EDU Q2 Results: Operating Income Surges 244%, Margins Strengthen
New Oriental Education & Technology Group (EDU) reported a strong second quarter for fiscal 2026. The standout figure: operating income soared by 244.4% year-over-year to $66.3 million, and margins improved sharply. An ongoing focus on high-quality growth, cost control, and expanding educational offerings drove the bottom line higher.
Revenue Growth Steady Across Core and New Initiatives
Total net revenues climbed 14.7% year-over-year to $1.19 billion, led by strong performance from new business lines and resilient test preparation demand. Notably, domestic test prep for adults and university students rose by around 12.8%, and innovative educational initiatives posted 21.6% growth. Overseas test preparation grew 4.1% in the same period, underscoring EDU’s diversified revenue base.
Operating Efficiency and Margin Expansion Outpace Top-Line Growth
EDU’s operating costs and expenses increased 10.4%—well below the revenue growth rate. As a result, operating margin jumped from 1.9% to 5.6%. Non-GAAP operating margin (excluding stock compensation and amortization) came in at 7.5%, a 470-basis-point improvement year-over-year. CFO Stephen Yang credited these gains to enhanced cost control, product mix optimization, and improved utilization in core businesses.
| Key Metric | Q2 FY2026 | Q2 FY2025 | % Change |
|---|---|---|---|
| Net Revenues (USD, millions) | 1,191.44 | 1,038.64 | 14.7% |
| Operating Income (USD, millions) | 66.31 | 19.26 | 244.4% |
| Non-GAAP Operating Income (USD, millions) | 89.13 | 29.05 | 206.9% |
| Operating Margin | 5.6% | 1.9% | - |
| Non-GAAP Operating Margin | 7.5% | 2.8% | - |
GAAP and Non-GAAP Profits Show Healthy Growth
Net income attributable to New Oriental for the quarter reached $45.5 million, up 42.3% year-over-year. Non-GAAP net income climbed 68.6% to $72.9 million. On a per ADS basis, basic and diluted EPS were $0.29 and $0.28 respectively; Non-GAAP basic and diluted EPS hit $0.46 and $0.45.
| Profit Metrics | Q2 FY2026 | Q2 FY2025 | % Change |
|---|---|---|---|
| Net Income (USD, millions) | 45.45 | 31.93 | 42.3% |
| Non-GAAP Net Income (USD, millions) | 72.91 | 43.23 | 68.6% |
| Net Income per ADS (Basic) | 0.29 | 0.20 | 45.9% |
| Non-GAAP Net Income per ADS (Basic) | 0.46 | 0.27 | 72.9% |
Cash Position Strong, Shareholder Returns Ongoing
EDU ended the quarter with $1.84 billion in cash and equivalents, $1.62 billion in term deposits, and $1.88 billion in short-term investments. Net operating cash inflow reached $323.5 million for the quarter. The company is delivering on its shareholder return plan: a $1.20 per ADS dividend (to be paid in two installments) and a $300 million share repurchase authorization, of which $86.3 million has already been used to repurchase approximately 1.6 million ADSs.
Growth in EDU’s Subsidiaries and New Initiatives Stands Out
EDU’s non-academic tutoring reached 1,058,000 student enrollments across 60 cities, while its intelligent learning system attracted 352,000 paid users. Subsidiary East Buy reported a turnaround to profitability: revenue rose 5.7% to RMB2.3 billion ($323.3 million), and net profit hit RMB239 million ($33.4 million), compared to a net loss last year. Gross margin for East Buy reached 36.4%, supported by private label and offline expansion.
Forward Guidance: Revenue Outlook Raised on Back of High-Quality Growth
EDU projects Q3 revenue in the $1.31–1.35 billion range (up 11–14% year-over-year), and lifted full-year 2026 revenue guidance to $5.29–5.49 billion (8–12% growth anticipated). The company cites strong execution, demand across educational offerings, and continued progress in operational efficiency as drivers.
Actionable Insights
EDU’s earnings underscore the benefits of operational discipline and a diversified approach to education services in China. Material improvements in margins and cash flow hint at a path toward even greater profitability as digital, OMO, and AI initiatives scale. For investors interested in companies that can deliver both growth and operational leverage, EDU warrants close tracking as fiscal 2026 unfolds.
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