Why Youdao (DAO) is back in focus after its latest earnings
Youdao (DAO) is drawing attention after reporting fourth quarter and full year 2025 earnings, with revenue higher than a year earlier but quarterly net income lower, while full year profit was above the prior year.
See our latest analysis for Youdao.
The earnings release appears to have sharpened market focus on Youdao, with the 1 day share price return of 5.34% and 7 day share price return of 10.20% standing against a 30 day share price return of 9.92%. Over a longer horizon, the 1 year total shareholder return of 6.99% contrasts with a 5 year total shareholder return of 70.33%, suggesting that momentum has been improving more recently but remains weak over the longer term.
If Youdao’s move has you looking at other education and AI themed names, it could be a good time to scan 59 profitable AI stocks that aren't just burning cash as potential next ideas.
With the share price up over the past week but still sitting below the average analyst target of US$11.75, the key question now is whether Youdao is still mispriced or if the market is already accounting for potential future growth.
Most Popular Narrative: 13% Undervalued
With Youdao last closing at $10.26 against a widely followed fair value estimate of $11.75, the current price sits below what that narrative assumes, putting extra weight on the growth and margin story that underpins the model.
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 while supporting future revenue growth and margin expansion.
Curious what kind of revenue runway and margin profile are baked into that view, and how rich a future earnings multiple it leans on, the full narrative breaks down the growth mix, long term profitability assumptions and the valuation jump required to close the gap to $11.75.
Result: Fair Value of $11.75 (UNDERVALUED)
Have a read of the narrative in full and understand what's behind the forecasts.
However, there are still pressure points, including weaker smart device revenue and lower online marketing margins, that could quickly challenge the upbeat, AI-driven growth story.
Find out about the key risks to this Youdao narrative.
Another Angle On Valuation
The fair value narrative points to Youdao trading below an $11.75 estimate, but the current P/E of 78.7x tells a different story. That is far above the US Consumer Services average of 17.1x and above a fair ratio of 34.1x, which suggests valuation risk if sentiment cools.
See what the numbers say about this price — find out in our valuation breakdown.
Next Steps
Mixed signals in the story so far? With investors flagging both risks and rewards, it is worth checking the full picture for yourself, especially if you want to move quickly. Weighing 2 key rewards and 2 important warning signs could help you decide where you stand.
Looking for more investment ideas?
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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.
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