Timothy Zhao • Goldman Sachs Group, Inc.

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VNet Management acknowledged the guidance is conservative, stating they are monitoring customer utilization pace relative to chip availability and may upgrade guidance if wholesale utilization remains strong. For the retail IDC business, they noted the slight sequential revenue decline was within a reasonable range and expect the segment to remain stable or grow slightly going forward.

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An executive explained that while both self-built and rental models coexist, the vast majority of clients currently prefer renting from third-party operators like VNET due to the booming demand, making it impractical for most to build their own facilities. The prevailing model is 'rental plus self-build.' Regarding workloads, he clarified that AI inference models are typically deployed in retail IDCs, where clients prioritize convenience and application development over cost. In these scenarios, latency is not considered a significant issue.

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CFO Qiyu Wang attributed the strong MRR growth to faster-than-expected client move-ins and improved profitability from economies of scale and lower costs. Rotating President Chenggang Shen reiterated that the delivery plan for Q4 remains on track to meet annual targets, and next year's capacity delivery guidance is based on secured orders and expected expansions.

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Wenbei Wang, Head of Investor Relations, described new AI tools like a recruitment agent named "HAMR" and customizable digital avatars for interviews, noting the company is patient for a "killer application" to emerge. CFO Yu Zhang explained the Hong Kong offering was aimed at improving liquidity, not raising capital. He highlighted the new $250M share repurchase program and an $80M dividend policy as strong commitments to shareholder returns, also noting the successful reduction in share-based compensation expenses.

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CEO Peng Zhao reported positive feedback from AI product tests, noting a 25% efficiency gain for recruiters and a 15% higher achievement rate for job seekers, but stressed a cautious approach to monetization. CFO Yu Zhang affirmed confidence in the RMB 3 billion profit target, citing disciplined cost control and operational leverage from internal AI. Zhang also confirmed the ongoing share repurchase program and stated the company is exploring other measures to enhance shareholder returns.

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Founder, Chairman and CEO Peng Zhao explained that the spring recruitment season showed strong sequential growth of 173% in active job postings, compared to 141% last year. He noted that the white-collar sector is stably recovering, boosted by AI-related job growth, and that overall cash-in is showing an accelerating trend. Regarding monetization, Mr. Zhao stated he has no aggressive plans to increase ARPU, preferring to support the market's recovery. He emphasized the company's potential lies in its ability to serve a growing number of new enterprises, having added over 6 million in the past two years.

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CEO Peng Zhao noted that blue-collar revenue growth outpaced white-collar, now exceeding 38% of total revenue, with manufacturing and logistics as top-performing subsectors. He added that hyperscale (>10k employees) and small/micro (<100 employees) enterprises showed the strongest performance. CFO Yu Zhang specified that key accounts drove the highest revenue growth at over 30% YoY. Regarding user growth, Mr. Zhao stated the addressable market is over 400 million employees, providing a long runway for expansion, and confirmed that marketing spend will remain at a relatively low level next year due to strong organic traffic.

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Alex Peng, President & CFO, explained that while learning center expansion remains a key growth driver, the focus is on increasing density in existing cities with a disciplined approach. He noted that the rapid growth pace of fiscal 2025 is not expected to continue, and year-over-year revenue growth for Peiyou will likely taper. Peng added that new centers take slightly longer to ramp up but ultimately reach healthy operational levels, with overall Peiyou retention remaining strong at around 80%.

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President and CFO Alex Peng confirmed the Learning Device business reported an adjusted operating loss for Q4 and the full fiscal year 2025. He explained that the current priority is building long-term competitiveness. For fiscal 2026, the strategy involves enhancing device functionality with AI, expanding the product portfolio, improving go-to-market capabilities, and driving operational efficiency through economies of scale. Peng characterized this as a multiyear capability-building phase paving the way for future growth and profitability.

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Executive Jackson Ding clarified that xueersi.com is a strategic priority where the primary focus is on product quality and excellence. He noted that growth is driven by both product development—including refining existing products and adding new SKUs and formats—and effective user acquisition. Ding emphasized that the company is leveraging multiple marketing channels to connect with a broader audience and drive user conversion.

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Executive Zhuangzhuang Peng acknowledged that the entry of 'full stack' competitors (with hardware, software, AI, and content) has intensified the market, which he views as positive for customer awareness and the industry. He admitted this impacts sales and marketing costs in some channels but stated the company's focus is on leading with product competency and exploring efficient go-to-market capabilities. While costs have increased in certain channels, they remain stable in others, and the company closely monitors efficiency across all channels.

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Executive President & CFO Stephen Zhihui Yang estimated that cost controls could contribute 100-150 basis points to margin improvement in FY26. He reported an 8-9% net increase in learning centers in Q4 and stated that the FY26 expansion plan targets 10-15% growth, contingent on revenue performance and restricted to high-performing cities.

