Gaotu Techedu : Annual Report for Fiscal Year Ending December 31, 2025 (Form 20-F)
GOTU
Published on 04/22/2026 at 06:12 am EDT
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
The following discussion of our financial condition and results of operations is based upon and should be read in conjunction with our consolidated financial statements and their related notes included in this annual report. This report contains forward-looking statements. See "Forward-Looking Information." In evaluating our business, you should carefully consider the information provided under the caption "Item 3. Key Information-D. Risk Factors" in this annual report. We caution you that our businesses and financial performance are subject to substantial risks and uncertainties.
A. Operating Results
Key Factors Affecting Our Results of Operations
Our results of operations and financial condition are affected by the general factors driving mainland China's private education industry. We have benefited from China's overall economic growth, significant urbanization rate, and higher per capita disposable income of urban households in mainland China, which has allowed many households in mainland China to spend more on education. We have also benefited from the increasing internet penetration in mainland China. At the same time, however, our results are subject to changes in the regulatory regime governing mainland China's private education industry, particularly uncertainties relating to online education services. In particular, on July 24, 2021, the General Office of the State Council and the General Office of the Central Committee of the Communist Party of China jointly promulgated the Alleviating Burden Opinion. Among other things, the Alleviating Burden Opinion provides that (i) Academic AST Institutions are prohibited from raising funds by listing on stock markets or conducting any capitalization activities; (ii) foreign capital is prohibited from controlling or participating in any Academic AST Institutions through mergers and acquisitions, entrusted operation, joining franchise or variable interest entities; and (iii) online tutoring for preschool-age children is prohibited, and offline academic subjects (including foreign language) tutoring services for preschool-age children is also strictly prohibited. The Alleviating Burden Opinion provides that any violation of the foregoing shall be rectified. The Alleviating Burden Opinion further states that the administration and supervision over academic subjects tutoring institutions for students on grade ten to twelve shall be implemented by reference to the applicable provisions of the Alleviating Burden Opinion. See "Item 4. Information on the Company-B. Business Overview-Government Regulations-Regulation Related to Private Education" for more details. As a result, we ceased offering compulsory education academic subject tutoring services by the end of 2021, and took other measures to maintain our continued operations. Currently, our focus is on offering and developing traditional learning services, non-academic tutoring services, and college student and adult education services, as well as educational content and digitalized learning products. We are also exploring new opportunities to further enrich our business offerings as we continue to expand our student base. In addition, our new businesses may be adversely affected by fierce competition and uncertainties of the industry with respect to the development of regulatory requirements.
Our business, financial condition, results of operations and prospect have been materially and adversely affected in 2023, 2024, 2025 and subsequent periods by the actions we have taken to date to be in compliance with the Alleviating Burden Opinion and related regulations, rules and policies, as well as our new business directives in the non-compulsory education business vertical. See also "Item 3. Key Information-D. Risk Factors-Risks Related to Our Business and Industry-Significant risks exist in relation to the interpretation and implementation of, or proposed changes to, the laws, regulations and policies of mainland China regarding the private education industry. In particular, our compliance with the Opinions on Further Alleviating the Burden of Homework and After-School Tutoring for Students in Compulsory Education and the implementation measures issued thereunder by the PRC government authorities has materially and adversely affected and will materially and adversely affect our business, financial condition, results of operations and prospect."
In addition, the PRC government regulates various other aspects of our business and operations, including the qualification, licensing or filing requirements for entities that provide education services and limitations on foreign investments in the education industry. See "Item 3. Key Information-D. Risk Factors-Risks Related to Our Business and Industry-We face uncertainties with respect to the development of regulatory requirements on operating licenses and permits for our education services in mainland China. Failure to obtain or renew requested licenses or permits in a timely manner or obtain newly required ones due to adverse changes in regulations or policies could have a material adverse impact on our business, financial condition and results of operations."
While our business is influenced by general factors affecting the education industry in mainland China, our results of operations are also directly affected by certain company specific factors, including the following major factors:
Our ability to execute new business strategies and attract students to enroll in our paid courses
Our net revenues primarily consist of course fees from our students. Our net revenues are primarily driven by increases and decreases in our paid course enrollments. However, in compliance with the regulation of mainland China pursuant to which tutoring services related to academic subject to students from kindergarten through grade nine are prohibited, we ceased offering compulsory education academic subject tutoring services by the end of 2021. We are exploring alternative strategic opportunities that can effectively leverage the resources and knowhow accumulated through our past compulsory education academic subject tutoring services. We have continued to operate our business outside of the compulsory education academic subject tutoring services. Currently, our focus is on offering and developing traditional learning services, non-academic tutoring services, and college student and adult education services, as well as educational content and digitalized learning products. If we fail to successfully execute our new business strategies and attract students to enroll in our courses, our financial condition and results of operations may be materially adversely affected.
