New Oriental Education & Technology Group Inc. (EDU) Q1 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call reflects a positive sentiment due to revenue growth in educational initiatives, operating income increase, and a strong shareholder return plan. Despite some declines in net income, the optimistic growth outlook in K-12 and high school segments, margin expansion, and strategic cost control measures indicate positive future performance. The Q&A insights emphasize management's confidence in overcoming competitive challenges and maintaining high shareholder returns. However, increased SBC expenses and lack of specific guidance details introduce some caution, but overall, the sentiment leans positive, predicting a stock price increase of 2% to 8%.
Key Financial Performance
Total Net Revenue Increased by 6.1% year-over-year. This growth was driven by strong capabilities, enhanced operational resilience, and sustainable profitability.
Non-GAAP Operating Margin Reached 22%, representing a year-over-year improvement of 100 basis points. This improvement was due to efforts in managing costs and streamlining efficiency.
Overseas Test Prep Business Revenue Increased by about 1% year-over-year. No specific reasons for the change were mentioned.
Overseas Study Consulting Business Revenue Increased by about 2% year-over-year. No specific reasons for the change were mentioned.
Adults and University Students Business Revenue Increased by 14% year-over-year. No specific reasons for the change were mentioned.
New Educational Business Initiatives Revenue Increased by about 15% year-over-year. This growth was driven by investments in facilitating students' all-around development.
Operating Costs and Expenses $1,212.2 million, representing a 6.1% increase year-over-year. No specific reasons for the change were mentioned.
Cost of Revenues Increased by 9.3% year-over-year to $637.8 million. No specific reasons for the change were mentioned.
Selling and Marketing Expenses Increased by 3.6% year-over-year to $200.6 million. No specific reasons for the change were mentioned.
G&A Expenses Increased by 2.4% year-over-year to $373.8 million. No specific reasons for the change were mentioned.
Share-Based Compensation Expenses Increased by 239.8% year-over-year to $23.3 million. No specific reasons for the change were mentioned.
Operating Income $310.8 million, representing a 6% increase year-over-year. No specific reasons for the change were mentioned.
Non-GAAP Operating Income $335.5 million, representing an 11.3% increase year-over-year. No specific reasons for the change were mentioned.
Net Income Attributable to New Oriental $240.7 million, representing a 1.9% decrease year-over-year. No specific reasons for the change were mentioned.
Non-GAAP Net Income Attributable to New Oriental $258.3 million, representing a 1.6% decrease year-over-year. No specific reasons for the change were mentioned.
Net Cash Flow from Operations Approximately $192.3 million. No year-over-year comparison or reasons for the change were mentioned.
Capital Expenditure $55.4 million. No year-over-year comparison or reasons for the change were mentioned.
Deferred Revenue $1,906.7 million, an increase of 10% compared to $1,733.1 million at the end of the first fiscal quarter of 2025. No specific reasons for the change were mentioned.
You have reached the limit. Sign up to access full content
Get started
Operating Highlights
Non-academic tutoring business: Focused on cultivating students' innovative ability and comprehensive qualities, rolled out to around 60 cities, with top 10 cities contributing over 60% of this business.
Intelligent learning system and device business: Utilizes past teaching experience and data technology to provide personalized learning content, tested in 60 cities, with top 10 cities contributing over 50% of this business. Revenue increased by 15% year-over-year.
AI-powered intelligent learning device and smart study solution: Launched to transform education through technology, with positive market feedback and ongoing refinements.
Integrated tourism-related business line: Includes domestic and international study tours and research camps for K-12 and university students across 55 cities, with top 10 cities contributing over 50% of revenue. Expanded product range to include cultural travel, China study tour, global study tour, and camp education.
East Buy's private label portfolio: Focused on nutritious food products, strengthened quality management, and advanced its app and membership platform to connect customers to premium products and services.
Operational efficiency: Non-GAAP operating margin reached 22%, a year-over-year improvement of 100 basis points. Investments in AI are being leveraged to streamline internal operations and boost efficiency.
OMO teaching platform: Invested $28.5 million to upgrade and maintain the online merging offline teaching platform, aiming to deliver advanced and diversified education services.
Capacity expansion and hiring: Strategic approach to expand presence in cities with strong performance while managing resources carefully.
AI integration: Embedding AI across offerings to strengthen core capabilities and streamline operations.
