Gaotu Techedu (NYSE:GOTU) released first-quarter financial results and hosted an earnings call on Tuesday. Read the complete transcript below.
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Summary
Gaotu Techedu reported a 13.2% year-over-year revenue increase to approximately $1.7 billion, with non-GAAP operating profit and net profit reaching $13.8 million and $41.4 million, respectively.
The company is focusing on profitable growth, integrating AI into curriculum development, and enhancing user engagement through both online and offline educational services.
Deferred revenue rose 24.1% year-over-year to nearly $1.8 billion, indicating strong future revenue recognition.
The offline educational services are expanding, with plans to extend successful models to new cities, and a focus on building local trust and service quality.
Gaotu Techedu repurchased 33.1 million ADSes for approximately 704 million RMB and continues to invest in initiatives that broaden access to quality education.
Future guidance for Q2 2026 projects revenues between 1,578 million and 1,598 million, representing a year-over-year increase of 13.6% to 15.0%.
Full Transcript
OPERATOR
Hello ladies and gentlemen. Thank you for standing by and welcome to the Gaotu Techedu Inc. First quarter 202026 earnings conference call. At this time, all participants are in listen only mode. After management’s remarks, there will be a question and answer session. Today’s conference call is being recorded. I would now like to turn the conference over to your first speaker today, Ms. Katherine Chen, head of Investment Relations. Please go ahead, Katherine.
Katherine Chen (Head of Investment Relations)
Thank you. Good evening everyone. Thank you for joining Gaotu’s first quarter 2026 earnings conference call. My name is Katherine and I’ll help post the earnings call today. Gaotu’s earnings release for the quarter was distributed earlier and is available on the Company’s IR website at IR Gaotu CN as well as through PR Newswire Services. Joining the call with me tonight from Gautu Senior Management is Mr. Larry Chen, Gautu’s founder, chairman and chief executive officer Mr. Robin Luo, Gautu’s chief operating officer Mr. Mike Xu, Gaotu’s head of strategy and Ms. Hui Lau, Gao Tu Senior Finance Director. Larry will first begin with the quarter’s business highlights and strategies, followed by Robin’s overview of our operational performance, and we will finish with a detailed discussion of our financial performance by Hui Lau. Following their prepared remarks, we’ll open the floor to questions from analysts. Robin and Mike will address analyst questions during the QA session. Before we begin, I’d like to remind you that this conference call will contain forward looking statements made under the Safe harbor provision of the US Private Security Litigation Reform act of 1995. These forward looking statements are based upon management’s current beliefs and expectations as well as the current market and operating conditions. They involve known or unknown risks, uncertainty and other factors all of which are difficult to predict and many of which are beyond the Company’s control and may cause the Company’s actual results, performance or achievements to differ materially from those contained in any forward looking statements. Further information regarding this and other risks is included in the Company’s public filing with the US sec. The Company does not undertake any obligations to update any forward looking statements except as required under applicable law. During today’s call, management will also discuss certain non GAAP measures for comparison purpose only. For definition of non GAAP financial measures and reconciliation of GAAP to non GAAP financial results, Please refer to 2026 earnings release published earlier today. As a reminder, this conference is being recorded. In addition, a live and replay webcast of this conference call will be available on Gautu’s IR website. It is now my pleasure to introduce our Founder, Chairman and Chief Executive Officer
Larry Chen (Founder, Chairman and Chief Executive Officer)
Larry Good evening and good morning everyone. Thank you for joining us on Gaotu’s first quarter 2026 earnings conference call. I would like to take this opportunity to thank each of you for your interest and support for Gaotu. Before I start, please be reminded that all financial figures discussed today are RMB unless stated otherwise. The first quarter of 2026 marked another important step in strengthening Gaotu’s operational quality and long term capabilities. Under our profitable growth strategy, revenue grew by 13.2% year over year to approximately $1.7 billion, with non GAAP operating profit and net profit reaching 13.8 million and 41.4 million respectively. After excluding the impacts of share repurchases, our cash position increased by 69.7 million year over year, providing strong support for our ongoing investments in products, technology and talents to drive sustainable long term growth. The value of education is not limited to short term outcomes, but rather compounds over time through sustained engagement, consistent effort and incremental progress. The same is true in business. What drives long term resilience through cycles is not skill alone, but the organizational capabilities, product strength