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Stephen Zhihui Yang, Executive President & CFO, estimated that cost controls could contribute 100-150 basis points to full-year margin expansion. He reported an 8-9% net increase in learning centers in Q4 and stated the FY26 plan is to align expansion with revenue, targeting a 10-15% increase, primarily in the second half of the year and in high-performing cities.

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CFO Zhihui Yang stated that he expects margin expansion in Q4 and fiscal 2026, driven by cost control and efficiency enhancements initiated in the current quarter. He highlighted a key focus on improving the utilization of facilities to support this goal.

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Sisi Zhao, an executive at New Oriental, explained that quarterly enrollment figures can fluctuate due to registration timing. She stated the company is comfortable with a full-year growth rate of roughly 40% or more for the new business segment, driven by volume increases and a 4-6% rise in average selling price (ASP).

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Executive Sisi Zhao stated that the key K-9 new initiatives grew over 56% in Q1. Executive President and CFO Zhihui Yang explained the enrollment growth slowdown was a timing difference from an earlier summer enrollment window, with combined Q4/Q1 growth remaining strong. Regarding East Buy, Mr. Yang deferred detailed comments to its own earnings release, while Ms. Zhao clarified that guidance comparisons are 'apple-to-apple,' including East Buy's former education business in both the current and prior-year base.

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CFO Yi Yang stated that AI capabilities are seamlessly integrated into Tuya's existing PaaS, SaaS, and solution models, which allows for repricing certain offerings, such as AI-empowered audio PaaS. On the outlook, Yang acknowledged that tariff discussions have created short-term uncertainty and a 'bumping' in the demand cycle, but he expects a return to normal once negotiations are settled. For PaaS gross margin, he expressed satisfaction with the current high level, stating the focus is on maintaining it to motivate the ecosystem rather than pushing it significantly higher.

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Co-Founder and CFO Alex Young (Yi Yang) explained that initial AI opportunities are in audio/video interaction devices, complex decision-making scenarios like energy management, and AI-integrated toys. He stated that the company is prioritizing scalability over immediate margin impact for AI features. Young also clarified that OpEx is not expected to increase significantly as AI investment has been ongoing, and the company will maintain its focus on operational leverage.

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CFO Alex Yang described the current year as a 'rebounding year' for IoT PaaS as customers emerge from inventory cycles and reinvest in IoT projects. She highlighted two growth drivers: product innovation, particularly with AI-based services, and customer expansion into the enterprise level with solutions for telecom carriers and government projects. Regarding shareholder returns, she confirmed that the recent dividend was a special one, and future regular dividends will be considered annually based on non-GAAP profitability.

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Tao Xu, Executive Director and CFO, responded that while the existing home market saw a strong Q1 recovery, a typical seasonal slowdown is expected in Q2. Mr. Xu noted that external trade frictions have caused some short-term disruption in buyer expectations in certain cities, but overall homeowner sentiment remains stable. He expressed cautious optimism, believing that domestic supportive policies will likely mitigate trade risks and help stabilize the market in the medium to long term.

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Tao Xu, Executive Director and CFO, explained that the market saw a strong rebound in Q4 2024 due to policy stimulus, with a notable structural shift toward existing homes. He reported that this momentum continued post-Chinese New Year, with existing home transaction volume up approximately 40% year-over-year. For 2025, Xu projects the market may begin to bottom out, contingent on price stabilization, forecasting a modest recovery for existing homes while the new home market may continue to adjust.

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CEO Yongdong Peng stated that the home renovation focus has shifted from rapid scaling to building foundational capabilities, primarily by upgrading the Home SaaS system to version 2.5 and improving construction delivery. For the rental business, he reported that the number of managed units under the 'carefree rent' model surpassed 300,000. Profitability is being driven by improved unit economics through better leasing efficiency, reduced vacancy costs, and optimized re-renting processes. Peng proudly noted that the Beijing rental business achieved breakeven in H1 2024, validating the model's viability.

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CEO Yongdong Peng stated the focus is on quality growth, with the number of active stores increasing 1.4% quarter-over-quarter and new stores showing high retention and productivity. He noted stores connected in Q4 2023 achieved positive ROI by March 2024. Regarding the new home outlook, Peng acknowledged market toughness but highlighted resilience through expanded developer partnerships and strict risk controls, evidenced by a 69-day DSO and a high percentage of commissions from SOE developers.

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CEO William Huang stated that the Tier 1 market is starting to rebalance, predicting a potential supply-demand turnaround in 6-12 months which could improve pricing. For DayOne, Huang explained that new orders are from a diversified mix of cloud and video companies. He noted the primary driver in Southeast Asia is high-performance CPU for cloud and video applications, not GPU-driven AI, thus chip policies are not expected to have a significant impact.

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CFO Nan Shen detailed that Gaotu's current AI strategy focuses on internal cost reduction and efficiency improvements rather than external product promotion. Key applications include assisting in course design, automating homework correction, providing AI-driven oral language practice, and improving internal R&D and customer service systems. Shen emphasized a conservative investment approach, aiming to perfect internal use cases before marketing AI-powered services to new students.

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