Youdao Q2 profit surges on AI strategy; revenue up 3.5% to $216M

Youdao reported Q2FY26 revenue of US$216.2 million, up 3.5% YoY, with operating income reaching a record US$16.4 million. Learning services drove growth with a 20.9% revenue increase and 65.5% gross margin. The earnings call emphasized the rollout of Confucius 4 LLM, high retention rates in learning services, and a strategic pivot to high-margin online marketing, resulting in an expanded consolidated gross margin of 48.9%.