and user trust built over time. With this in mind, while we remain focused on delivering near term results, we are equally committed to advancing user value, organizational efficiency and operational resilience across our business fundamentals. Next, I would like to walk you through our strategic priorities and key developments this quarter across five areas. First, profitable growth is moving beyond the periodic results toward a more sustainable operational capability. In recent quarters, we have continued to optimize our operating structure, focusing on balancing business health, operating efficiency and long term returns. Our mature online business has built robust scalable capabilities across course offerings, teaching services, user engagement and organizational collaboration and continued to demonstrate resilient profitability. This quarter, as we navigate a dynamic marketing environment in 2026, we will maintain our disciplined operating approach, improving resource education efficiency and execution preceding so that growth is built on an increasingly healthy and sustainable foundation. Based on our current business momentum and operating performance, we remain confident in delivering continued improvement in operational quality throughout the year. Second, AI is evolving from a mere productivity tool into a key fundamental capability powering Gaotu’s scalable growth and organizational transformation. In recent periods, we have progressively integrated AI across curriculum development, content creation, operational collaboration and learning services within our curriculum development system. For example, AI is enhancing our question banks and knowledge graphs, supporting teaching and formative assessment, and assisting teachers and curriculum teams with repetitive standardized tasks. Before that, we are weaving AI into our business workflows, operational processes and organizational systems to serve as a core infrastructure for operational decision making and cross functional collaboration. On the user side, we continue to explore a spectrum of AI powered product formats tailored to diverse learning needs including learning tools, AI enhanced one on one tutoring scenarios and AI integrated online large class courses. As AI becomes more deeply embedded in our core business, we are establishing a skill with AI framework that allows our best teachers, curriculum expertise and the proven service models to scale with greater efficiency, enhancing user experience while unlocking organizational and operational leverage. Third, user needs and learning experience remain the fundamental drivers behind our continuous product and servicing integration and guide our efforts to strengthen talent development initiatives. On the teaching services front, we continue to optimize our feedback mechanisms and the service framework. Take our online large class as an example. By deepening collaboration across instructors, tutors and the curriculum team, we have formed a weekly feedback loop that captures student pain points, progress variations and classroom feedback in real time. These learning insights flow directly back into course integration, iteration and service support, keeping content closely aligned with students actual learning pace. At the same time, we continue to reinforce our talent pipeline. This spring we expanded our campus recruitment and early career talent development efforts with campus engagement across prestigious domestic and international universities including Oxford, Cambridge, Tsinghua and Peking University. By tracking individuals who are genuinely passionate about education and demonstrate the motivation and the potential to grow with us, we are building a strong talent foundation to support our long term capabilities in product innovation, teaching excellence and organizational development. Fourth, our offline service offerings are progressing in line with expectations and are increasingly demonstrating their value, enhancing user engagement, building brand equity and driving long term value creation. For example, our offline educational services for college students now span seven cities where we have developed durable service and engagement capabilities centered around college students. Evolving Needs Our Zhengzhou Dream Center has spent the past year validating an integrated service model that brings care, learning, daily life services and personal development achieving notably high utilization rates in the process. These enriched service touch points have also driven meaningful improvements in user satisfaction and brand awareness. We plan to extend this model to Wuhan in 2026. Additionally, we will further expand our offline presence across all business segments, sharpening our service delivery capabilities to better align with these cohorts, diverse learning stages, growth objectives and service needs. This will comprehensively elevate the learning experience, deepen user trust and enhance brand value throughout the user’s lifelong learning journey. Fifth, we believe long term value goes beyond financial results. It equally reflected in our ability to create lasting social impact for all our shareholders and society through efficient, disciplined capital allocation. We remain committed to sharing the benefits of the company’s long term development