We believe providing an effective learning experience is critical to attracting new students and increasing our paid course enrollments. We are committed to providing high quality course offerings to our students and will continue to enhance our students' learning experience through enriching our course offerings, enhancing our brand reputation and refining our technology. We will continue to improve our ability to convert sales leads into paid course enrollments cost-effectively.
Our ability to maintain our course fees
Our net revenues are also affected by the level of tuition fees we charge and average gross billing per paid course enrollment for our courses. Growth in the level of tuition fees we charge and average gross billing per paid course enrollment is dependent on our increased ability to charge premium fees for our course offerings. Our ability to charge premium pricing is affected by the quality and effectiveness of our course offerings, the overall demand for our courses, and prices and availability of competing courses. In addition, our course fee may be subject to evolving regulations, which may set a price limit on our course fees. Moreover, as we shifted our focus continue to explore new business opportunities in non-academic tutoring services, education for college students and adults, educational content and digitalized learning products, our new courses and product and service offerings may not have higher or even the same margins as we had in the past. We cannot assure you that we would be able to maintain our course fee level, and our course fees could continue to decline in the future due to these factors. See "Item 3. Key Information-D. Risk Factors-Risks Related to Our Business and Industry-We may not be able to maintain our course fee level" for more details.
Our ability to manage our operational efficiency
Our operating margins depend on our ability to control our costs and realize additional operation leverage as we continue to operate. Our business changes may result in substantial demands on our management, operational, technological, financial and other resources. To manage and support our further development, we must improve our existing operational, administrative and technological systems and our financial and management controls, and recruit, train and retain additional qualified teachers and school management personnel as well as other administrative and sales and marketing personnel, particularly as we grow outside of our existing areas. We will continue to implement additional systems and measures in order to effectively manage and support our business. If we cannot achieve these improvements, our financial condition and results of operations may be materially adversely affected.
We depend on our ability to sell and market our course offerings in a cost-effective manner to maintain and improve our operating margins. Selling expenses have historically been the largest item of our total operating expenses. Our selling expenses are primarily composed of compensation to our personnel involved in sales and marketing, selling expenses relating to our online and mobile marketing, and branding expenses. Our ability to maintain or lower our selling expenses as a percentage of net revenues depends on our ability to improve sales and marketing efficiency and leverage our existing brand value and recognition of our superior teaching quality to achieve word-of-mouth referrals. We may also incur increased research and development and general and administrative expenses due to the expansion of our course offerings in new areas.
We offer most of our courses online in a live format. Our future success depends on the development and application of relevant technologies to meet our demand for sufficient network capacity and to strengthen proprietary capabilities in areas such as AI and big data analytics, all in a cost-effective manner. While we continue to focus on our technology development, we plan to devote more resources to upgrading our technology infrastructure and software upgrades to increase our operational efficiency.
Key Line Items and Specific Factors Affecting Our Results of Operations
Net Revenues
In 2023, 2024 and 2025, we derived substantially all of our net revenues from the course fees that we charge to our students. We generally collect course fees in advance, which we initially record as deferred revenues. We recognize revenues proportionally as the classes are delivered. The majority of our courses are typically delivered within a period from 1 month to 6 months. For some courses, we continue to provide students with 12 months to 36 months access to the pre-recorded audio-video courses after the online live courses are delivered. The related revenue for playback is recognized proportionally over the playback period. The playback revenue represents a relatively small portion of the total course fees.
The following table sets forth a breakdown of our total net revenues by amounts and percentages for the periods presented:
For the Year Ended December 31,
2023
2024
2025
RMB
%
RMB
%
RMB
US$
%
(in thousands, except for percentages)
Net revenues:
Learning services
2,872,901
97.0
4,419,964
97.1
6,039,033
863,570
98.2
Educational content & digitalized learning products
55,980
1.9
83,930
1.8
77,089
11,024
1.3
Other revenue
31,932
1.1
49,662
1.1
30,650
4,383
0.5
Total
2,960,813
100.0
4,553,556
100.0
6,146,772
878,977
100.0
Our learning services in 2023, 2024 and 2025 primarily consisted of tutoring fees from traditional learning services, non-academic tutoring services, college student and adult education services. Our educational content & digitalized learning products primarily consisted of the amount of sales in books and digitalized auxiliary learning tools. Our other revenue was primarily derived from online marketing service, intellectual properties license grant service and the rent we charged to third parties.
