On August 27, Gaotu Techedu (NYSE:GOTU) reported second-quarter results that showed the company converting years of restructuring into cleaner numbers. Revenue climbed 20.2% year over year to RMB 1,670.1 million, and the net loss narrowed to RMB 135.8 million from RMB 216.0 million a year earlier. Cash flow told an even sharper story, with operating cash inflow jumping 46.3% to RMB 861.2 million. The quarter answers one question about Gaotu’s turnaround, but it opens another about how far the growth can stretch.
Getting Leaner By The Quarter
Growth at Gaotu is no longer riding on one segment. Non-academic tutoring revenue rose 30% year over year and now makes up more than 40% of the total, while gross billings from that unit grew over 20% and contributed more than 45% of billings. Traditional learning services added over 17% billings growth of its own, and the combined college and civil service prep business grew more than 40% after the company reworked its service framework around different stages of a student’s development. Online one-on-one tutoring billings for new enrollments jumped more than 55%, evidence that talent pipeline investments made since 2025 are starting to pay off.
That growth is showing up in the margin structure too. Gross margin ticked up to 66.5% from 66.0%, the operating expense ratio fell 7.9 percentage points, and R&D and G&A combined dropped 3.5 points as a share of revenue, aided by AI tools the company says cut content development time by five to eight times in some scenarios. Retention for online spring enrollments rose more than 5 percentage points, and tutor productivity improved over 20%. Deferred revenue, largely tuition collected in advance, grew 18.9% to RMB 2.6 billion, a signal of demand already locked in for coming quarters. Gaotu also kept buying back stock, repurchasing 36.5 million ADSs for RMB 741.8 million as of Aug. 26, 2026.
The Costs That Haven’t Shrunk
The improvement has limits. Selling expenses still rose 11.2% year over year to RMB 913.2 million on higher marketing and branding spending, and at 54.7% of net revenues, that line remains the single biggest drag on the income statement. Cost of revenue climbed 18.3% to RMB 559.2 million as Gaotu hired more instructors and absorbed higher server and rental costs, a reminder that scaling a tutoring business still means scaling headcount. Despite all the narrowing, Gaotu posted an operating loss of RMB 149.8 million and a net loss of RMB 135.8 million, so the company has not yet crossed into profitability.
Offline expansion also comes with a caveat management chose to state plainly. Chief Operating Officer Robin Luo said the company will “optimize resource allocation or even eliminate projects and sites that we do not see potential to generate right economic returns,” and described offline growth as reviewable project by project after the summer cycle. Guidance for the third quarter points to revenue growth of 16.4% to 17.7%, a deceleration from the 20.2% posted in the second quarter.
What The Positioning Data Shows
Hedge fund ownership of Gaotu slipped from 10 funds in the prior quarter to 9 in the most recent one, a modest pullback rather than a rush for the exits. Short interest sits at just 1.89% of float, low enough to suggest organized skepticism around the stock is thin. That combination points to a stock institutions are treating as a wait-and-see story rather than a conviction call in either direction.
Where The Story Goes From Here
Gaotu’s second quarter makes the case that its turnaround is real, with losses narrowing, cash flow climbing, and growth now spread across more than one business line. Yet the same results show a company still leaning on marketing spend to generate that growth and choosing caution over expansion offline. The AI-driven efficiency gains and improved tutor productivity have room to keep compounding if they continue outrunning the cost of acquiring new students.
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