China's Youdao Q4 revenue rises 16.8% yr/yr

Overview

• China AI solutions provider's Q4 revenue rose 16.8% yr/yr

• Gross margin for Q4 fell to 45.1% from 47.8% last year

• Q4 operating income decreased 28.5% yr/yr

Outlook

• Youdao remains committed to AI-Native strategy focusing on learning services and advertising

• Company aims to deliver differentiated user experiences and drive sustainable long-term growth

Result Drivers

• ONLINE MARKETING GROWTH - Revenue from online marketing services increased 37.2% yr/yr, driven by demand from NetEase group and overseas markets due to AI investments

• LEARNING SERVICES INCREASE - Learning services revenue rose 17.7% yr/yr, driven by strong sales of AI-driven subscription services

• SMART DEVICES DECLINE - Revenue from smart devices fell 26.6% yr/yr due to decreased demand for smart learning devices

Key Details

Analyst Coverage

• The current average analyst rating on the shares is "buy" and the breakdown of recommendations is 6 "strong buy" or "buy", 2 "hold" and no "sell" or "strong sell"

• The average consensus recommendation for the software peer group is "buy"

• Wall Street's median 12-month price target for Youdao Inc is $12.20, about 24.1% above its February 10 closing price of $9.83

• The stock recently traded at 30 times the next 12-month earnings vs. a P/E of 32 three months ago

Press Release: ID:nPn2gXMhpa

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