NetEase Youdao Q2 2026 Earnings Report: Q2 net revenue reached RMB 1.47 billion, with the AI-native strategy accelerating the realization of commercial value

On August 20, NetEase Youdao (NYSE: DAO) released its unaudited financial results for the second quarter of 2026. During the reporting period, Youdao continued to advance its "AI-native" strategy, significantly improved operating cash flow, and achieved steady growth in multiple financial indicators.

The financial report showed that NetEase Youdao's net revenue in Q2 reached RMB 1.47 billion, a year-on-year increase of 3.5%, marking eight consecutive quarters of positive operating profit. In the first half of the year, Youdao's net revenue reached RMB 2.81 billion, up 3.6% year-on-year. This result represents a key turning point for NetEase Youdao's "AI-native" strategy, transitioning from an "investment phase" to a "harvest phase."

On one hand, the AI Agent matrix continues to be implemented, with LobsterAI's user base surpassing 1 million. AI applications have moved from the "proof of concept" stage to "scaled growth." On the other hand, AI technology has been deeply integrated into various business scenarios such as learning services, AI hardware, and online marketing, driving growth in operating profit and validating AI's ability to continuously enhance efficiency across businesses. With the "Ziyue" large language model as the technological foundation and vertical-scenario AI Agents as the growth engine, Youdao is continuing to realize its commercial value.

The AI Agent matrix is accelerating the deployment of AI across various scenarios, driving high-quality development across all of Youdao's business lines.

As AI Agents accelerate their deployment, their value in vertical scenarios is being redefined. In the highly interactive and feedback-driven realm of teaching and learning, AI is no longer just an auxiliary tool but has become an "intelligent tutor" deeply embedded throughout the entire learning journey, transforming the concept of personalized instruction into a scalable product experience. Under this trend, Youdao's learning services continue to release growth momentum driven by AI-powered personalized teaching capabilities, with net revenue reaching RMB 800 million in the second quarter, a year-on-year increase of 20.9%.

Meanwhile, AI subscription services have also seen steady growth. With the continuous iteration and enhancement of large language models and Agent capabilities, product experiences in language application scenarios such as translation and spoken language are undergoing qualitative changes. In the second quarter, sales from Youdao's AI subscription services amounted to approximately RMB 100 million, representing a year-on-year increase of over 20%. Notably, usage of the AI simultaneous interpretation feature in Youdao Dictionary and Youdao Translate increased by approximately 100% year-on-year. Sales of the AI speaking practice product, Hi Echo, more than doubled year-on-year in the second quarter.

In terms of online marketing services, net revenue reached RMB 580 million in the second quarter. Youdao proactively optimized its business structure by focusing on high-margin opportunities, driving the gross profit margin of this segment to 28.7%, an increase of approximately 3 percentage points year-on-year. This optimization has led to healthier growth quality: advertising revenue from industries with strong medium-to-long-term prospects, such as AI applications and short dramas, achieved year-on-year growth of over 50% for two consecutive quarters. In the second quarter, both the number of new clients and the advertiser repurchase rate saw significant sequential increases. During the reporting period, Youdao launched Ad Optimizer 2.0, achieving upgrades in three key areas: unified management, automated delivery, and intelligent alerts, thereby further enhancing delivery efficiency and value for advertisers.

The health of Youdao's smart hardware business improved year-on-year in the second quarter. During the reporting period, Youdao launched the X8 series of Dictionary Pens. For the seventh consecutive year, Youdao Dictionary Pen ranked first in sales on JD.com and Tmall during the 618 shopping festival. Youdao's AI Q&A Pen was recognized as an "Excellent Education Case for Safe and Beneficial AI" by the Ministry of Education and the Cyberspace Administration of China, as well as a typical case of AI application by the Ministry of Industry and Information Technology.

AI Agents enter a stage of scaled growth; NetEase Youdao accelerates the opening of new growth spaces in the AI-native era.

