New Oriental, which operates private education, test preparation, overseas study consulting, and live commerce businesses in China, continued its top-line momentum this quarter as revenue exceeded expectations. Adult and college student test prep revenue grew about 29.1% year-over-year, and new education business initiatives rose about 24.8%, leading the growth. Extracurricular tutoring recorded about 1.07 million enrollments across roughly 60 cities.

On the profitability side, adjusted operating income climbed 34.7% YoY to $110 million, while GAAP operating income swung to a profit of $85.8 million from an operating loss a year earlier. Deferred revenue, a prepayment indicator, reached $2.243 billion, up 14.8% YoY, leaving ample room for future revenue recognition. For fiscal 2027, the company set a fresh cash dividend of roughly $300 million and a buyback authorization of up to $200 million, reaffirming its commitment to shareholder returns.

While revenue and adjusted EPS topped expectations, adjusted net income and adjusted diluted EPS ($0.55) — which better reflect the quality of per-share results — came in below the year-ago quarter ($0.61). Last year included a $60.3 million goodwill impairment, whereas this quarter had none, making GAAP net income appear sharply higher; on an adjusted basis, however, profitability gains lagged the top-line expansion.

In the business mix, domestic adult and college test prep and new education initiatives posted double-digit growth, while overseas test prep and study abroad consulting stayed in the low single digits, remaining a relative weak spot. The CFO attributed the adjusted operating margin expansion to internal restructuring one-time charges, but noted that margin volatility could persist until the cost structure stabilizes. The company provided only a fiscal 2027 revenue guide without an EPS outlook, leaving earnings expectations more dependent on subsequent results.

Management framed fiscal 2026 as a strong finish on the back of solid revenue growth, with emphasis on elevating the quality of core education, improving cost and operational efficiency, and expanding customer lifetime value. The Executive Chairman stressed the effectiveness of the core education strategy. The CEO identified the integration of online and offline education and the adoption of artificial intelligence as central organizational priorities, and said East Buy (live commerce) would be driven by channel and own-brand strengthening to sustain medium- and long-term growth. The CFO noted that adjusted operating margin expanded YoY even after restructuring one-time charges, signaling continued focus on fixed-cost reduction and efficiency improvements in the new fiscal year. With revenue guidance pointing to continued double-digit growth, the market is focused on whether the company can sustain its top-line momentum while improving margins simultaneously.

The market appears to have taken in stride the beat on both revenue and adjusted EPS, the fiscal 2027 double-digit revenue guide, and the reaffirmation of shareholder returns through dividends and buybacks. However, the YoY decline in adjusted net income, sluggish growth in the overseas test prep and study abroad segment, and restructuring costs have capped expectations, making the rally more of a measured relief bounce than a sharp surge.