You have reached the limit. Sign up to access full content
Get started
Risk or Challenges
Regulatory Compliance: The company is in close collaboration with government authorities in various provinces and municipalities in China to ensure compliance with relevant policies, guidelines, and regulations. This indicates potential regulatory hurdles that could impact operations if not managed properly.
Cost Management: Operating costs and expenses increased by 6.1% year-over-year, with specific increases in cost of revenues (9.3%), selling and marketing expenses (3.6%), and G&A expenses (2.4%). This could challenge profitability if not controlled effectively.
AI Integration: While the company is investing in AI-powered intelligent learning devices and solutions, there is inherent risk in the adoption and scalability of new technologies, as well as potential market acceptance challenges.
Market Penetration: The non-academic tutoring business and intelligent learning system business are concentrated in high-tier cities, with the top 10 cities contributing over 50-60% of revenue. This reliance on a limited number of markets could pose risks if these markets face economic or competitive pressures.
Revenue Growth Dependency: Revenue growth in the K-12 business is projected to accelerate, but it is heavily dependent on enhanced service quality and student retention rates, which could be impacted by external factors such as competition or changing customer preferences.
Economic Uncertainty: The company’s financial performance, including net income, showed a slight decrease year-over-year, which could be indicative of broader economic uncertainties or operational challenges.
You have reached the limit. Sign up to access full content
Get started
Guidance & Outlook
Revenue Guidance for Q2 FY 2026: Total net revenue for the group, including East Buy, is expected to be in the range of $1,132.1 million to $1,263.3 million, representing a year-over-year increase of 9% to 12%.
Revenue Guidance for Full FY 2026: Total net revenue for the group, including East Buy, is projected to be in the range of $5,145.3 million to $5,390.3 million, representing a year-over-year increase of 5% to 10%.
K-12 Business Growth: Revenue growth in the K-12 business is expected to accelerate in Q2 FY 2026, driven by enhanced service quality and improved student retention rates.
Operational Efficiency and Margin Improvement: The company aims to further improve margins and operational efficiency while maintaining cost control and sustainable profitability across all business segments.
Capacity Expansion and Hiring: Plans to increase presence in cities with strong top-line and bottom-line performance, while carefully managing resources and aligning new openings with local needs and financial results.
You have reached the limit. Sign up to access full content
Get started
Shareholder Return Plan
Ordinary Cash Dividend: The Board of Directors has approved an ordinary cash dividend of $0.12 per common share or $1.2 per ADS, to be paid in two installments totaling approximately $190 million. The first installment of $0.06 per common share or $0.6 per ADS will be paid to holders of record as of November 18, 2025. The second installment of $0.06 per common share or $0.6 per ADS is expected to be paid around 6 months after the first installment, with details to be announced later.
Share Repurchase Program: The company has announced a new share repurchase program, allowing for the repurchase of up to $300 million of its ADS or common shares from the open market over the next 12 months.
You have reached the limit. Sign up to access full content
Get started
Key Q&A
Q:Could management elaborate on the latest competition landscape in K-12 and adjustments to strategy?
A:Management noted revenue growth acceleration in K-12 since Q2, driven by better quality of products and services, leading to higher student retention and new enrollments. Despite competition using low-price or free strategies in summer, students returned in autumn. K9 business is expected to grow over 20% year-over-year, and high school business to achieve double-digit growth in 2026.
Q:What drove the increase in SBC to $23 million this quarter and its outlook?
A:The increase in SBC was due to ADS shares granted to management, staff, and teachers over the next 3 years. SBC expenses are expected to remain at similar levels for the coming quarters, with higher expenses in the first year and less in subsequent years.
Q:Could you break down the test prep growth by age and consulting growth by subsegment for overseas business?
A:Overseas test prep grew by 1% in Q1, with younger age students growing over 25% year-over-year. Consulting business grew by 2%, with non-U.S. and U.K. consulting and background improvement growing fast. Guidance for overseas-related business remains conservative, expecting a low single-digit decline year-over-year.
Q:How should we think about the shareholder return policy going forward?
A:The Board approved a 3-year shareholder return plan, including a $190 million dividend (50% of last year's net profit) and a $300 million share buyback. The payout ratio this year exceeds 130%. Management aims to maintain a high payout ratio and yield, with future dividends based on the previous fiscal year's net profit.
Q:What contributed to the strong operating margin in Q1 and its outlook?
A:Q1 margin expansion (100 basis points) was driven by better utilization, operating leverage, cost control, and East Buy's profit contribution. Cost control measures since March have shown results, and margin expansion is expected to continue in Q2 and for the full year.
