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    Learn Why The Bull Case For Youdao (DAO) Could Change Following High P E Debate

    Simply Wall St·11/01/2026 18:22:08
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    • Youdao has drawn fresh attention after trading on a very high P/E multiple relative to peers, as investors weigh whether earnings from AI driven learning services and online marketing are sufficient to support such a valuation.
    • The key issue is whether subscription based AI education tools and higher margin advertising can carry the load, while smart device revenue and margins face pressure and investment in large language models keeps costs elevated.
    • This article examines how Youdao's investment narrative is affected by debate over its high P/E valuation and AI growth expectations.

    Compare Youdao's rich P/E story with other potential AI beneficiaries by scanning our curated list of 41 profitable AI stocks that aren't just burning cash that already back their narratives with actual earnings power.

    Youdao Investment Narrative Recap

    To own Youdao at this kind of P/E, you need to believe the story that AI driven Learning Services and Online Marketing can carry the financial weight. That means subscription tools like Youdao Lingshi and Confucius LLM based products continue to deepen engagement and keep recurring revenue and margins resilient, even as profit margins sit around 2.7%.

    The recent focus on the lofty valuation does not change the near term swing factors. The short term catalyst remains execution in AI subscriptions and marketing tools after income from operations in Q1 2026 declined 44.7% and operating margin slipped to 4.3%. The main risk is that heavy AI investment and weak smart device demand keep group margins under pressure.

    Without fresh announcements tied directly to this latest move in Youdao shares, the most relevant reference point is management’s ongoing push into AI driven learning products and advertising tools outlined over recent quarters. Confucius LLM, Mr. P AI Tutor, multi modal K–12 problem solving and subscription services together form the operational backbone of the current equity story.

    These offerings connect straight back to the key catalysts that investors are debating. Growing AI led subscription revenue near RMB 400m and solid Online Marketing Services performance need to offset smart device revenue that declined 18.2% in 2025 and more than 30% year over year in Q1 and Q2 2026. Execution on that mix shift is what ultimately has to justify Youdao’s rich earnings multiple.

    Youdao's narrative projects CN¥8.8b revenue and CN¥535.3m earnings by 2029. That implies 13.4% yearly revenue growth and an earnings increase of about CN¥374.6m from CN¥160.7m today.

    Uncover why Youdao's fair value is essentially in line with its current price.

    NYSE:DAO 1-Year Stock Price Chart
    NYSE:DAO 1-Year Stock Price Chart

    Exploring Other Perspectives

    For Youdao, the bullish twist in this story is margin expansion. The most optimistic analysts were penciling in profit margins rising from 2.7% to 7.6% and earnings near CN¥721.0 million by 2029. Those forecasts came before this latest P/E driven spotlight, so treat them as one possible path and compare them with other viewpoints.

    Explore another Youdao fair value estimate, including one that suggests it could be worth as much as $19.83.

    Decide For Yourself

    Disagree with existing narratives? Extraordinary investment returns rarely come from following the herd, so consider trusting your own analysis.

    Looking For More Ideas Beyond Youdao?

    If Youdao has you thinking harder about valuation, risk and earnings quality, it can help to line it up against other opportunities that meet different checklists. The Simply Wall St Screener lets you quickly filter for companies that better match your own comfort level on balance sheets, volatility or income needs.