with our shareholders. As of June 1, 2026, we had repurchased a total of 33.1 million ADSes for approximately 704 million RMB. In addition, we continue to invest in initiatives that broaden access to quality education. For example, Gaotu foundation the My AI Science Class project has reached 33 rural schools across seven provinces and empowered more than 23,000 teachers. We plan to expand its coverage, hold regular on site classes in Baise, and improve the accessibility of educational resources in underserved regions. We believe technology should not only improve efficiency, but also help bridge regional gaps in high quality educational resources and create broader social value. Enduring success comes from unwavering commitment and future momentum begins with the steps we take today. Looking ahead, we will continue to advance with focus and resolve, leveraging technology and innovation to expand the boundaries of education and further strengthening our business foundations through disciplined execution. We are fully confident in our capability to accompany and support students throughout their growth journey, creating sustainable long term value for our users and our shareholders. And thank you very much everyone. This concludes my prepared remarks. I will now pass the call over to our COO Robin to walk you through the quarter’s operational performance.
Robin Luo (Chief Operating Officer)
Thank you Larry and thank you everyone for joining our call today. I’m Robin. I will now walk you through our operating performance and business Update for the first quarter of 2026. Please note that all financial data are in RMB terms unless otherwise stated. Building on the progress we made over the past year in enhancing operational quality and organizational efficiency, we continue to advance our profitable growth strategy as we entered 2026. Notably, we achieved the first quarter profitability for the second consecutive year, reflecting and the resilience of our mature business model as well as our continued improvements in organizational execution and resource allocation. R&D and G&A expenses as a percentage of Revenue declined by 0.7 percentage points Year over year, demonstrating ongoing gains in management efficiency and organizational collaboration. Deferred revenue totaled nearly 1.8 billion RMB, up 24.1% year over year, providing clear visibility into revenue recognition in the coming quarters and laying a solid foundation for the steady execution for our full year business plan. The education subject to seasonal patterns closely aligned with students learning cycles and the course schedules. This year, the later timing of Chinese New Year shifted the delivery mix session and the spring classes across quarters. Our resource deployment is also calibrated to this enrollment with those and business cycles. Therefore, we believe that evaluating the company’s performance over the first half of the year as a more complete operating cycle offers a clearer picture of our underlying trends. Looking at our current execution progress, our profitability and operational efficiency continue to as we further optimize our product mix, organizational collaboration and resource allocation efficiency, we remain optimistic about our full year operating performance next our business Progress by Segments Learning Service contributed over 95% of net revenues, non-academic tutoring services and traditional learning services at our core, segments generated over 85% of our total revenues. In our new initiatives focused on online and offline non-academic tutoring services, gross billings increased by over 20% year over year in the first quarter, contributing more than 35% of total gross billings while revenue grew by over 15% year over year, accounting for near 40 percent of total revenues as enrollment capabilities matured. The online business within this segment maintained the first quarter profitability for the second consecutive years, underscoring strong product market fit and operational resilience. On the business front, we continue to advance our learning service systems and strengthen and educational product innovation, leveraging AI capabilities to build diverse learning scenarios that spark students interest, sharpen critical thinking and develop practical skills. We are also deepening our focus on localized curriculum development to make our teaching content more relevant and our services more tailored by meeting user needs with greater precision. This effort collectively lay a solid foundation for enhanced learning outcomes and higher user retention. Our accounted for over 45% of total revenues and maintained a healthy growth trajectory during the first quarter. Our consistent investments in strengthening our teaching talent pipeline and upgrading our service system are gradually translating into tangible operating results. In particular, our one on one tutoring business recorded year over year growth of more than 20% in both revenue and gross billings supported by professional capabilities, service and engagement and supply stability for our AI is playing an important role in improving the efficiency and precision of personalized learning services. We continue to strengthen our end to end tailored service model across key stages of the learning process including learning