Shares of Youdao Inc ( DAO ) fell slightly following the company's fourth-quarter results, mainly on profit-taking with the stock having climbed almost 45% over the past month.

The results came amid an exciting earnings season. Here's a deep dive into Youdao's ( DAO ) financial release.

Analyst Ratings For Youdao ( DAO )

The company is known for its online platform that focuses on providing learning tools and services. Powered by AI, the platform has been developed by internet services company NetEase, Inc. ( NTES ) .

Morgan Stanley, Jefferies and Citigroup have a Buy rating on Youdao ( DAO ). Check out other analyst stock ratings.

Youdao ( DAO ): Highlights Of Financial Release

For the fourth quarter, Youdao ( DAO ) reported net revenues of RMB 1.3 billion ($180 million), down 9.5% year-on-year. Management indicated that the top-line contraction was mainly due to a decline in revenues from learning services.

Despite the decline in revenues, profitability improved in the quarter. Income from operations reached RMB 84.2 million ($11.6 million), representing 10.3% year-on-year growth.

The Chinese company reported earnings of 70 cents per share for the fourth quarter, significantly beating the consensus estimate of 54 cents per share by 30.6%.

For the full year, net revenues reached RMB 5.6 billion ($770 million), up 4.4% year-on-year. Income from operations reached RMB 148.8 million ($20.51 million), compared to a loss of RMB 466.3 million ($64.26 million) in 2023.

Management said that Youdao Lingshi, the service that provides online learning courses, improved customer loyalty in the fourth quarter. Backed by Youdao Lingshi's AI-powered tiered learning videos and learning counseling, retention rates surpassing 70% in the fourth quarter, marking a year-over-year improvement of over 5 percentage points.

The company also indicated that the transition from larger to smaller classes had driven an over 20% year-on-year increase in gross billings in the fourth quarter.

Youdao Desktop Translation won the "Best Online Education App Award" at the Microsoft Store 2024 Annual App Awards.

Youdao Leverages DeepSeek

On February 6, Youdao ( DAO ) announced the full deployment of DeepSeek-R1 in its learning apps, courses, ad platforms and hardware devices.

Mr. P AI Tutor, Youdao's ( DAO ) popular tool that provides deeper insights into learning materials, is being powered by DeepSeek-R1 to offer "a faster, more responsive, and cost-efficient service," the company said in a statement.

Mr. P AI Tutor is available in several languages. The company said that the "long reasoning chains offered by DeepSeek-R1" has helped Mr. P AI Tutor to improve its personalized Q&A capabilities, "providing deeper and more accurate solutions and significantly upgrading the user experience." The company plans to launch Mr. P AI Tutor 2.0 in the near term.

DeepSeek's advanced reasoning capabilities are fully deployed in other products, like SpaceOne.

Youdao ( DAO ) has also introduced the SpaceOne full-screen tutoring device, an AI-powered learning tool designed for students and professionals.

"We believe that large AI models should serve not merely as additional features, but as autonomous agents that drive outcomes," CEO Feng Zhou said during the earnings call. He added that Youdao ( DAO ) plans to launch an "AI Native" strategy, which involves "leveraging AI as a foundational layer across our business lines."

DAO Price Action: Shares of Youdao ( DAO ) had declined by 1.25% to close at $10.26 on Friday.