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Youdao (DAO) Returned To Profit, Is The Earnings Progress Already Priced In?

Simply Wall St · 2d ago

Youdao (NYSE:DAO) is in focus after reporting second quarter 2026 results that showed revenue of CNY 1,466.86 million and net income of CNY 73.79 million, compared with a net loss a year earlier.

Youdao’s latest earnings and the completed share repurchase come after a strong run in the stock, with the 90 day share price return of 37.26% and 1 year total shareholder return of 78.95% pointing to building momentum despite some recent short term weakness.

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Youdao’s share price now trades close to the average analyst target and above one intrinsic value estimate, which raises a simple question: How much of the recent earnings progress is already in the price?

Most Popular Narrative: 9.2% Overvalued

Youdao’s most followed valuation narrative places fair value at $14.95, which is below the last close of $16.32. That gap is small enough that the details behind the story matter.

Rapid advancement and integration of proprietary large language models like Confucius are enabling Youdao to deploy personalized and adaptive learning tools (e.g., AI Essay Grading, Mr. P AI Tutor, and AI-driven course recommendations), which are driving record-high user retention and positioning the company to capture structural growth in digital, lifelong, and AI-powered education, supporting future revenue growth and margin expansion.

Read the complete narrative. Read the complete narrative.

Want to see what Youdao’s valuation story is really built on? The fair value hinges on compounding revenue, rising margins, and a richer earnings profile. The key question is how ambitious those inputs are.

Result: Fair Value of $14.95 (OVERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, Youdao’s story also faces pressure from falling smart device revenue and softer deferred revenue in learning services, which could challenge the durability of its AI driven growth case.

Find out about the key risks to this Youdao narrative.

Next Steps

With Youdao’s story showing both enthusiasm and caution, it makes sense to review the details yourself and move quickly while sentiment is still shifting. To see both sides of the story in one place, take a closer look at the 1 key reward and 3 important warning signs.

Looking for more investment ideas beyond Youdao?

If Youdao has your attention, do not stop here. Broaden your watchlist with other focused opportunities that could sharpen your overall portfolio positioning.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.