assessment, studying, planning, progress tracking and performance feedback. Our AI powered learning analytics and diagram enable tutors to more efficiently consolidate and analyze users learning data, identify individual knowledge gaps and learning set more personalized plans. This not only makes our service delivery more effective but also provides students and parents with clear progress milestones and next step planning, further enhancing overall users experience and service satisfaction. On the channel front, we continue to optimize our channel mix by higher quality acquisition channels while from private traffic and word of mouth referrals. The resulting improvements in user quality, conversion efficiency and the retention rates continue to strengthen the operation fundamentals of our traditional business. Another key component of our learning services is educational services for college students and adults. While sustained its solid growth momentum this quarter, gross billings grew over 15% year over year and contributed over 25% of total gross billings with revenue accounting for 10% of total revenue. This performance reflects our continued focus on users involving needs as well as ongoing optimization of product offerings, service management and operational use. Taking our educational services for college students as an example, building high quality engagement throughout users learning journey has always been our key priority. We have or structured framework to evaluate teacher students engagement across interaction frequency, emotional connection and professional academic support, improving the quality of tutor services and optimizing user experience. At the same time, we are embedding AI capabilities more deeply in our daily operations to streamline, standardize the workflows and enhance operational efficiency, enabling teachers to dedicate more time to higher value activities such as personalized learning plan and regular mentorship. This quarter, gross billings and revenues for our educational services for college students grew by more than 20% year over year, with operating cash flow also improving year over year. Our civil service exam preparation business also double digit year over year growth in both revenue and gross billings during the quarter. With our capital productivity continuing to improve, reflecting ongoing enhancements in user value and operational efficiency across all, we are advancing toward the same goal, driving gains in both business scale and operational quality through sharper understanding of user needs, stronger products and service relevance, and more efficient organization, collaboration and resource allocation. As we move toward this direction, we are continuing our operational decisions and resource deployment, enabling each business to chart a healthier and more sustainable growth path to at its respective stage of development. With that, I will now turn the call over to our Senior Financial Director Willam who will walk you through our financial data.
Willam
Thank you, Robin. I will now walk you through our financial data. Please note that all financial data are in RMB terms unless otherwise stated. Our cost of revenue this quarter was 514.8 million. Gross profit increased 12.9% year over year to nearly 1.2 billion RMB with a gross margin of 69.5%. Total operating expenses during the quarter increased 16.1% year over year to nearly 1.2 billion. Breaking it down selling expenses increased 19.0% to year over year this quarter to 844.1 million, accounting for 50.0% of net revenue. Research and development expenses increased 5.7% year over year to 159.0 million, accounting for 9.4% of net revenues. General and administrative expenses increased 12.9% year over Year to 164.7 million, accounting for 9.7% of net revenues. Income from operations was 6.9 million and the operating income margin was 0.4%. Non GAAP income from operations was 13.8 million and the non GAAP operating income margin was 0.8%. Net income was 34.5 million and net income margin was 2.0%. Non GAAP net income was 41.4 million and the non GAAP net income margin was 2.5%. Our net operating cash outflow increased 73.6% year over year to 828.4 million. Now turning to our balance sheet. As of March 31, 2026 we held 691.2 million in cash, cash equivalents and restricted cash, along with 2.1 billion in short term investment and 501.4 million in long term investment. This comes to a total of nearly 3.3 billion. As of March 31, 2026, our deferred revenue balance was around 1.8 billion, primarily consisting of tuition received in advance. As of June 1, 2026, we had repurchased an aggregate of around 33.1 million ADSs on the open market for nearly 704 million. RMB before I provide our business outlook for the next quarter, please allow me to remind everyone that this contains forward looking statements which include risks and uncertainties that are beyond our control and the could cause the actual results to differ materially from our predictions. Based on our current estimates, total net revenue for the second quarter of 2026 are expected to be between 1,578 million and 1,598 million, representing an increase of 13.6 million to 15.0% on a year over year basis. This concludes my prepared remarks. Operator, we are now ready for the Q and A session. Thank you everyone for listening.
