Youdao Q3 2025: AI-Powered Ads Drive Revenue Growth, Surpassing All Other Sources

BEIJING – Youdao (DAO), a player in intelligent learning solutions, reported its third-quarter 2025 financial results today, showcasing the escalating impact of its “AI-Native” strategy. The company marked its fifth consecutive profitable quarter, driven significantly by its AI-powered advertising services, which have surged as a primary growth driver.

Key Financial Takeaways:

• Net revenue reached RMB 1.6 billion (approximately $200 million USD).
• Operating profit hit RMB 28.3 million (approximately $3.93 million USD), with year-over-year growth of nearly 150% for the first three quarters.
• Operating cash outflow decreased by 31.7% year-over-year, indicating improvements in operational efficiency.

Advertising Revenue Overtakes Traditional Segments

Youdao’s advertising revenue reached a record RMB 0.74 billion (approximately $101 million USD) in Q3 2025, representing a substantial 51.1% year-over-year increase. This marks the first time advertising has become Youdao’s largest revenue source, a testament to the company’s successful integration of AI across the advertising value chain.

This growth isn’t just about increased ad spend; it’s about strategic AI implementation. Industry analysts are closely watching how Youdao leverages its AI-driven tools to achieve results.

• AI-Powered Creative Generation: Youdao iMagicBox, with its image-to-video capabilities and digital human presenters, effectively bridges the gap between content creation and ad placement. This “production-placement” loop increases efficiency while cutting costs. This is a key differentiator, as many companies struggle with the fragmented process of ad creation and deployment.
• AI-Driven Campaign Strategy: The AI Ad Placement Optimizer provides comprehensive decision support, from initial strategy to post-campaign analysis. This end-to-end approach significantly boosts return on investment (ROI), allowing Youdao to offer its clients more effective and targeted campaigns.

Global Expansion Fueled by Youdao Ads

Youdao’s overseas business experienced robust growth in Q3 2025, exceeding 100% year-over-year. Youdao Ads has been pivotal in this expansion, providing an integrated solution powered by AI, encompassing influencer matching, AI-enabled content creation, precise ad placement, and data analytics. The platform’s reach now extends to nearly 30 million influencers worldwide, marking significant progress in building a global network.

The company has also rolled out AI-driven, self-service tools designed to further empower influencer (KOL) marketing. These AI agents automate customer requirement analysis, recommend suitable influencers, and generate tailored rationales for each recommendation. Real-time comment monitoring and sentiment analysis further aid brands in dynamically tracking campaign performance.

A notable example is Youdao Ads’ support for NetEase Games’ international promotion of “Where Winds Meet.” The integrated marketing strategy, leveraging AI-powered influencer collaborations, resulted in over 500 million video views. This highlights Youdao’s ability to handle large-scale, sophisticated marketing campaigns.

“Our Q3 performance validates the impact of our AI-Native strategy,” said Youdao CEO Feng Zhou. “We are committed to furthering the innovative application of the Confucius large model in both learning and advertising. We are confident in our ability to achieve sustained improvements in operating profit and achieve operating cash-flow breakeven for the first time annually.”

Analysts point to Youdao’s focus on AI integration as a key factor in its continued success. The company’s ability to monetize its AI capabilities, particularly in the advertising sector, sets it apart from competitors. The market will be closely watching whether Youdao can maintain this momentum and continue to scale its AI-driven solutions.