A Look At Youdao (DAO) Valuation As Q1 Revenue Rises But Profitability Softens

First quarter earnings and completed buyback draw investor focus

Youdao (DAO) reported first quarter 2026 results with revenue of CN¥1,348.02 million and net income of CN¥38.58 million, alongside a completed 7,500,000 share repurchase under its previously announced buyback program.

See our latest analysis for Youdao.

The mixed first quarter picture of higher revenue alongside lower net income has arrived after a period where momentum has been building, with a 90 day share price return of 12.77% and a 1 year total shareholder return of 29.42%.

If earnings season has you reassessing growth stories in tech and education, it can be useful to compare Youdao with other AI focused businesses through our 62 profitable AI stocks that aren't just burning cash

With revenue growth, lower net income and a completed 7,500,000 share buyback, Youdao’s recent gains may already reflect a lot of good news. Is this a fresh entry point, or are markets already pricing in future growth?

Most Popular Narrative: 22.5% Undervalued

At the last close of $11.57, the most followed narrative pegs Youdao’s fair value at $14.93, framing the recent share gains in a valuation context.

The digital education market is set for a major demand surge as ongoing internet penetration and device access fuel secular adoption of online learning. Youdao's dominant position in smart devices and interactive apps is described as making it uniquely positioned to capture outsized market share as its addressable user base grows, which the narrative links to outsized top-line growth.

Read the complete narrative.

Curious what justifies that higher fair value? The narrative leans on faster earnings expansion, firmer margins and a richer future profit multiple than many investors might expect.

Result: Fair Value of $14.93 (UNDERVALUED)

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

However, tougher regulation in China, rising competition, and higher content costs could quickly challenge the optimistic margin and growth assumptions behind that $14.93 fair value.

Wall Street's queuing for one rocket. While SpaceX counts down to its IPO, other companies tied to the new space race are already in orbit. → 20 Compelling Space Companies watchlist · Global Space Race Investing Ideas screener · Scan the sector by valuation on Rocket Lab's valuation page.

Another View: High P/E Puts The Spotlight On Valuation Risk

That $14.93 fair value narrative leans on strong growth and higher future margins, but the current P/E of 136.5x is far above both peers at 26x and a fair ratio of 48.5x. That gap suggests investors are already paying up heavily, so it may be useful to consider how much of the story is already in the price.

See what the numbers say about this price — find out in our valuation breakdown.

Next Steps

With optimism around growth potential and concerns about valuation both in play, it makes sense to move quickly and weigh the full picture for yourself using 1 key reward and 4 important warning signs.

Looking for more investment ideas?

If Youdao has sharpened your focus, do not stop here, fresh opportunities across the market could suit your goals better than sticking to a single stock.

• Spot potential growth stories early by scanning 24 elite penny stocks with strong financials that pair smaller size with stronger financial profiles than many investors expect.
• Hunt for mispriced quality by using the 46 high quality undervalued stocks to see which stocks combine solid fundamentals with prices that lag their underlying strength.
• Prioritise defence as well as upside by checking the 63 resilient stocks with low risk scores where resilient balance sheets and lower risk scores take center stage.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com