In compliance with the Alleviating Burden Opinion, we ceased offering compulsory education academic subject tutoring services by the end of 2021. Currently, we focus on offering traditional learning services, non-academic tutoring services, college student and adult education services, as well as educational content and digitalized learning products. The cessation of our compulsory education academic subject tutoring services has materially and adversely affected our financial condition and results of operations in 2023, 2024 and 2025, and we expect it will continue to have an adverse effect on our financial condition and results of operations in 2026 and subsequent periods.
Cost of revenues
Our cost of revenues primarily consists of performance-based salaries to instructors and total compensation to tutors. We recorded cost of revenues of RMB790.2 million, RMB1,454.9 million and RMB2,001.7 million (US$286.2 million) in 2023, 2024 and 2025, respectively. Our cost of revenues also includes costs for teaching materials, rental expenses for our office space, depreciation and amortization expenses, and transaction fee paid to third-party online payment channels.
Operating expenses
Our operating expenses consist primarily of selling expenses, and to a lesser extent, research and development expenses and general and administrative expenses.
Selling expenses. We recorded selling expenses of RMB1,501.2 million, RMB2,963.7 million and RMB3,289.1 million (US$470.3 million) in 2023, 2024 and 2025, respectively. Our selling expenses primarily consist of expenses relating to our marketing and brand promotion activities, compensation to our personnel involved in sales and marketing expenses and other miscellaneous expense.
Research and development expenses. We recorded research and development expenses of RMB462.0 million, RMB648.1 million and RMB626.9 million (US$89.7 million) in 2023, 2024 and 2025, respectively. Research and development expenses consist primarily of compensation to our education content development personnel, and to our technology development personnel, and to a lesser extent, server and bandwidth expenses and others.
General and administrative expenses. We recorded general and administrative expenses of RMB356.4 million, RMB668.7 million and RMB732.2 million (US$104.7 million) in 2023, 2024 and 2025, respectively. Our general and administrative expenses consist primarily of payroll and related expenses for employees involved in general corporate functions and administrative personnel.
Taxation
We had income tax expenses of RMB10.7 million in 2023, income tax expenses of RMB8.6 million in 2024 and income tax benefits of RMB4.1 million (US$0.6 million) in 2025. We are subject to various rates of income tax under different jurisdictions. The following summarizes major factors affecting our applicable tax rates in Cayman Islands, Hong Kong and mainland China.
Cayman Islands
The Cayman Islands currently levies no taxes on corporations based upon profits, income, gains or appreciation. There are no other taxes likely to be material to us levied by the government of the Cayman Islands except for stamp duties which may be applicable on instruments executed in, or brought within the jurisdiction of the Cayman Islands. In addition, the Cayman Islands does not impose withholding tax on dividend payments.
Hong Kong
Under the current Hong Kong Inland Revenue Ordinance, the subsidiaries in Hong Kong are subject to profits tax at the rate of 8.25% on assessable profits up to HK$2 million; and 16.5% on any part of assessable profits over HK$2 million. To avoid abuse of the two-tiered tax regime, each group of connected entities can nominate only one Hong Kong entity to benefit from the two-tiered income tax rate. Under the Hong Kong tax laws, we are exempted from the Hong Kong income tax on our foreign-derived income. In addition, payments of dividends from our Hong Kong subsidiary to us are not subject to any Hong Kong withholding tax. No provision for Hong Kong profits tax was made as we had no estimated assessable profit that was subject to Hong Kong profits tax during 2023, 2024 and 2025.
Mainland China
Generally, our mainland China onshore subsidiaries, VIEs and their subsidiaries are subject to enterprise income tax on their taxable income in mainland China at a statutory rate of 25%. The enterprise income tax is calculated based on the entity's global income as determined under the tax laws and accounting standards of mainland China.
Beijing Gaotu was qualified as a high and new technology enterprise in August 2017, which reduced its enterprise income tax rate to 15%. Its qualification was renewed in November 2023 and it can continue to enjoy the 15% preferential tax rate until December 2026.
Beijing Lexuebang was qualified as a high and new technology enterprise during the year ended December 31, 2019. Its qualification was renewed in December 2022 and October 2025, and it can continue to enjoy the 15% preferential tax rate until 2028.
Beijing Yuexuebang has obtained a Software Enterprise Certificate in 2024 and renewed in 2025. It can be exempted from enterprise income tax for 2023 and 2024, and enjoy a reduced tax rate of 12.5% in 2025.
If our holding company in the Cayman Islands or any of our subsidiaries outside of mainland China were deemed to be a "resident enterprise" under the PRC Enterprise Income Tax Law, it would be subject to enterprise income tax on its worldwide income at a rate of 25%. See "Item 3. Key Information-D. Risk Factors-Risks Related to Doing Business in China-If we are classified as a mainland China resident enterprise for income tax purposes, such classification could result in unfavorable tax consequences to us and our non-domestic shareholders or the ADS holders."
