Gaotu Techedu Revenue Jumps 38 Percent

Gaotu Techedu(NYSE:GOTU) reported second quarter 2025 earnings on August 26, 2025, posting 37.6% year-over-year revenue growth to nearly RMB 1.4 billion and narrowing its non-GAAP net loss by 50.5% year over year. Gross billings rose 36.2% year over year to RMB 2.3 billion, and management raised full-year revenue guidance after a strong first half and continued momentum in both core and new initiatives. The following highlights focus on the company's AI-driven operating leverage, offline learning expansion, and core academic business performance.

AI adoption drives Gaotu Techedu operating leverage

R&D expenses as a percentage of revenue dropped to 10.7% in the quarter, and operating expenses as a share of revenue decreased by 31.6 percentage points year over year, reflecting the impact of artificial intelligence (AI) integration across teaching, tutoring, and curriculum development. The company also achieved a net operating cash inflow of RMB 588.8 million, up RMB 202.6 million from the prior year period.

"By streamlining procedures and unlocking data-driven insights, we are maximizing operational efficiency and enhancing strategic decision-making. Furthermore, AI empowers every Gaotu employee to transcend the boundaries, fostering both professional growth and personal fulfillment. Together, we are building long-term market advantages and a more dynamic organization positioned for sustainable growth."
-- Larry Chen, Founder, Chairman and Chief Executive Officer

Gaotu Techedu's rapid AI adoption is directly reducing costs, increasing scalability, and positioning the company for sustainable long-term growth in a competitive education market.

Offline learning expansion accelerates product diversification

Contributions from offline centers surpassed 5% of gross billings, with over 20% year-over-year growth in this emerging segment. The company leveraged its proprietary online educational content to enable operational synergies as it rolled out offline products, while maintaining strong performance in traditional online academic tutoring.

"In the second quarter, offline learning center revenue grew by more than 20% on a year over year basis and has already contributed over 5% of gross billings this quarter. The reason behind that is, first, on the customer side, we are leveraging the unique advantage of in-person interaction to build deeper trust with students and parents in a more direct way."
-- Shannon Shen, Chief Financial Officer

Early momentum in offline learning validates Gaotu Techedu's hybrid model, broadening its revenue base and enhancing its ability to meet localized demand.

Core academic business boosts retention and referrals

The spring semester saw rising new enrollment retention rates, and customer referrals jumped 75% year over year in the second quarter, driving selling expense ROI up to 2.75% from 1.99% year over year. The number of students accepted to China’s top two universities reached a cumulative total of 1,118 as of the class of 2025.

"According to primary statistics, the number of students from Gaotu's class of 2025 admitted to the top two universities in China reached 267, marking five consecutive years of growth. To date, 1,118 Gaotu students have been admitted to the top two leading universities, a strong testament to our competitiveness across educational products, teaching quality, and learning services. Additionally, our referral rate for the second quarter surged by 75% compared to a year ago."
-- Shannon Shen, Chief Financial Officer

These results demonstrate the effectiveness of Gaotu Techedu's academic offerings and marketing strategy, supporting higher marketing ROI and reinforcing the company's competitive position in premium education outcomes.

Looking Ahead

Management guided net revenues in the range of RMB 1.5 billion to RMB 1.578 billion for the third quarter, implying anticipated year-over-year growth of 28.9% to 30.6%. Leadership raised its full-year growth expectation, now projecting nine-month year-over-year revenue growth to exceed 40%, above initial targets set at 30%. No explicit margin or profit guidance was issued for subsequent quarters.

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This article was created using Large Language Models (LLMs) based on The Motley Fool's insights and investing approach. It has been reviewed by our AI quality control systems. Since LLMs cannot (currently) own stocks, it has no positions in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.