Could you elaborate on the capacity expansion plans for Q4 FY26 and FY27?

The company plans to open 10-15% new capacity (in square meters) for FY26, with 8% net add in the first three quarters. For FY27, they expect to open around 10% or more new learning centers, primarily focusing on K-12 business, while also leveraging online/OMO products to improve utilization rates. “I think the whole year is the net expansion is somewhere around 10% to like 13%, 14%. As I said, we only allow the cities with the good performance of the top line, bottom line last year to open more the learning centers.”

Can you quantify the one-off restructuring expense for Q4 FY26 and discuss the target for sales and marketing expenses for FY27?

The one-off expense in Q4 related to overseas business restructuring is estimated to have a negative impact of 50-100 bps on margin, roughly $10 million to $15 million. Management expects marketing expenses as a percentage of revenue to decrease in FY27 due to cost control and focus on product quality. “I think the negative impact on margin is roughly 50 bps to 100 bps. So roughly $10 million to $15 million is a one-off.”

What is the growth trend and competitive outlook for the K-12 business, especially after some deceleration last summer?

Management is optimistic about K-12 revenue growth, expecting 15-20% for high school and 20%+ for content in Q4 and next year. They attribute this to improved product quality, higher student retention rates, and increased utilization, reducing the need for extensive marketing spend. “I think in the Q4, our K-12 business still got the revenue growth about, let's say, 15% to 20%. [indiscernible] 20% content growth plus 20% plus top line growth and high school business let's say, 15% to 20%.”

EDU

New Oriental (EDU) Q3 FY26 earnings call: guidance and Q&A

Earnings call· Feb 2026 (Q3 FY26)· Consumer Discretionary· Apr 22, 2026

Source: earnings call transcript

Executive summary

New Oriental Q3 FY26 — Strong Revenue Growth and Margin Expansion

New Oriental delivered another quarter of solid results, with revenue exceeding expectations and significant margin expansion driven by operational efficiency and cost control. The company is strategically expanding its capacity and investing in AI and new initiatives like 'New Oriental Home' to serve entire family units, aiming for sustainable profitability and enhanced customer lifetime value. Management expressed optimism for continued margin expansion and healthy growth in core education and East Buy businesses.

Highlights

Total net revenue grew by 19.8% year-over-year to $1,473 million, surpassing expectations for several consecutive quarters.
Non-GAAP operating income rose 42.8% year-over-year to $202.9 million, driven by better utilization and cost control.
Non-GAAP net income attributable to New Oriental increased 34.3% year-over-year to $152.2 million.
New education initiatives (nonacademic tutoring, intelligent learning systems) recorded strong revenue growth of 23% year-over-year.
Deferred revenue increased by 7.8% year-over-year to $1,885.9 million, indicating strong future revenue recognition.

Concerns

Overseas study consulting business recorded a revenue decrease of about 4% year-over-year.
Net cash outflow generated from operations for the quarter was approximately $7.5 million.
A one-off restructuring expense of roughly $10 million to $15 million (50-100 bps impact on margin) is expected in Q4 FY26 related to overseas business consolidation.

Guidance & targets

Category	Target	Timeline	Confidence
Total Net Revenue	$1,429.6 million to $1,466.9 million high materiality	Q4 · FY26	High
Full-Year Total Net Revenue	$5,561.4 million to $5,598.7 million high materiality	FY26	High
Q4 FY26 Profit Margin	Expansion medium materiality	Q4 · FY26	High
FY27 Margin Expansion	Up high materiality	FY27	High
Capacity Expansion (Square Meters)	Around 10% or even a little bit more medium materiality	FY27	Medium
Marketing Expenses as % of Revenue	Down medium materiality	FY27	High
Overseas Business Revenue Growth	Flattish or low single digits up medium materiality	Q4 · FY26	Medium
Overseas Business Margin	Up medium materiality	FY27	High

Segment performance

Segment	Revenue	YoY	QoQ	Margin
Overseas Test Prep Business Recorded a revenue increase year-over-year for the quarter.	—	7%	—	—
Overseas Study Consulting Business Recorded a revenue decrease year-over-year for the quarter.	—	-4%	—	—
Adults and University Students Business Recorded a revenue increase year-over-year this quarter.	—	15%	—	—
New Education Initiatives (Nonacademic Tutoring & Intelligent Learning System) Delivered sustainable revenue growth. Non-academic tutoring has grown steadily, particularly in high-tier cities. Intelligent learning system shows enhanced customer retention and scalability. Non-academic tutoring cities rolled out: ~60Non-academic tutoring revenue contribution from top 10 cities: >60%Intelligent learning system cities launched: ~60Intelligent learning system revenue contribution from top 10 cities: >50%	—	23%	—	—
Integrated Tourism Related Business (Study Tours, Research Camps, Cultural Tours) Culture 12 China study tour, global study tour, and camp education products continue to be well received. Expanding into senior health and wellness tourism through partnerships utilizing an asset-light model. Student programs operating cities: ~55Student programs revenue contribution from top 10 cities: >50%Adult tourism offerings spread: ~30 provinces domestically and select international destinations	—	—	—	—