Results of Operations
The following table sets forth a summary of our consolidated results of operations for the periods presented, both in absolute amount and as a percentage of our net revenues for the periods presented. This information should be read together with our consolidated financial statements and related notes included elsewhere in this annual report. The results of operations in any particular period are not necessarily indicative of our future trends.
For the Year Ended December 31,
2023
2024
2025
RMB
%
RMB
%
RMB
US$
%
(in thousands, except for percentage data)
Net revenues
2,960,813
100.0
4,553,556
100.0
6,146,772
878,977
100.0
Cost of revenues(1)
(790,207
)
(26.7
)
(1,454,917
)
(32.0
)
(2,001,693
)
(286,238
)
(32.6
)
Gross profit
2,170,606
73.3
3,098,639
68.0
4,145,079
592,739
67.4
Operating expenses
Selling expenses(1)
(1,501,200
)
(50.7
)
(2,963,736
)
(65.1
)
(3,289,064
)
(470,330
)
(53.5
)
Research and development expenses(1)
(462,043
)
(15.6
)
(648,063
)
(14.2
)
(626,947
)
(89,652
)
(10.2
)
General and administrative expenses(1)
(356,369
)
(12.0
)
(668,673
)
(14.7
)
(732,234
)
(104,708
)
(11.9
)
Total operating expenses
(2,319,612
)
(78.3
)
(4,280,472
)
(94.0
)
(4,648,245
)
(664,690
)
(75.6
)
Loss from operations
(149,006
)
(5.0
)
(1,181,833
)
(26.0
)
(503,166
)
(71,951
)
(8.2
)
Interest income
75,829
2.6
70,384
1.5
39,919
5,708
0.6
Realized gains from investments
31,230
1.1
25,302
0.6
34,065
4,871
0.6
Other income, net
54,471
1.8
45,825
1.0
101,764
14,552
1.7
Income/(loss) before provision for income tax and share of results of equity investees
12,524
0.5
(1,040,322
)
(22.9
)
(327,418
)
(46,820
)
(5.3
)
Income tax (expenses)/benefits
(10,657
)
(0.4
)
(8,632
)
(0.2
)
4,111
588
0.0
Share of results of equity investees
(9,165
)
(0.3
)
-
-
-
-
-
Net loss
(7,298
)
(0.2
)
(1,048,954
)
(23.1
)
(323,307
)
(46,232
)
(5.3
)
Note:
For the Year Ended December 31,
2023
2024
2025
RMB
RMB
RMB
US$
(in thousands)
Share-based compensation expenses
Cost of revenues
12,959
7,003
5,641
807
Selling expenses
8,603
9,267
5,748
822
Research and development expenses
17,012
8,942
7,795
1,115
General and administrative expenses
19,779
28,005
20,034
2,864
Total
58,353
53,217
39,218
5,608
Year ended December 31, 2025 compared to year ended December 31, 2024
Revenues
Our net revenues increased by 35.0% from RMB4,553.6 million in 2024 to RMB6,146.8 million (US$879.0 million) in 2025. This increase was primarily due to the 23.0% increase in gross billings from RMB5,612.4 million in 2024 to RMB6,903.7 million in 2025.
Net revenues from learning services increased by 36.6% from RMB4,420.0 million in 2024 to RMB6,039.0 million (US$863.6 million) in 2025. This increase was primarily due to the continuous year-over-year growth of gross billings in traditional learning services and non-academic tutoring services in 2025 as a result of our sufficient and effective response to strong market demand.
Net revenues from educational content & digitalized learning products were RMB77.1 million (US$11.0 million) in 2025, compared with that of RMB83.9 million in 2024. This decrease was primarily attributable to the decreased sales amount in books businesses.
Net revenues from other revenue were RMB30.7 million (US$4.4 million) in 2025, compared with that of RMB49.7 million in 2024, primarily attributable to the decrease in software sales revenue from a third party.
Cost of revenues
Our cost of revenues increased by 37.6% from RMB1,454.9 million in 2024 to RMB2,001.7 million (US$286.2 million) in 2025. This increase was primarily due to expansion of instructors and tutors workforce, higher rental cost, and increased depreciation and amortization cost.
Gross profit
As a result of the foregoing, our gross profit increased by 33.8% from RMB3,098.6 million in 2024 to RMB4,145.1 million (US$592.7 million) in 2025. Our gross margin decreased from 68.0% in 2024 to 67.4% in 2025.
Operating expenses
Our total operating expenses increased by 8.6% from RMB4,280.5 million in 2024 to RMB4,648.2 million (US$664.7 million) in 2025.
