Gaming giant NetEase reports strong growth in ed-tech unit Youdao as shares slide amid market volatility
- NetEase reports growth in its Youdao ed-tech unit, buoyed by a surge in demand for remote learning during the coronavirus pandemic
- Gaming remains NetEase’s largest revenue source in the final quarter of 2020
NetEase, the owner of China’s second largest gaming business, reported robust growth in its education tech unit Youdao on Thursday, but its shares still took a beating.
The Hangzhou-based tech company reported net revenue of 19.8 billion yuan (US$3 billion) for the fourth quarter of 2020, marking a year-on-year increase of 25.6 per cent. While gaming still accounted for the bulk of its revenue, NetEase’s biggest growth came from Youdao, which saw its net revenue rise nearly 170 per cent from the same period a year ago.
Youdao’s strong momentum reflects the rapid growth of China’s online learning market, which was estimated to have surpassed 315 billion yuan in 2020, almost tripled from five years ago, according to global market data tracker Statista. The rising demand has spurred an investment frenzy, crowning multiple ed-tech unicorns during the Covid-19 pandemic.
Youdao offers educational products and services, spanning both software and hardware. While it is best known in China for its online dictionary, Youdao has also expanded its services to include a variety of online classes. The company also produces smart learning devices such as the Youdao Smart Pen and Youdao Pocket Translator.
“Youdao is likely to be NetEase’s main sales growth driver in the coming quarters,” said Vey-Sern Ling, a senior analyst at Bloomberg Intelligence. “It is benefiting from expanded usage due to the company’s marketing efforts as well as the pandemic shifting learning to online channels.”
