Gaotu Techedu Q2FY26 revenue up 20%, net loss narrows 37%
- Net revenues rose 20.2% YoY to RMB1,670.1 million in Q2FY26
- Net loss narrowed 37.1% to RMB135.8 million as operating efficiency improved
- Non-academic tutoring revenue grew over 30%, driving segment profitability
- Offline Dream Centers in Zhengzhou and Wuhan reached full capacity
- Share repurchases totaled 36.5 million ADSs for RMB741.8 million
*this image is generated using AI for illustrative purposes only.
Gaotu Techedu Inc. (NYSE: GOTU) reported a 20.2% year-over-year increase in net revenues for the second quarter ended June 30, 2026, driven by sustained demand for its AI-powered education services.
The Beijing-based company posted a net loss of RMB135.8 million, a significant improvement from the RMB216.0 million loss recorded in the same period last year. In US dollar terms, sales reached $246.138 million, up 26.91% from $193.951 million in the prior year period. Adjusted EPS improved to $(0.08) from $(0.12) per share.
Financial Performance
Net revenues reached RMB1,670.1 million in Q2FY26, up from RMB1,389.4 million in Q2FY25. Gross billings, which reflect cash received from course sales net of refunds, grew 19.4% to RMB2,689.1 million.
Cost of revenues rose 18.3% to RMB559.2 million due to expanded instructor and tutor workforces, higher server costs, and increased depreciation. Despite these costs, gross profit margin expanded to 66.5% from 66.0% in the prior year period.
| Metric | Q2FY26 (RMB) | Q2FY25 (RMB) | Change |
|---|---|---|---|
| Net Revenues | 1,670.1 million | 1,389.4 million | +20.2% |
| Gross Billings | 2,689.1 million | 2,252.4 million | +19.4% |
| Operating Loss | (149.8) million | (241.9) million | -38.1% |
| Net Loss | (135.8) million | (216.0) million | -37.1% |
Operating expenses increased 8.8% to RMB1,260.6 million, primarily due to higher marketing expenditures and workforce expansion. However, operating expenses as a percentage of net revenues decreased by 7.9 percentage points year-over-year, reflecting improved operational efficiency. Selling expenses increased 11.2% to RMB913.2 million, while R&D and G&A expenses as a percentage declined by 3.5 percentage points year-over-year.
Business Segment Updates
The company highlighted strong performance across key segments:
- Non-academic tutoring services: Revenue increased by over 30% year-over-year, accounting for over 40% of total revenues. This segment remained profitable with improved growth quality.
- Traditional learning services: Gross billings increased by over 15% year-over-year, contributing over 40% of total gross billings.
- College and adult education: Revenue grew by more than 15% year-over-year. Quality learning programs and civil service exam preparation businesses saw combined revenue and gross billings growth of over 40% year-over-year.
- Offline operations: The two Dream Centers in Zhengzhou and Wuhan reached full capacity. The offline business delivered high double-digit year-over-year revenue growth in the first half of the year, supported by stronger local brand recognition and better classroom utilization.
What the Numbers Show
The divergence between the 20.2% revenue growth and the 8.8% increase in total operating expenses highlights successful operating leverage. While absolute spending rose to support marketing and R&D, the cost structure became significantly more efficient relative to top-line growth, directly contributing to the 38.1% contraction in the operating loss. AI capabilities are enhancing product experience and service efficiency, with AI-driven improvements noted in curriculum development and tutoring services.
Cash Flow and Balance Sheet
Net operating cash inflow surged 46.3% to RMB861.2 million in Q2FY26, compared to RMB588.8 million in Q2FY25. This strong cash generation supports the company's ongoing share repurchase programs.
As of June 30, 2026, Gaotu held cash and cash equivalents, restricted cash, and investments totaling RMB3,992.9 million, a slight increase from RMB3,972.5 million at the end of December 2025. Excluding share repurchases, this aggregate position increased by RMB354.6 million year-over-year. Deferred revenue reached RMB2.6 billion, representing 18.9% year-over-year growth.
Outlook and Shareholder Returns
For the third quarter of 2026, Gaotu expects net revenues between RMB1,838 million and RMB1,858 million, representing a 16.4% to 17.7% year-over-year increase.
The company continues its capital return strategy, having cumulatively repurchased approximately 36.5 million ADSs for US$103.5 million (RMB741.8 million) under its active and completed share repurchase programs as of August 26, 2026.
How might the sustained expansion of Gaotu's offline 'Dream Centers' impact its long-term capital expenditure requirements and scalability compared to its digital-first model?
Given the 30%+ growth in non-academic tutoring, what regulatory risks remain for this segment in China, and how could future policy shifts affect its profitability?
Will the current trajectory of operating leverage allow Gaotu to achieve GAAP profitability in the near term, or will continued R&D investment in AI services keep the company in a net loss position?
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