EDU operating KPIs by quarter

EDU operating KPIs stated on its earnings calls, by fiscal quarter
KPI	This call Feb 2026 Q3 FY26	May 2026 Q4 FY26	Change vs prior quarter
Capital expenditures OMO platform	$30.6M This quarter, we invested $30.6 million to enhance and maintain our OMO platform, which enables us to provide high-quality instruction to students, while adapting to their individual learning needs. Source: earnings call transcript	$31.2M During this quarter, we invested $31.2 million to improve and maintain our OMO platform, which enable us to provide and interrupt high-quality instructions to students that cater to their individual learning needs. Source: earnings call transcript	+2%
Registered families New Oriental Home	330K+ We have now launched this pilot program in 12 cities as test beds, including Hangzhou, Suzhou, Xian and Wuhan, with over 330,000 registered families. Source: earnings call transcript	950K+ We have launched this pilot program in 69 cities as test beds, including Hangzhou, Suzhou, Xi'an and [indiscernible] with over 950,000 registered families by the end of this quarter. Source: earnings call transcript	—

Operating figures the company stated on at least two of the calls shown, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Product announcements

Product	Type	Timeline	Details
New Oriental Home	launch	Q3 FY26
AI-Purely-Driven Educational Products	roadmap	Coming several months

Deals & partnerships

Wellness facilities in Hainan, Una and Guangxi Expanding into senior health and wellness tourism

Utilizing an asset-light model to pilot emerging opportunities in senior health and wellness tourism, partnering with over 40 facilities.

Risks & headwinds

Economic and International Situation Impact on Overseas Business Q3 FY26

Overseas study consulting revenue decreased 4% YoY

Mitigation:Overseas team's resilience, consolidation of overseas test prep and consulting to provide one-stop service, cost control measures to save fixed costs.

One-off Restructuring Expenses Q4 FY26

$10 million to $15 million (50-100 bps negative impact on margin)

Mitigation:These are one-off expenses primarily contained in Q4 FY26, expected to reduce fixed costs and drive margin up in the coming year for the overseas business.

What to watch in Q4 FY26

Q4 FY26 Total Net Revenue

next quarter

Current Q3 FY26 revenue: $1,473 million

Target $1,429.6 million to $1,466.9 million

Why it matters

This will indicate if the company's growth trajectory remains strong and if the raised full-year guidance is on track.

we expect the total net revenue for the group in the fourth quarter of fiscal year 2026 to be in the range of 1,429.6 million to $1,466.9 million

Find out whether EDU delivers this. Inve re-checks your case every morning.

Q&A highlights

What are the key drivers behind the 230 bps operating margin expansion this quarter, and what is the outlook for margins in Q4 and next fiscal year?

Management attributed margin expansion to better utilization, operating leverage, cost control, and East Buy's contribution. They are optimistic about Q4 margin expansion despite one-off expenses and expect continued margin growth in the next fiscal year due to focus on profitability across all business lines.

“I think the margin expansion was mainly due to the better utilization, operating leverage and the cost control and as well the more profit contribution from Easter Buy.”

asked by Unknown Analyst · answered by Zhihui Yang

2 min read 5 chapters

Detailed narrative

Core Business Performance and Growth Drivers

New Oriental reported solid Q3 FY26 results, with total net revenue growing 19.8% year-over-year to $1,473 million, exceeding expectations. This growth was driven by strong performance across various segments, including overseas test prep (up 7% YoY), adults and university students business (up 15% YoY), and new education initiatives (up 23% YoY).

The company attributes this success to its strategic focus on operational efficiency, cost control, and product quality enhancement, leading to improved student retention and utilization rates.

New Initiatives and Strategic Expansion

The company's new education initiatives, including nonacademic tutoring and intelligent learning systems, have been rolled out to approximately 60 cities each, with top-tier cities contributing significantly to revenue. Integrated tourism, encompassing study tours and cultural tours, operates in about 55 cities.

New Oriental is also piloting 'New Oriental Home,' a private domain platform integrating education, East Buy offerings, and cultural tourism into a unified ecosystem, demonstrating strong user engagement with 330,000 registered families and 10-15% activation rates in 12 pilot cities.

East Buy's Contribution and Future Strategy

East Buy continues to be a significant contributor, advancing its multi-platform, multi-content strategy with specialized live streaming channels and optimizing content. Future plans for East Buy include expanding its private label portfolio, enhancing product R&D, accelerating app membership ecosystem development, and growing its offline footprint through vending machines and experience stores.

These initiatives are expected to drive operational efficiency and supply chain excellence, supporting sustainable long-term growth and increased profitability.

AI Integration and Efficiency Gains

New Oriental is actively integrating AI across its offerings to strengthen core capabilities and streamline internal operations. AI technology is being embedded into online products, intelligent learning devices, and even offline classes to enhance learning experiences and improve efficiency. The company is also exploring new AI-purely-driven educational products that rely minimally on human resources, aiming to achieve significant efficiency improvements and labor cost reductions in the coming 1-2 years.

Financial Highlights and Capital Allocation

Non-GAAP operating income increased 42.8% to $202.9 million, and non-GAAP net income rose 34.3% to $152.2 million, reflecting strong margin expansion. The company reported a net cash outflow from operations of $7.5 million and capital expenditure of $68.8 million. New Oriental continues its shareholder return plan, with a second dividend installment of $0.06 per common share ($0.6 per ADS) and an ongoing share repurchase program, having repurchased approximately $184.3 million of ADS as of April 21, 2026.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.