Detailed narrative
Strategic Focus on User Value and Brand Building
Gaotu emphasizes placing user value at the core of its long-term development, building a comprehensive learning service ecosystem that integrates online and offline offerings. The company leverages data on learning behaviors and feedback to refine product design and teaching services, fostering a virtuous cycle of data, experience, and brand. This approach aims to strengthen user recognition, retention, and word-of-mouth referrals, reinforcing the belief that educational service is a long-term endeavor built on trust.
Resource Allocation and Profitable Growth
The company is committed to driving profitable growth by concentrating resources on businesses with strong user value propositions and clear operational returns. This involves strengthening products, allocating greater resources, and providing stronger organizational support for businesses demonstrating strong user satisfaction and market fit. For early-stage businesses, resource allocation is dynamically optimized, focusing investments on areas with high risk-return potential. This strategy has shown results in improved unit economics and operating efficiency.
AI Capability Development and Operational Efficiency
AI is emerging as a critical productivity driver, generating tangible value across curriculum development, course delivery, tutoring services, and user insights. AI-powered systems improve efficiency by 5 to 8x in content creation, significantly lower personalized content costs, and enhance quality control across service workflows. Automated assignment grading reduces repetitive work, allowing tutors to focus on personalized guidance. AI also refines user insights, leading to more precise learning support and improved retention.
Online and Offline Business Synergy
Gaotu's online business has seen improved retention rates and operating efficiency, contributing to better unit economics. The offline business, including Dream Centers, food camps, and learning centers, delivered high double-digit year-over-year revenue growth in the first half of the year. Synergies between online and offline operations are strengthening, with online brand equity supporting offline expansion, and differentiated offline experiences reinforcing brand awareness and engagement. Measurable learning outcomes, such as admissions to top universities, underscore the effectiveness of their teaching capabilities.
Segment Performance and Operational Excellence
Learning services represent 95% of net revenues, with non-academic tutoring and traditional learning services accounting for over 80%. Non-academic tutoring revenue increased by 30% YoY, contributing over 40% of total revenues, and its online business remained profitable. The traditional business saw gross billings grow over 13% YoY. Educational services for college students and adults grew over 15% YoY, accounting for over 10% of total revenues, with combined revenue and gross billings for college learning programs and civil service exam prep growing over 40% YoY.
Financial Health and Capital Allocation
The company reported a gross margin of 66.7% and significantly narrowed adjusted operating and net losses. Operating expenses as a percentage of net revenues declined by 7.9 percentage points, driven by optimized user acquisition and AI integration. Net operating cash inflow increased by 46.3% YoY to CNY 861.2 million. Cash reserves totaled nearly CNY 4.0 billion. Gaotu continues its share repurchase program, having repurchased nearly 36.7 million ADSs for RMB 741.8 million as of August 26, 2026, while preserving financial flexibility.