EDU

• Financial Performance

  • GAAP operating income was $85.8 million, compared to an $8.7 million operating loss in the prior year quarter
  • Non-GAAP operating income increased 34.7% year-over-year to $110 million, and operating margins expanded for the quarter and full fiscal year
  • Net income attributable to New Oriental increased 775.8% year-over-year to $62.2 million
  • Deferred revenue grew 14.8% year-over-year to $2,242.9 million as of quarter end
  • Operating costs and expenses grew 15.3% year-over-year to $1,443.7 million, slower than revenue growth

• Core Education and AI Initiatives

  • Invested $31.2 million in the quarter to upgrade the company's OMO teaching platform to support adaptive, personalized learning
  • The company's proprietary vertical AI-powered personalized learning platform completed phase 1 deployment, achieving meaningful sales within 25 days of launch, outperforming generic large language models for education use cases
  • Non-K-12 children's educational businesses have achieved steady market penetration, particularly in high-tier cities
  • The intelligent learning device business has shown improved customer retention and strong scalability

• EastBuy (E-commerce) Updates

  • EastBuy advanced its multi-platform live streaming strategy on Douyin, launching 11 new vertical accounts to expand its channel matrix to 18 total channels
  • New operational programs (streamer recruitment, supplier summits) strengthened internal teams, deepened supplier partnerships, and improved customer engagement
  • For FY2027, EastBuy will accelerate private label expansion across food and daily necessities, scale R&D and quality control to uphold its three high standards (safety, quality, cost performance), advance its app membership ecosystem, and expand offline experience footprints leveraging New Oriental's nationwide network

• New Oriental Home Strategic Pilot

  • New Oriental Home is a unified full-life-cycle family ecosystem platform that combines education services, EastBuy offerings, and cultural tourism products in a single app
  • As of quarter end, the pilot has launched in 69 cities with over 950,000 registered families, 70% cumulative activity participation, and a 23% campaign activation rate that outperforms most public domain e-commerce platforms
  • Early results include a 10 basis point retention increase for Grade 7 students, lower customer acquisition costs, improved cross-selling efficiency, and optimized overall operating costs

• The company expects accelerating revenue growth and expanding margins for the first quarter of FY2027, supported by improving summer enrollment trends and faster growth and profit contribution from EastBuy
• Full fiscal year 2027 total net revenue is guided to a range of $6,453.9 million to $6,680.3 million, representing 14% to 18% year-over-year growth. Management notes the guidance is conservative and expects to outperform the range.
• K-12 education business (K-9 plus high school) is expected to deliver ~20% year-over-year revenue growth in FY2027, with stronger growth in Q1 and improving margins
• Overseas related business (test prep and consulting combined) is expected to deliver low single-digit year-over-year growth in FY2027, with expanding margins from completed restructuring
• Capacity expansion is planned at 10% to 15% new capacity in FY2027, down from 13% in FY2026, with most expansion in high-performing markets. Top-line growth will outpace capacity expansion, driving higher utilization rates for existing centers
• Capital expenditure for FY2027 is expected to be $250 million to $300 million, up slightly from FY2026 due to construction of a new corporate headquarters in Changping
• The company approved a total capital return plan of ~$500 million for FY2027, including a ~$300 million cash dividend (paid in two installments in December 2026 and June 2027) and a new $200 million share repurchase program over 12 months
• Selling and marketing expenses as a percentage of total revenue are expected to decline in FY2027, supporting margin expansion

Total net revenue for the quarter grew 23% year-over-year to $1,529.5 million. Segment performance is as follows:

• Overseas Test Prep Business: 6% year-over-year revenue increase
• Overseas Study Consulting Business: ~1% year-over-year revenue increase
• Adults and University Students Business: 29% year-over-year revenue increase
• New educational business initiatives (including non-K-12 children's business, intelligent learning system and device business): 25% year-over-year revenue increase. Non-K-12 children's business operates in ~60 cities, with the top 10 cities contributing ~60% of segment revenue. The intelligent learning system/device business operates in ~60 cities, with the top 10 cities contributing over 50% of segment revenue.
• Integrated tourism-related business (study tours, camps, cultural tourism): operates student programs in 55 domestic cities (top 10 cities generate over 50% of segment revenue), adult offerings across 30 provinces and selected international destinations, and has expanded into senior wellness tourism with an asset-light model (14 partnerships with 45+ wellness facilities)

• Forward-looking statements are inherently uncertain, and actual results may differ materially from projections due to risks and uncertainties outlined in New Oriental's SEC filings
• The regulatory environment for education in China remains evolving, and the company must continue adapting operations to meet changing policy requirements
• Population decline in the K-12 cohort is a long-term industry challenge
• Macroeconomic headwinds and global geopolitical conditions continue to pressure growth in the overseas test prep and consulting business
• Competition in the education and consumer e-commerce sectors may pressure market share and margins

Q: The FY2027 annual guidance is higher than expected. Can you break down quarterly trends, especially for Q1 FY2027 revenue and margins? / A: Management is optimistic about accelerating Q1 FY2027 revenue growth driven by strong deferred revenue (up 15% YoY), improving summer enrollment in core education, and accelerating revenue and profit growth from EastBuy. They shifted to annual guidance only to encourage long-term evaluation of performance, and note the full-year guidance is conservative with an expectation of beating it. Margin is expected to expand full-year, after a 60 basis point group margin expansion in Q4 FY2026 even with a $10-15 million one-off overseas business restructuring charge.

Q: What is the FY2027 capacity expansion plan, and what compliance risk exists from reported regulatory inspections of learning centers? / A: New Oriental plans 10-15% new capacity in FY2027, all focused on markets with proven top and bottom-line performance. Improving student retention will lift utilization of existing centers, and top-line growth will outpace capacity expansion to drive average utilization higher. Management states the company has passed all government requirements over the past four to five years, and views the current regulatory environment as neutral to positive, with no material near-term compliance risk.

Q: Can you update the growth and margin outlook for the combined overseas test prep and consulting business? / A: The combined overseas business faces ongoing growth pressure from macroeconomic and geopolitical conditions, and is expected to deliver low single-digit growth in FY2027, with low single-digit growth also expected in Q1. The business gained market share in FY2026 despite headwinds, and the completed merger of test prep and consulting enabled management restructuring, one-stop customer service, and cost reduction. The combined segment delivered ~15% operating margin in FY2026, and margin is expected to expand in FY2027 from continued cost control.

Q: How is New Oriental leveraging AI, and is AI focused on transforming teaching or improving operational efficiency? / A: New Oriental uses AI across three priorities: 1) embedding AI into existing products (learning devices, in-class and after-school tools) to improve product quality, learning efficiency, and student experience; 2) piloting new AI-powered education solutions, including the newly launched vertical personalized platform that combines domain expertise with AI; 3) using AI to improve internal operational efficiency and reduce labor costs for teaching and support staff. Management notes they have a competitive advantage over peers due to existing teaching data, capital, and technology to implement AI effectively.