Selling expenses. Our selling expenses increased by 11.0% from RMB2,963.7 million in 2024 to RMB3,289.1 million (US$470.3 million) in 2025. The increase was mainly due to the expansion of employees workforce of learning advisers and marketing personnel, as well as a higher expenditure on marketing and branding activities.
Research and development expenses. Our research and development expenses decreased by 3.3% from RMB648.1 million in 2024 to RMB626.9 million (US$89.7 million) in 2025, primarily due to decreases in personnel of content and technology development function.
General and administrative expenses. Our general and administrative expenses increased by 9.5% from RMB668.7 million in 2024 to RMB732.2 million (US$104.7 million) in 2025. This increase was primarily due to the expansion of employees workforce of general management and support personnel.
Loss from operations
We had loss from operations of RMB1,181.8 million in 2024 and loss from operations of RMB503.2 million (US$72.0 million) in 2025.
Interest income & realized gains from investments
Our interest income and realized gains from investments were RMB74.0 million (US$10.6 million) in 2025, compared with a total of RMB95.7 million in 2024. In both fiscal years, our interest income and realized gains from investments consisted primarily of interest earned from our cash and cash equivalents, short-term and long-term investments.
Other income, net
Other income is offset by other expenses. Other income, net increased by 122.1% from RMB45.8 million in 2024 to RMB101.8 million (US$14.6 million) in 2025, primarily due to the refund received from our ADR depositary bank in 2025.
Income tax (expenses)/benefits
We had income tax expenses of RMB8.6 million in 2024 and income tax benefits of RMB4.1 million (US$0.6 million) in 2025.
Net loss
As a result of the foregoing, we had a net loss of RMB1,049.0 million in 2024 and a net loss of RMB323.3 million (US$46.2 million) in 2025.
Year ended December 31, 2024 compared to year ended December 31, 2023
For a detailed description of the comparison of our operating results for the year ended December 31, 2024 to the year ended December 31, 2023, see "Item 5. Operating and Financial Review and Prospects-A. Operating Results-Results of Operations-Year Ended December 31, 2024 Compared to Year Ended December 31, 2023" of our annual report on Form 20-F filed with the Securities and Exchange Commission on April 22, 2025.
Impact of Foreign Currency Fluctuation
See "Item 3. Key Information-D. Risk Factors-Risks Related to Doing Business in China-Fluctuations in exchange rates could have a material and adverse effect on our results of operations and the value of your investment." and "Item 11. Quantitative and Qualitative Disclosures About Market Risk-Foreign Exchange Risk."
Impact of Governmental Policies
Historically, we offered a comprehensive set of online courses, which primarily included compulsory education academic after-school tutoring courses covering major subjects at all grades. However, the regulatory developments relating to after-school tutoring services, including the Alleviating Burden Opinion and its implementation measures, prohibit, among other things, academic AST providers from offering classes over contents outside of or in advance of the school curriculum. See "Item 3. Key Information-D. Risk Factors-Risks Related to Doing Business in China" and "Item 4. Information on the Company-B. Business Overview-Government Regulations." In compliance with the Alleviating Burden Opinion, we ceased offering compulsory education academic subject tutoring services by the end of 2021. The cessation of compulsory education academic subject tutoring services and other actions we have taken to comply with the regulatory developments have materially and adversely affected and will continue to have a material adverse impact on our revenues in 2023, 2024, 2025 and subsequent periods. See "Item 3. Key Information-D. Risk Factors-Risks Related to Our Business and Industry-Significant risks exist in relation to the interpretation and implementation of, or proposed changes to, the laws, regulations and policies of mainland China regarding the private education industry. In particular, our compliance with the Opinions on Further Alleviating the Burden of Homework and After-School Tutoring for Students in Compulsory Education and the implementation measures issued thereunder by the PRC government authorities has materially and adversely affected and will materially and adversely affect our business, financial condition, results of operations and prospect" and "Item 3. Key Information-D. Risk Factors-Risks Related to Our Business and Industry -The cessation of the compulsory education academic subject tutoring services and other actions we have taken to comply with recent regulatory developments have materially and adversely affected and will materially and adversely affect our business, financial condition, results of operations and prospect. Failure to effectively and efficiently manage changes of our existing and new business may materially and adversely affect our ability to capitalize on new business opportunities."
