EDU (Trans): FY guidance 14–18%, K-12 up 20%

Dolphin Research's transcript of New Oriental's FY26 Q4 (quarter ended May 31, 2026) earnings call. We summarize core takeaways and management commentary below.

I. Results recap

1. Shareholder returns: To execute the 3-year capital return plan approved in Jul 2025, the BOD approved an FY27 cash dividend and a new buyback. Total FY27 capital returns are estimated at approx. $500 mn. The cash dividend will be about $300 mn, paid in two tranches in Dec 2026 and Jun 2027; the new repurchase authorizes up to $200 mn of ADS/common stock over 12 months post-approval.In addition, the previously authorized 12‑month buyback of up to $300 mn remains in place. As of Jul 28, 2026, the company had repurchased approx. 51.5 mn ordinary shares (incl. ADS‑equivalents) for about $274 mn.

2. Guidance: FY27 net revenue is guided to $6.454–6.680 bn, +14%–18% YoY. Management reiterated its guidance is typically conservative and expects an actual beat; starting this fiscal year, guidance shifts to annual (vs. quarterly).Confidence on Q1 is high, with deferred revenue at Q4-end up approx. 15% YoY, pointing to next‑quarter growth.

3. Key financials: FY26 Q4 total net revenue was $1.5295 bn, +23% YoY. Non‑GAAP OP was $110 mn, +34.7% YoY, with OPM up 60 bps YoY (including a $10–15 mn one‑off internal reorg charge).GAAP OP was $85.8 mn (vs. an OP loss of $8.7 mn a year ago); net income attributable to shareholders was $62.2 mn, +775.8% YoY; Non‑GAAP attributable net income was $87.8 mn, −10.5% YoY.

Operating cash inflow was approx. $518.7 mn, with capex of $99 mn. As of May 31, 2026, cash and equivalents stood at $1.8212 bn; deferred revenue was $2.2429 bn, +14.8% YoY.

4. Costs and expenses: Q4 total operating costs and expenses were $1.4437 bn, +15.3% YoY. COGS was $717.3 mn (+25.9%), S&M was $262.5 mn (+23.9%), and G&A was $463.9 mn (+13.2%).Goodwill impairment was zero (vs. $60.3 mn in the prior year Q4); SBC was $22.7 mn, −20.7% YoY. Basic/diluted EPS per ADS was $0.40/$0.39, and Non‑GAAP basic/diluted EPS per ADS was $0.56/$0.55.

II. Call details

2.1 Management highlights

1. Core K-12 and new education initiatives

a. Adult and college student business revenue rose 29% YoY in Q4. New education initiatives grew 25% YoY overall.

b. Non‑academic (new literacy) programs for children are now in about 60 cities, with steady penetration in top‑tier markets. The top 10 cities contribute around 60% of revenue.

c. The intelligent learning system and hardware business (adaptive learning solutions built on proprietary pedagogy and data analytics) has launched in about 60 cities. Retention and scalability improved, with the top 10 cities contributing over 50% of revenue.

d. Q4 investment of $31.2 mn was made to upgrade and maintain the OMO platform, embedding AI into product innovation and internal operations on an ongoing basis.

2. AI product progress

a. The AI‑driven personalized learning platform completed its Phase I rollout and achieved meaningful sales within 25 days of launch.

b. The platform is not a generic LLM; it is built on a highly vertical learning system carrying New Oriental's proprietary teaching and content assets.

3. Culture & travel

a. Study camps for K-12 and college students and culture‑focused travel for middle‑aged and senior customers continued to scale. Student study tours now cover about 55 cities, with the top 10 cities contributing over 50% of segment revenue.

b. Premium adult culture‑tour products cover about 30 provinces and select overseas destinations.

c. Entered health & wellness tourism with a light‑asset model, partnering with over 45 institutions across key destinations such as Hainan, Yunnan, and Guangxi.

4. East Buy

a. In FY26, it expanded a multi‑platform livestreaming matrix on Douyin, adding 11 vertical channels to reach 18 in total. It also rolled out host recruitment and an annual supplier summit to strengthen operations.

b. In FY27, East Buy will accelerate own‑brand expansion (food and daily necessities), step up product R&D and QC, build out its app‑based membership ecosystem, and leverage the national footprint to add offline experiential stores.

5. New Oriental Home (new strategic pilot)

a. A full‑lifecycle platform for the family unit spanning children‑parents‑elders, integrating education services, East Buy merchandise, and culture & travel into a single app.

b. Piloted this quarter in 69 cities including Hangzhou, Suzhou, Xi'an, and Wuhan, with over 950k registered families. Cumulative event participation rate is about 70%, and the latest activation rate reached 23%, well above most open‑domain e‑commerce platforms.

c. A 'earn‑and‑redeem' points system lowers CAC, boosts retention, and drives cross‑sell. Retention for 7th‑grade students from summer to autumn improved by 10 bps.

2.2 Q&A

Q: Can you break down FY27 guidance by quarter? What are the revenue and margin trends for Q1?

A: Our FY26 strategy was to lift product and service quality, which is bearing fruit. Better quality is driving higher student retention, and Q4 was another solid quarter.With healthy K-12 growth and East Buy's recovery, we are more constructive on FY27, hence the 14%–18% full‑year guide. Note our annual guidance is consistently conservative and we expect to beat; shifting to annual guidance better reflects our long‑term focus and helps investors evaluate us beyond a quarterly lens.