OPERATOR
Thank you. We will now begin the question and answer session. To ask a question, you may press Star then one on your telephone keypad. If you’re using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. For the benefit of all participants on today’s call, if you wish to ask your question to management in Chinese, please immediately repeat your question in English. For the sake of clarity and order, please ask one question at a time. Management will respond and then feel free to follow up with your next question. At this time, we will pause momentarily to assemble our roster. The first Question comes from LC Shing with CLSA. Please go ahead.
LC Shing
Thank you management for taking my question and congratulations on the steady results. My question is about the offline business. So we mentioned in our opening remarks that the offline business progress right now is in line with our expectation. Could you share more details on the latest progress update in terms of operation and also our plan for this year? I will translate to Chinese.
Mike Xu (Head of Strategy)
Okay, thank you. Elsie, this is Mike. I will take this question. So let me first start with how we think about our offline business. For Gaotu, offline is an important part of our long term learning service strategy. It is not just another revenue stream. It can help us build deeper local trust, provide more direct service to student parents and create a meaningful second growth curve over time. Since we launched offline business, we have been built capabilities needed to run it well. That includes a localized curriculum, local teams, experienced operating talents and better data systems. The goal is straightforward and we want each city to have products and that fit the local demand and we want our delivery quality to be consistent. As we enter 2026, we are starting to see these earlier investment translate into clearer operating results. So at operating level, retention has been improving steadily and some cities and products are already showing stronger competitiveness. Classroom utilization is also moving in the right direction. In cities where we have operated for a longer period of time, brand recognition and word of mouth are helping us scale more efficiently. In some markets, we are also seeing the brand equity from our online business to support our offline services. We also see user demand becoming more clear. Families with specific learning goals and high expectations for service quality, looking for strong teachers, localized products and more attractive learning support. This long term commitment to star teacher strategy and service excellence. So let’s move to the summer enrollments. The offline business is progressing broadly in line with our expectation as the enrollment is still going on. So we will provide further updates accordingly. But based on the first five months, both gross billion and the revenue have been tracking with our expected range and we are seeing user demand and channel conversion gradually pick up. Based on the current progress, we expect offline billion revenue to maintain relatively strong growth in the first half of the year. Going forward, we will continue to expand with discipline. We’ll closely look at each city including user demand, classroom utilization, retention, teacher supply and operating efficiency before we scale further. More importantly, we want offline growth to be built on a solid product quality, consistent service experience and steady accumulation of local trust and reputation. So that concludes my answer. Hope that can address your question, Elsie.
LC Shing
Yeah, thank you. It’s very clear.
OPERATOR
The next question comes from Yukon Zheng with CITIC. Please go ahead.
Yukon Zheng
Good evening management. Thank you for taking my question. And my question is about the cost control. We noticed that the company has achieved great expense control discorder. So do we have an outlook on the cost control and efficiency over the common quarter? And I will transfer myself. Thank you. It’s very clear.
OPERATOR
As there are no further questions now I’d like to turn the call back over to Katherine Chen for closing remarks.
Katherine Chen (Head of Investment Relations)
Yeah, yeah. Thank you everyone for joining our call tonight. And if you have any further questions please don’t hesitate to contact our investor relations department or our management via email at [email protected] directly. You are also welcome to subscribe to our news alert on the company’s IR website. Thank you very much again for your time. Have a great night.
OPERATOR
Thank you. This concludes today’s conference call. You may now disconnect your line. Thank you.
Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company’s SEC filings and official press releases. Corporate participants’ and analysts’ statements reflect their views as of the date of this call and are subject to change without notice.
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