B. Liquidity and Capital Resources
The following table sets forth a summary of our cash flows for the periods presented:
For the Year Ended December 31,
2023
2024
2025
RMB
RMB
RMB
US$
(in thousands)
Net cash generated from operating activities
353,697
258,007
416,094
59,501
Net cash (used in)/generated from investing activities
(423,978
)
620,821
(818,783
)
(117,084
)
Net cash used in financing activities
(90,480
)
(205,302
)
(214,140
)
(30,622
)
Effect of exchange rate changes
10,781
(17,139
)
2,512
359
Net (decrease)/increase in cash, cash equivalents and restricted cash
(149,980
)
656,387
(614,317
)
(87,846
)
Cash, cash equivalents and restricted cash at the beginning of the year
819,933
669,953
1,326,340
189,664
Cash, cash equivalents and restricted cash at the end of the year
669,953
1,326,340
712,023
101,818
Our principal source of liquidity has been cash generated from operating activities. As of December 31, 2025, we had RMB596.2 million (US$85.3 million) and RMB115.8 million (US$16.6 million) in cash and cash equivalents and restricted cash, respectively. Our cash and cash equivalents primarily consist of cash on hand and deposits which have original maturities of three months or less and are readily convertible to cash.
As of December 31, 2025, we had RMB2,708.8 million (US$387.4 million) and RMB551.6 million (US$78.9 million) in short-term investments and long-term debt investments, respectively. Our short-term and long-term investments generally consist of investments in financial products issued by banks, which contain a fixed or variable interest rate, which were classified to short-term investments accounted for those with original maturities no longer than one year and long-term investments accounted for those with original maturities greater than one year.
As of December 31, 2025, our prepaid expenses and other current assets were RMB504.8 million (US$72.2 million). Our prepaid expenses and other current assets mainly consist of receivables from third parties, prepaid VAT and income tax, prepaid other service fees, and receivables from third-party payment platforms.
We believe that our current cash and cash equivalents and our anticipated cash flows from operations will be sufficient to meet our anticipated working capital requirements and capital expenditures for at least the next 12 months. We may decide to enhance our liquidity position or increase our cash reserve for future investments through additional capital and finance funding. The issuance and sale of additional equity would result in further dilution to our shareholders. The incurrence of indebtedness would result in increased fixed obligations and could result in operating covenants that would restrict our operations. We cannot assure you that financing will be available in amounts or on terms acceptable to us, if at all.
As of December 31, 2025, 93.3% of our cash and cash equivalents were held in mainland China, 6.6% in Hong Kong, and 0.1% in Singapore; 94.3% were denominated in Renminbi, 5.5% were denominated in U.S. dollars, 0.1% were denominated in Hong Kong dollars and 0.1% were denominated in Singapore dollars. As of December 31, 2025, 66.5% of our short-term and long-term investments were held in mainland China; 74.3% was denominated in Renminbi. As of December 31, 2025, 88.6% of our cash and cash equivalents and 65.9% of our short-term and long-term investments were held by the VIEs and their subsidiaries.
Although we consolidate the results of our VIEs and their subsidiaries, we only have access to the assets or earnings of our VIEs and their subsidiaries through our contractual arrangements with the VIEs and their shareholders. See "Item 4. Information on the Company-C. Organizational Structure-Contractual Arrangements with the VIEs and Their Shareholders." For restrictions and limitations on liquidity and capital resources as a result of our corporate structure, see "-Holding Company Structure."
We may make additional capital contributions to our mainland China subsidiaries, establish new mainland China subsidiaries and make capital contributions to these new mainland China subsidiaries, make loans to our mainland China subsidiaries, or acquire offshore entities with operations in mainland China in offshore transactions. However, most of these uses are subject to the regulations of mainland China. See "Item 3. Key Information-D. Risk Factors-Risks Related to Doing Business in China-Mainland China's regulation of loans to and direct investment in mainland China entities by offshore holding companies and governmental control of currency conversion may delay or prevent us from making loans to or make additional capital contributions to our mainland China subsidiaries and VIEs, which could materially and adversely affect our liquidity and our ability to fund and expand our business."
Substantially all of our revenues are denominated in Renminbi. Under existing foreign exchange regulations of mainland China, Renminbi may be converted into foreign exchange for current account items, including profit distributions, interest payments and trade-and service-related foreign exchange transactions.
We expect that substantially all of our future revenues will be denominated in Renminbi. Under existing foreign exchange regulations of mainland China, payments of current account items, including profit distributions, interest payments and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior SAFE approval as long as certain routine procedural requirements are fulfilled. Therefore, our mainland China subsidiaries are allowed to pay dividends in foreign currencies to us without prior SAFE approval by following certain routine procedural requirements. However, approval from or registration with competent government authorities is required where the Renminbi is to be converted into foreign currency and remitted out of mainland China to pay capital expenses such as the repayment of loans denominated in foreign currencies. The PRC government may at its discretion restrict access to foreign currencies for current account transactions in the future.