For Q1, we are quite confident about sustaining momentum: deferred revenue at Q4‑end grew approx. 15% YoY, a leading indicator for next‑quarter revenue. Summer enrollment trends are improving, which should accelerate education revenue, alongside better operating efficiency.East Buy's Q1 revenue should also accelerate, contributing more revenue and profit to the group.

On margins, Q4 absorbed a drag from overseas businesses and a $10–15 mn one‑off internal reorg cost, yet OPM still expanded 60 bps YoY. Into FY27, we will continue to focus on profitability across lines, maintain cost discipline, and drive efficiency to unlock operating leverage; we expect full‑year margin expansion and are confident about margin expansion in Q1 as well.

Q: After further acceleration in K-12 during Q4, how should we think about revenue growth for Q1 and FY27?

A: K-12 posted strong growth in FY26. For the new year, we guide K-12 as a whole (K-9 plus high school) to grow about 20% YoY.Enrollment momentum is healthy and Q1 revenue growth should be stronger. K-12 is also expected to deliver higher margins in the new fiscal year.

Q: What is the FY27 capacity expansion plan and current utilization? Also, there were reports of inspections at certain learning centers; are there compliance risks to watch?

A: FY26 capacity increased 13% for the year (by floor area), with disciplined expansion. In the new year, we plan to add 10%–15% capacity, with most new sites located in regions that performed best on both top and bottom lines last year.Improving student retention will lift utilization at existing centers; and with OMO and online growth, we do not need to open many new centers. Overall, revenue growth will outpace learning center expansion, driving another increase in Avg. utilization.

On regulation, we comply with policy requirements. Over the past 4–5 years we have passed all government checks, so we should be fine.My personal take on the regulatory environment is neutral to slightly positive.

Q: What are you seeing in overseas test‑prep this summer in Tier‑1 cities, and how will that segment trend this year? You merged two businesses last year; can you share a margin outlook for overseas?

A: Overseas‑related businesses faced growth pressure last year amid macro and geopolitics, but they showed resilience, and we continue to take share. We expect low single‑digit growth for the new year, with Q1 roughly in low single digits as well.

We merged overseas test‑prep and consulting in Q3 last year to restructure teams, deliver one‑stop services, and tighten cost control. Overseas‑related margins were about 15% last year; with the merger‑driven cost actions, margins should expand this year, and we will continue to push on cost control.

Q: Sales & marketing/distribution expenses were up QoQ and YoY last quarter. Why, and how should we view FY27 S&M with New Oriental Home rolling out? Ex‑East Buy, was Q4 core education Non‑GAAP OPM flat or also expanding?

A: East Buy spent more on marketing in Q4, but its revenue grew rapidly. For the new year, we expect group S&M as a percentage of revenue to decline, which should lift margins.

Excluding East Buy's contribution, education margins were roughly flat. Note Q4 included a $10–15 mn one‑off expense related to the overseas merger and reorg; adding it back, core margins improved.

Q: Can you quantify cost‑optimization — how much fixed cost savings in FY27? What's the capex budget? Store openings fell ~40% YoY (~170) last year, but capex was flat and is set to rise; is the gap due to East Buy's offline stores?

A: Cost control started last Mar, and we delivered about $100 mn savings in FY26. Phase I is nearing completion, and we are moving into Phase II — more management restructuring and broader use of AI to reduce labor costs.We target higher cost savings in the new year than last year.

On capex, last year was about $250 mn; this year we expect $250–300 mn, for capacity additions and learning pads, among others. The difference is not East Buy — its offline stores are very light on capex.We added 13% capacity by area last year and plan 10%–15% this year, with capacity growth trailing revenue growth to lift utilization. The capex uptick mainly reflects construction of our new headquarters in Changping, which raises costs modestly, hence slightly higher capex YoY.

Q: Competition was intense last summer. How is the competitive landscape this summer, and how do you view K-12 over three years given demographics and competition?

A: Competition this summer is milder than last year, which supports our stronger Q1 acceleration guide. K-12 should grow slightly faster in Q1 and for the full year versus last year.Demographics are a headwind, but parents will prioritize quality and are willing to invest in education. Large players are likely to take more share over the next five years, in our view.

Q: With rapid AI progress, how is the company applying AI across teaching and learning? Is AI primarily a tool to transform pedagogy or to boost operating efficiency?

A: We are investing heavily to bring AI into education in three areas. First, we use AI to enhance quality and the learning experience across all existing products — embedding new AI features into learning hardware, using AI tools in class to improve teaching efficiency, and enabling students to use AI after class to study more effectively.With ample capital, technology, and proprietary pedagogy, this differentiates us from competitors.

Second, and more exciting, we are piloting a broad set of new AI products. Beyond standalone products, as announced this quarter, we recently launched a new platform that combines AI with our teaching expertise and content assets to deliver new solutions.It is still early days, but we expect the platform to improve and a pipeline of new products to follow.

Third, we deploy AI to improve work efficiency and reduce labor costs — across teachers, TAs, and functional support roles. Staff can use AI tools to handle more work, reducing the need to hire as many new employees as before, which lowers HR costs and raises efficiency.Overall, AI strengthens our differentiation and competitive edge.

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