Q:What should we expect for the tax rate in the next quarter and full year?
A:The Q1 tax rate was 27% due to withholding tax on dividends from WFOE to ListCo. The tax rate for the year is expected to be higher than last year due to increased capital allocation to investors.
Q:Can the revenue growth gap between non-academic tutoring and intelligent learning systems be used to model future growth?
A:Revenue growth for junior high school business is faster than primary school due to a lower base and significant efforts in middle school business. K9 business is expected to grow 20% in Q2, with better performance anticipated in the second half of the year.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the sustainability of overseas growth and the exact breakdown of consulting subsegments. Additionally, responses on shareholder return policy and tax rate lacked clarity on long-term strategies and specific figures.
You have reached the limit. Sign up to access full content
Get started
Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI efficiency
AI regard
Act law
Buy East
Buy focus
Buy product
East Buy
Hello diving
Ms Forward
OMO venture
Oriental cash
Oriental core
Oriental decrease
Oriental trajectory
acquisition increase
aftersales service
app membership
base premium
blockbuster offering
capability AI
capability end
capability resilience
category blockbuster
city parallel
core capability
detail result
device study
direction New
diving detail
education technology
efficiency quarter
efficiency success
efficiency support
effort efficiency
effort merging
end quality
expectation capability
label
profitability
EDU Transcript
New Oriental Education & Technology Group Inc. (EDU) Q2 2026 Earnings Call Transcript
Positive1-28
The earnings call indicates strong financial performance with significant revenue growth across various segments, improved margins, and effective cost management. Despite some macroeconomic challenges, the company shows resilience, particularly in the K-12 segment. Management's optimistic guidance and strategic initiatives, including AI and operational efficiency, further bolster positive sentiment. Although some specifics were not disclosed, the overall outlook remains favorable, supporting a positive stock price movement prediction.
New Oriental Education & Technology Group Inc. (EDU) Q1 2026 Earnings Call Transcript
Positive10-28
The earnings call reflects a positive sentiment due to revenue growth in educational initiatives, operating income increase, and a strong shareholder return plan. Despite some declines in net income, the optimistic growth outlook in K-12 and high school segments, margin expansion, and strategic cost control measures indicate positive future performance. The Q&A insights emphasize management's confidence in overcoming competitive challenges and maintaining high shareholder returns. However, increased SBC expenses and lack of specific guidance details introduce some caution, but overall, the sentiment leans positive, predicting a stock price increase of 2% to 8%.
New Oriental Education & Technology Group Inc. (EDU) Q4 2025 Earnings Call Transcript
Positive7-30
The earnings call presents a positive outlook with a 59.4% revenue increase and strong cash flow. The Q&A reveals challenges such as economic factors affecting guidance but also highlights optimism in margin improvements and K-12 growth. The expanded share repurchase program and expected margin expansion further support a positive sentiment. Despite some uncertainties in non-academic segments, the overall guidance and strategic initiatives indicate a favorable stock price movement.
New Oriental Education & Technology Group Inc. (NYSE:EDU) Q3 2025 Earnings Call Transcript
Unknown4-24
Earnings call summary presents mixed signals: revenue miss but optimistic growth in several segments; strong share repurchase plan, but increased expenses and flat non-GAAP income. Q&A reveals concerns about overseas growth and competition, but management expects margin expansion and growth in core segments. Overall, the sentiment is balanced with both positive and negative factors, leading to a neutral prediction.
EDU Report
Frequently Asked Questions
Where does this earnings call transcript come from?
All transcripts are sourced directly from the official live webcast or the company’s official investor relations website. We use the exact words spoken during the call with no paraphrasing of the core discussion.
How soon is the transcript available after the earnings call ends?
Full verbatim transcripts are typically published within 4–12 hours after the call ends. Same-day availability is guaranteed for all S&P 500 and most mid-cap companies.
Is the transcript edited or altered in any way?
No material content is ever changed or summarized in the “Full Transcript” section. We only correct obvious spoken typos (e.g., “um”, “ah”, repeated 10 times”, or clear misspoken ticker symbols) and add speaker names/titles for readability. Every substantive sentence remains 100% as spoken.
Why do some answers appear as “Unclear” or “Inaudible”?
When audio quality is poor or multiple speakers talk over each other, we mark the section instead of guessing. This ensures complete accuracy rather than introducing potential errors.
Who creates the AI Summary and Key Q&A highlights shown above the transcript?
They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