2026 is regarded by the industry as the "Year One of AI Agents," with the shift from single-point tool invocation to multi-agent collaboration becoming a core trend in the deployment of large language models. AI Agents are the core vehicle for NetEase Youdao's "AI-Native" strategy. Youdao's AI Agent portfolio showcases application achievements across scenarios such as office collaboration, knowledge management, cross-language communication, AI hardware, enterprise marketing, and content production. Leveraging its years of accumulated closed-loop capabilities in "technology-product-scenario" within learning, office work, and advertising, NetEase Youdao is advancing the implementation logic of AI serving physical scenarios and reconstructing real task workflows. This drives the transition of AI from single-point functions to an Agent service system covering multi-scenario task execution, marking a phased milestone in NetEase Youdao's comprehensive transformation towards AI Native.

In the first quarter, Youdao released LobsterAI, the first open-source desktop-level full-scenario personal assistant in China, attracting widespread attention from the industry and the global developer community. By the second quarter, LobsterAI's user base surpassed 1 million, establishing it as one of the "Top Four Office Agents" in China, marking the formal transition of Youdao's AI Agents from the "product launch" phase to the "scaled growth" stage.

In addition to LobsterAI, Youdao's AI Agent matrix includes Agent products already deployed in scenarios where Youdao has accumulated extensive experience. Youdao launched the industry's first "Simultaneous Interpretation Agent," which allows users to connect common headphones to automatically complete real-time recognition, instant translation, generate timestamped records comparing original and translated text, and produce AI meeting summaries. This has driven a doubling in usage volume for Youdao's simultaneous interpretation business.

iMagicBox, under Youdao Ads, integrates over 2,000 localized digital human avatars globally. Based on Youdao's trillion-parameter large translation model, it achieves native-level polishing across multiple scenarios, covering the full AI generation chain from text-to-image, image-to-video, to video dubbing. This reduces ad material production costs by approximately 70% compared to manual processes, with a 100% localization pass rate. Another platform, InfunEase, connects with over 30 million creators worldwide, covering more than 250 countries and regions. It features three influencer marketing Agents for brand promotion insights, social media data collection, and video comment analysis, capable of analyzing sentiment trends and conversion intentions in comments to output visualized matching reports. Its core YODA Agent automatically links natural language queries, MCN matching, regional data benchmarks, influencer cooperation proposal generation, and AI review of video content, significantly compressing the overseas influencer screening cycle, which traditionally takes weeks.

Furthermore, Youdao launched the AI-powered headphones, Youdao OpenPods, pioneering a new category of "AI-native hardware." Dubbed "simultaneous interpretation worn on the ears," OpenPods support real-time bidirectional translation across more than ten languages, achieving professional-level TEM-8 translation quality, and feature voice cloning capabilities. The independent recording and translation earbud case enables face-to-face bilingual conversations without needing to open a smartphone. Across all scenarios, the accuracy rate for speech-to-text transcription reaches 98%, with additional features for automatically generating structured meeting minutes, to-do lists, and mind maps.

As AI Agents accelerate their deployment, Youdao continues to strengthen its underlying model capabilities. During the reporting period, Ziyu 4 further enhanced its visual mathematical reasoning and complex logical inference capabilities through architectural and data-level optimizations, while also improving inference efficiency. Ziyu 4-TTS continued to refine capabilities such as cross-language voice cloning, emotional transfer, and streaming speech generation. Looking ahead, Youdao will continue to iterate on the capabilities of the Ziyu large language model, leveraging stronger understanding, reasoning, and interaction abilities to support the continuous upgrade of its AI Agent matrix, thereby accelerating the conversion of underlying model capabilities into user-facing product experiences and commercial value.

Youdao CEO Zhou Feng stated that the company will continue to implement its "AI-native" strategy, fully leveraging Youdao's technological advantages to deepen the application of large language models in learning and advertising scenarios. By expanding its AI Agent product matrix with enhanced capabilities, the company aims to continuously improve user experience and satisfaction, thereby driving further improvements in profitability and cash flow in the second half of the year.

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