Youdao (DAO) stock is soaring 5.24% in intraday trading on Thursday following the release of its second quarter 2025 financial results, which exceeded expectations and marked the company's first-ever profitable second quarter.

The Chinese AI-powered learning and advertising solutions provider reported total net revenues of RMB 1.4 billion (US$197.9 million), representing a 7.2% increase from the same period in 2024. This result slightly surpassed analyst estimates of RMB 1.38 billion. More importantly, Youdao achieved income from operations of RMB 28.8 million (US$4.0 million), compared with a loss from operations of RMB 72.6 million for the same period in 2024.

The company's strong performance was driven by several factors. Notably, net revenues from online marketing services increased by 23.8% year-over-year to RMB 632.9 million (US$88.3 million), primarily due to increased demand from the gaming industry and overseas markets. This growth was attributed to Youdao's continued investments in AI technology. Additionally, the company's learning services segment saw a modest 2.2% increase in revenues.

Youdao's CEO, Dr. Feng Zhou, emphasized the success of the company's "AI Native Strategy" in driving robust financial results. The company has made significant strides in AI technology, including the release of its latest Large Language Model, Confucius 3, and the open-sourcing of Confucius 3-Math. These advancements have led to improvements in various products and services, such as the AI Essay Grading function in Youdao Lingshi, which achieved a historical high retention rate.

Looking ahead, Youdao plans to continue advancing its AI Native Strategy through scenario-driven optimization of its large language models and accelerated technological innovation across its learning and advertising segments. The company aims to further boost learners' productivity and elevate advertising return on investment while maintaining a focus on sustainable growth and improved financial metrics.