Operating activities
Net cash generated from operating activities in 2025 was RMB416.1 million (US$59.5 million), as compared to a net loss of RMB323.3 million (US$46.2 million). The difference was primarily attributable to (i) non-cash items that primarily consisted of RMB112.8 million (US$16.1 million)in depreciation of property, equipment and software and amortization of intangible assets, RMB39.2 million (US$5.6 million) in share-based compensation, and (ii) a net increase in changes in operating assets and liabilities by RMB643.3 million (US$92.0 million), which was primarily attributable to an increase of RMB480.0 million (US$68.6 million) in deferred revenue due to the course delivery, an increase of RMB281.7 million (US$40.3 million) in accrued expenses and other current liabilities, an increase of RMB85.4 million (US$12.2 million) in prepaid expenses and other current assets and an increase of RMB28.1 million (US$4.0 million) in other assets.
Net cash generated from operating activities in 2024 was RMB258.0 million, as compared to a net loss of RMB1,049.0 million. The difference was primarily attributable to (i) non-cash items that primarily consisted of RMB65.0 million in depreciation of property, equipment and software and amortization of intangible assets, RMB53.2 million in share-based compensation, and (ii) a net increase in changes in operating assets and liabilities by RMB1,193.4 million, which was primarily attributable to an increase of RMB848.3 million in deferred revenue due to the course delivery, an increase of RMB421.0 million in accrued expenses and other current liabilities, an increase of RMB67.0 million in other assets and an increase of RMB14.3 million in prepaid expenses and other current assets.
Net cash generated from operating activities in 2023 was RMB353.7 million, as compared to a net loss of RMB7.3 million. The difference was primarily attributable to (i) non-cash items that primarily consisted of RMB58.4 million in share-based compensation, RMB54.2 million in depreciation of property, equipment and software and amortization of intangible assets, and (ii) a net increase in changes in operating assets and liabilities by RMB257.5 million, which was primarily attributable to an increase of RMB278.3 million in deferred revenue due to the course delivery, an increase of RMB202.7 million in accrued expenses and other current liabilities, an increase of RMB182.6 million in prepaid expenses and other current assets, and an increase of RMB45.2 million in other assets.
Investing activities
Net cash used in investing activities in 2025 was RMB818.8 million (US$117.1 million), primarily due to the purchase of short-term and long-term investments of RMB14,122.5 million (US$2,019.5 million) and payment for asset acquisition and business acquisition of RMB193.3 million (US$27.6 million), partially offset by the proceeds from the maturity of short-term and long-term investments of RMB13,666.4 million (US$1,954.3 million).
Net cash generated from investing activities in 2024 was RMB620.8 million, primarily due to proceeds from the maturity of short-term and long-term investments of RMB15,427.3 million, partially offset by the purchase of short-term and long-term investments of RMB14,806.1 million.
Net cash used in investing activities in 2023 was RMB424.0 million, primarily due to the purchase of short-term and long-term investments of RMB20,428.0 million, partially offset by proceeds from the maturity of short-term and long-term investments of RMB20,145.9 million.
Financing activities
Net cash used in financing activities in 2025 was RMB214.1 million (US$30.6 million), primarily due to repurchase of ordinary shares of RMB343.3 million (US$49.1 million), partially offset by the net proceeds from short-term and long-term loans of RMB129.2 million (US$18.5 million).
Net cash used in financing activities in 2024 was RMB205.3 million, primarily due to repurchase of ordinary shares.
Net cash used in financing activities in 2023 was RMB90.5 million, primarily due to repurchase of ordinary shares.
Material Cash Requirements
Our material cash requirements as of December 31, 2025 and any subsequent period primarily include our capital expenditures, operating lease obligations and real estate purchase obligations.
Our capital expenditures primarily relate to leasehold improvements, real estate purchase, and investments in computers, network equipment and software, and intangible assets. Our capital expenditures were RMB40.8 million, RMB179.9 million and RMB362.8 million (US$51.9million) in 2023, 2024 and 2025, respectively. We intend to fund our future capital expenditures with our existing cash balance, and short-term investments. We will continue to make capital expenditures to meet the expected growth of our business.
We intend to fund our existing and future material cash requirements primarily with anticipated cash flows from operations, our existing cash balance and other financing alternatives. We will continue to make cash commitments, including capital expenditures, to support the growth of our business.
We have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties. We have not entered into any off-balance sheet derivative instruments. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with us.
The following table sets forth our contractual obligations by specified categories as of December 31, 2025:
Payment Due by Period
Total
Less than 1 Year
1-3 Years
3-5 Years
More than 5 Years
(In RMB millions)
Operating lease commitments(1)
496.9
164.3
243.1
86.5
3.0
Real estate purchase obligations
181.7
181.7
-
-
-
Total
678.6
346.0
243.1
86.5
3.0
Note:
Other than as shown above, we did not have any significant capital commitments, obligations or guarantees as of December 31, 2025.
