ecosystem, TAL is following a differentiated path of "technology + content" to build a moat that is not easy to replicate.

Youdao: Rapid Growth of Learning Services, 8 Consecutive Quarters of Operating Profits

Different from Gaotu, which is still hovering around the break-even line, NetEase Youdao has achieved a steady growth track of profitability. The 2026 second-quarter report released on August 20 shows that the company achieved a net revenue of 1.47 billion yuan, up 3.5% year on year; operating profit was 111.5 million yuan, surging nearly 2.9 times year on year, and the operating margin increased from 2.0% in the same period of last year to 7.6%; net profit attributable to ordinary shareholders was 73.8 million yuan, turning around from a net loss of 17.8 million yuan in the same period of last year; Non-GAAP net profit was 90.6 million yuan, soaring more than 7 times year on year. This also marks the 8th consecutive quarter that Youdao has achieved operating profits.

The revenue structure shows an obvious trend of "one falling while another rising". The net revenue of learning services was 796 million yuan, surging 20.9% year on year, becoming the main growth engine, which is mainly benefited from the strong momentum of training services and AI-driven subscription products such as "Youdao Lingshi"; the net revenue of online marketing services was 584 million yuan, down 7.7% year on year, which the company explained as active strategic adjustment to focus more on advertisers with high ROI; the net revenue of smart devices was 86.8 million yuan, down 31.5% year on year, dragged by the weakening demand for smart learning devices and rising component costs, the gross margin of this segment dropped from 41.5% to 32.8%. The overall gross margin was 48.9%, significantly higher than 43.0% in the same period of last year, among which the gross margin of learning services reached 65.5%.

AI is the biggest feature that distinguishes Youdao from its peers. In the second quarter, Youdao launched the "Confucius 4" large model, which achieves industry-leading mathematical reasoning capability with lower reasoning cost, and upgraded its AI Agent capability to evolve towards independently completing complex office and learning tasks. Zhou Feng, CEO of Youdao, said that AI is continuously being transformed into tangible business results. With the support of traffic and computing power from the NetEase system, Youdao's "AI-native" path has become the key for it to go through the hardware cycle and stabilize its profit base.

Gaotu: Narrowing Losses, Accelerating Offline Layout, Striving for "100 Billion Yuan Cash Revenue"

Compared with its profitable peers, Gaotu is the only one among the four that has not yet achieved regular quarterly profitability, and its resilience in reducing losses is gradually emerging. In the second quarter of fiscal 2026, the company achieved a net revenue of 1.67 billion yuan, up 20.2% year on year; gross billings reached 2.689 billion yuan, up 19.4% year on year. It recorded an operating loss of 150 million yuan in the current period, which narrowed by 38.1% year on year, and the Non-GAAP net loss also narrowed by 37.6% to 129 million yuan. What is more noteworthy is that the net operating cash inflow was 861 million yuan, up 46.3% year on year — which means that Gaotu's self-sustaining cash generation capability has been substantially enhanced.

In the first half of the year, Gaotu achieved a net revenue of 3.36 billion yuan, up 16.6% year on year, maintaining a steady expansion momentum on the revenue side. The improvement on the cost side is obvious: the proportion of operating expenses in revenue in the second quarter decreased by 7.9 percentage points year on year, the growth rates of three core expenses including sales, R&D and administration were all significantly lower than the 20.2% revenue growth rate in the same period, and the operating leverage effect was clearly released. In terms of profitability rhythm, Gaotu only achieved a single-quarter profit briefly in the first quarter of 2026, with an adjusted net profit of 41.416 million yuan in the current period; it returned to the loss zone immediately in the second quarter, with a net loss of 136 million yuan. Although the loss narrowed by 37.11% year on year, the company as a whole has not yet formed continuous and stable quarterly profitability.

Chen Xiangdong, founder of Gaotu, designated 2026 as the year of "profitable growth", and clearly announced the annual target of hitting 100 billion yuan in cash revenue, while promoting the group to achieve full profitability. By the end of the first quarter of 2026, the company's deferred revenue reached 1.79 billion yuan, up 24.1% year on year, which has reserved sufficient cash flow "ammunition" for subsequent quarterly revenue recognition, continuous loss reduction and the sprint to the annual profit target.

Offline layout is another mainline of Gaotu's development in 2026. Following the opening of Gaotu Dream Center in Zhengzhou, the Gaotu Dream Center in Wuhan was officially opened on April 18, and the OMO (online-merge-offline) strategy is gradually maturing. The management has put forward a clear roadmap: local schools will achieve profitability in 2026, and the overall offline business will achieve profitability in 2027. By the end of last year, Gaotu has covered nearly 30 cities, and Chen Xiangdong said that he personally visited 18 of them, showing his high attention to the offline business.

In terms of capital operations, as of August 26, the total repurchase amount of Gaotu has exceeded 740 million yuan, conveying confidence to the market with real money. Gaotu, which has been established for 12 years, is trying to redefine the long-term value of education and training enterprises with the three-in-one model of "profitable growth + AI empowerment + full-cycle layout".

Common Mainline: AI Becomes the Growth Engine, Reshaping the Competitive Dimension of Education and Training

Putting the strategic puzzles of the four companies together, a clear mainline emerges: AI is no longer a nice-to-have concept, but a core engine that reshapes the growth logic of the education and training sector. However, the four players have different implementation paths.

New Oriental emphasizes "organizational-level AI" — embedding artificial intelligence into OMO teaching systems, existing products and operation processes, which not only improves teaching support, but also optimizes back-office efficiency. TAL bets on the closed loop of "AI + hardware + content". With a scale of 2 million weekly active learning machines, it has become the most natural test field for AI personalized learning; "Peak Training AI Tutor" integrates diagnosis, planning and Q&A functions. Youdao takes the "AI-native" path, taking the Confucius large model as the base and AI Agent as the extension, running through both learning and marketing scenarios. Gaotu proposes "Scale with AI", adopting the three-teacher model of "renowned lead teacher + secondary supporting teacher + AI learning companion" to replicate the proven high-quality teaching capabilities efficiently.

Learning machines and AI learning hardware are becoming a new battlefield for close competition among the three players. Xueersi T6, New Oriental smart learning systems, and Youdao smart devices are competing for the education budget and usage time of the same group of families. When hardware becomes the traffic entry and AI becomes the retention tool, the competitive dimension of education and training enterprises has quietly shifted from "who has more renowned teachers" to "whose agent understands students better".

Behind the financial reports, the growth of the four companies no longer relies on a single category, but on a diversified "combination punch": New Oriental covers overseas study, adult examinations, quality-oriented education and e-commerce; TAL balances offline quality-oriented tutoring, learning machines and content solutions; Youdao deploys three major segments including learning services (accounting for about 54%, the absolute main force), online marketing (about 39%) and smart devices (about 6%); Gaotu lays out four business lines covering K9, high school, college students and public examination tutoring, trying to build a full-life cycle learning platform. The balance of the business matrix itself is a buffer against cyclical fluctuations.

At the same time, the market share of the education service market continues to concentrate on leading institutions with strong brand, content barriers and positive cash flow. In the tracks with rapidly released demand such as quality-oriented education, smart learning devices, adult and vocational education, the threshold of scale effect and R&D investment in technology is constantly rising, the living space of small and medium-sized participants is compressed, and the leading edge of the top four players is expected to further expand.

This article is from the WeChat official account "Edu Guide" (ID: EduZhiNan), Author: Edu Guide, published with authorization from 36Kr.