New Oriental Education & Technology Group Inc. (NYSE: EDU) reported third-quarter revenue that beat estimates by 4 percent, driven by strong growth in its new educational initiatives and a recovery in its traditional tutoring businesses.
"We are pleased to see that after several consecutive quarters of revenue growth exceeding expectations, this quarter has once again surpassed expectations," Stephen Yang, executive president and chief financial officer, said on the company’s earnings call. He noted the results reinforce confidence in the company’s strategy and its path to sustainable profitability.
For the third quarter ended February 28, New Oriental’s net revenue grew 19.8 percent year-over-year to $1.42 billion, beating the consensus estimate of $1.36 billion. Non-GAAP net income attributable to the company was $152.2 million, a 34.3 percent increase from the same period last year, resulting in a non-GAAP basic earnings per ADS of $0.97.
The strong performance prompted New Oriental to raise its full-year revenue guidance for fiscal 2026 to a range of $5.56 billion to $5.60 billion, representing a 13 to 14 percent increase year-over-year. For the fourth quarter, the company projects revenue between $1.43 billion and $1.47 billion, for growth of 15 to 18 percent.
The top-line growth was primarily fueled by the company's newer ventures. The "new educational business initiatives," which include non-academic tutoring and intelligent learning systems, saw revenue expand by 23.3 percent year-over-year. The non-academic courses attracted approximately 458,000 student enrollments during the quarter.
Traditional segments also showed resilience. The domestic test preparation business for adults and university students grew by 14.5 percent, while the overseas test preparation unit increased by 7.4 percent. This growth contributed to a 230 basis point expansion in the non-GAAP operating margin, which reached 14.3 percent.
Following the results, CMBI raised its target price on New Oriental's U.S. stock to $82 from $78, maintaining a Buy rating. The firm cited the resilience of the core education business and improved efficiency, lifting its non-GAAP operating profit forecasts for fiscal years 2026 to 2028 by 5 to 14 percent.
New Oriental continued its commitment to shareholder returns, announcing the board's approval for the second installment of its fiscal 2026 dividend at $0.60 per ADS. The company also reported repurchasing approximately 3.3 million ADSs for $184.3 million as part of its $300 million buyback program.
Despite the positive results, the company plans to consolidate its overseas business, which will incur a one-off restructuring expense of $10 million to $15 million in the fourth quarter. Yang stated that even with this charge, the company is confident in achieving margin expansion for the quarter and the next fiscal year.
The results signal that New Oriental's diversification strategy is yielding significant returns, helping it navigate the post-regulatory environment in China's education sector. Investors will watch the fourth-quarter results and the upcoming fiscal 2027 for sustained margin improvement and continued growth in its new business lines.
This article is for informational purposes only and does not constitute investment advice.
