Net revenues reached RMB 1.3 billion, up 3.8% year over year, driven by learning services and online marketing. Operating profit fell to RMB 57.5 million, down 44.7% year over year, attributed to strategic AI investments and a high prior-year comparison base. Operating margin improved sequentially by 0.5 percentage points to 4.3%. Net operating cash outflow was RMB 93.1 million, narrowing 63.6% year over year, supported by recent AI product launches. Learning services revenue totaled RMB 627.5 million, up 4.2% year over year, with Youdao Lingshi momentum and gross billings growing over 20%. AI-driven subscription services sales exceeded RMB 100 million, representing over 70% year-over-year growth. Online marketing services revenue rose to RMB 611.1 million, up 20.9% year over year, supported by performance-based advertising demand. Smart devices net revenue declined to RMB 109.4 million, down 42.6% year over year, with gross margin falling to 39.9%. Contract liability decreased to RMB 667 million as of March 31, 2026.
"Online Marketing Services Revenue -- RMB 611.1 million, an increase of 20.9% year over year, driven by demand for performance-based advertising. Online Marketing Services Gross Margin -- 29.6%, stable year over year and up 1.8 percentage points sequentially. Emerging Sectors Advertising Revenue -- Revenue for AI applications and short-form drama sectors grew over 50% year over year. Smart Devices Net Revenue -- RMB 109.4 million, down 42.6% year over year, due to lower device demand."
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