Holding Company Structure
Gaotu Techedu Inc. is a holding company with no material operations of its own. We conduct our operations primarily through our mainland China subsidiaries, the VIEs and their subsidiaries in mainland China. As a result, our ability to pay dividends depends upon dividends paid by our mainland China subsidiaries. If our existing mainland China subsidiaries or any newly formed ones incur debt on their own behalf in the future, the instruments governing their debt may restrict their ability to pay dividends to us. In addition, our wholly foreign-owned subsidiaries in mainland China are permitted to pay dividends to us only out of its retained earnings, if any, as determined in accordance with mainland China's accounting standards and regulations. Under the laws of mainland China, each of our subsidiaries and the VIEs in mainland China is required to set aside at least 10% of its after-tax profits each year, if any, to fund certain statutory reserve funds until such reserve funds reach 50% of their registered capital. In addition, the VIEs may allocate a portion of its after-tax profits based on mainland China's accounting standards to a surplus fund at their discretion. The statutory reserve funds and the discretionary funds are not distributable as cash dividends. Remittance of dividends by a wholly foreign-owned company out of mainland China is subject to examination by the banks designated by SAFE. Our mainland China subsidiaries will not be able to pay dividends until they generate accumulated profits and meet the requirements for statutory reserve funds.
C. Research and Development, Patents and Licenses, etc.
Technology is the backbone of our highly scalable business model. Our strong technological capabilities enable us to deliver a superior student experience and improve operational efficiency. Our technology team, coupled with our proprietary artificial intelligence technology and the large volume of data generated from our operations, has continued to identify opportunities for improvements in our technology infrastructure and applications. As of December 31, 2025, we had a technology research and development team of 706 professionals.
Our trademarks, copyrights, domain names, trade secrets and other intellectual property rights distinguish our courses and services from those of our competitors and contribute to our ability to compete in our target markets. For more information about our technology capabilities and our intellectual property rights, see "Item 4. Information on the Company-B. Business Overview-Technology and Infrastructure" and "-Intellectual Property."
D. Trend Information
Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events since January 1, 2026 that are reasonably likely to have a material effect on our net revenues, income, profitability, liquidity or capital resources, or that would cause the disclosed financial information to be not necessarily indicative of future operating results or financial conditions.
E. Critical Accounting Estimates
We prepare our financial statements in accordance with U.S. GAAP, which requires our management to make judgment, estimates and assumptions. We continually evaluate these judgments, estimates and assumptions based on our own historical experience, knowledge and assessment of current business and other conditions, our expectations regarding the future based on available information and various assumptions that we believe to be reasonable, which together form our basis for making judgments about matters that are not readily apparent from other sources. Since the use of estimates is an integral component of the financial reporting process, our actual results could differ from those estimates. Some of our accounting policies require a higher degree of judgment than others in their application.
The selection of critical accounting policies, the judgments and other uncertainties affecting application of those policies and the sensitivity of reported results to changes in conditions and assumptions are factors that should be considered when reviewing our financial statements. We believe the following accounting policies involve the most significant judgments and estimates used in the preparation of our financial statements. You should read the following description of critical accounting policies, judgments and estimates in conjunction with our consolidated financial statements and other disclosures included in this annual report.
Valuation allowance for deferred tax asset
Deferred income taxes are recognized when temporary differences exist between the tax bases of assets and liabilities and their reported amounts in the financial statements. Net operating loss carry forwards and credits are applied using enacted statutory tax rates applicable to future years. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more-likely-than-not that a portion of or all of the deferred tax assets will not be realized. Deferred tax assets are recognized to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilized, which can require the use of accounting estimation and the exercise of judgment. The impact of an uncertain income tax position is recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant tax authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. Interest and penalties on income taxes will be classified as a component of the provisions for income taxes. Significant judgment is required in determining the valuation allowance. In assessing the need for a valuation allowance, we consider all sources of taxable income, including projected future taxable income, reversing taxable temporary differences and ongoing tax planning strategies. If it is determined that we are able to realize deferred tax assets in excess of the net carrying value or to the extent we are unable to realize a deferred tax asset, we would adjust the valuation allowance in the period in which such a determination is made, with a corresponding increase or decrease to earnings.
Recently Issued Accounting Pronouncements
A list of recent accounting pronouncements that are relevant to us is included in Note 2 to our consolidated financial statements, which are included in this annual report.
Disclaimer
Gaotu Techedu Inc. published this content on April 22, 2026, and is solely responsible for the information contained herein. Distributed via Public Technologies (PUBT), unedited and unaltered, on April 22, 2026 at 10:11 UTC.