Huatai maintains a "buy" rating on Youdao Inc ADR Class A (DAO.US) with a target price of $12.46.

Recently, Netease Inc Sponsored ADR Youdao Inc ADR Class A (DAO.US) released its third quarter financial report for 2025, achieving profitability for five consecutive quarters, with operating profit in the first three quarters increasing by nearly 150% year-on-year. Huatai maintained a "buy" rating for Youdao Inc ADR Class A in its latest research report, setting a target price of $12.46, highlighting the company's accelerated growth in advertising business, impressive performance in AI subscription services, and continued improvement in profit quality and growth momentum. The financial report shows that in the third quarter of 2025, Youdao Inc ADR Class A's net revenue was 1.63 billion yuan, a 3.6% year-on-year increase, with an operating profit of 28.3 million yuan. Online marketing services revenue increased by 51.1% year-on-year to 740 million yuan, becoming the top revenue source for the first time in a single quarter. Additionally, AI subscription service sales approached nearly 100 million yuan, reaching a historical high and growing by over 40% year-on-year, serving as a key driver for growth in the learning services sector. Huatai pointed out that Youdao Inc ADR Class A achieved high-quality growth in various businesses driven by the "AI-native" strategy. In terms of learning services, Youdao Inc ADR Class A's sales of LingShi grew by over 40% year-on-year. The intelligent hardware business continues to optimize, with the launch of the new generation AI answering pen Space X in August further enhancing the product's competitiveness in the real-time answering field. The rapid growth of the advertising business is attributed to Youdao Inc ADR Class A's continuous investment in AI technology. The company has established three major AI engines, including iMagicBox for creative generation, KOL platform and XiaoZhi AI optimization specialist, significantly improving advertising efficiency and marketing effectiveness. During the reporting period, advertising revenue from the gaming industry grew by over 50% year-on-year, with revenue from overseas markets increasing by over 100%. CEO of Youdao Inc ADR Class A, Zhou Feng, stated that the company will continue to deepen its "AI-native" strategy, promoting the deep application of the "ZiYue" large model in learning and advertising scenarios, striving to build a more competitive digital learning and intelligent marketing platform.