17 Education & Technology Group (YQ) investor relations material

Executive summary

• Achieved first quarterly GAAP and non-GAAP profitability in Q2 2026, with net income of RMB 1.1 million and adjusted net income of RMB 4.7 million, following a strategic transformation to AI-powered services.

• Net revenues surged 254.6% year-over-year to RMB 90.1 million in Q2 2026, driven by strong growth in consumer-facing AI-powered services and district/school projects.

• Gross margin expanded to 69.2%, up 11.7 percentage points year-over-year, reflecting improved revenue mix and higher contribution from AI application services.

• Continued investment in AI capabilities, product innovation, and expansion of the application ecosystem, including new teacher-facing AI agents and deeper integration in education workflows.

• Strategic transformation validated by strong revenue growth and improved operating leverage.

Financial highlights

• Q2 2026 net revenues: RMB 90.1 million (US$13.3 million), up from RMB 25.4 million in Q2 2025; H1 2026 net revenues: RMB 189.5 million (US$27.9 million), up from RMB 47.1 million in H1 2025.

• Gross profit in Q2 2026: RMB 62.3 million, up from RMB 14.6 million in Q2 2025; gross margin improved to 69.2% from 57.5% year-over-year.

• Net income: RMB 1.1 million (US$0.2 million) vs. net loss of RMB 26.0 million in Q2 2025; adjusted net income (non-GAAP): RMB 4.7 million (US$0.7 million) vs. adjusted net loss of RMB 18.9 million in Q2 2025.

• Operating expenses in Q2 2026: RMB 63.0 million, up 46.2% year-over-year, but significantly slower than revenue growth.

• Cash and equivalents at quarter end: RMB 456.9 million (US$67.3 million), up from RMB 407.0 million at year-end 2025.

Outlook and guidance

• Focus on expanding AI application services across more education scenarios, including regional, school-based, and consumer segments.

• Continued investment in AI, product innovation, and ecosystem expansion to drive long-term growth while maintaining disciplined capital allocation.

• Expectation of seasonality and quarterly fluctuations as scaling continues, but confidence in broadening growth foundation.