Breaking Down New Oriental Education & Technology Group Inc. (EDU) Financial Health: Key Insights for Investors

If you're looking at New Oriental Education & Technology Group Inc. (EDU), you see a classic pivot story with mixed results that demand a careful look. The headline numbers for the fiscal year ended May 31, 2025, look solid: total net revenues climbed 13.6% to $4.90 billion, and earnings were up 20.07% to $371.72 million. But, honestly, those full-year figures mask some near-term pressure; look closely at the fourth quarter, and you see a sharp drop in GAAP net income, plunging 73.7% to just $7.1 million-that's a serious margin challenge that needs a defintely plan. This tells you the core educational new business initiatives are driving revenue, but the cost of that growth is high, so the real question for investors is whether the massive investment into non-academic and AI-driven offerings can stabilize profitability and maintain the non-GAAP operating income surge of 116.3%.

Revenue Analysis

If you're looking at New Oriental Education & Technology Group Inc. (EDU), the key takeaway for fiscal year 2025 (FY2025) is that the company has successfully pivoted its business model, moving past the regulatory shock of the 'Double Reduction' policy. Total net revenues for the fiscal year ended May 31, 2025, hit a strong $4.90 billion, representing a 13.6% increase year-over-year. This growth is defintely a testament to their strategic shift.

The old revenue engine of K-9 academic tutoring is gone, but the new one is firing on multiple cylinders. The current revenue stream is a dual-engine model: the revitalized core educational services and the explosive growth of their new initiatives, particularly the e-commerce arm, East Buy. This diversification is what you want to see from a company that faced an existential threat.

The primary revenue sources now fall into a few key areas, all showing robust expansion. The core educational business, which excludes the East Buy private label products and livestreaming business, saw a significant increase in its own right, with net revenues growing 18.7% year-over-year in the fourth quarter of FY2025.

Here's the quick math on the segment contribution from the most recent quarter (Q4 FY2025, ended May 31, 2025) to illustrate the current mix:

• Core Educational Services (e.g., non-academic tutoring, overseas test prep): Approximately 87.6% of Q4 revenue.
• East Buy/Livestreaming E-commerce: Approximately 12.4% of Q4 revenue.

What this segment breakdown hides is the sheer velocity of growth in the smaller, high-margin segments. The company has successfully translated its brand equity into new, high-demand services. For example, in the third quarter of FY2025, the new educational business initiatives-which include non-academic tutoring courses and intelligent learning systems and devices-saw a year-over-year revenue growth of 34.5%.

The traditional, but still critical, segments are also performing well:

• Overseas study consulting and test preparation saw revenue growth of over 21.4% in the third quarter of FY2025.
• Domestic test preparation business targeting adults and university students grew by approximately 17.0% in the same period.

The table below maps the historical trend of their annual revenue, showing the strong rebound from the 2022 low point, which is critical context for understanding the FY2025 number.

The significant change in revenue streams is the emergence of East Buy as a material contributor. While the core education business is healthy, the e-commerce and new educational initiatives are the engines of future growth, providing a crucial buffer against regulatory risk. This is the kind of adaptability that warrants a deeper look into the company's financial health, which you can find in our full analysis: Breaking Down New Oriental Education & Technology Group Inc. (EDU) Financial Health: Key Insights for Investors.

Profitability Metrics

You're looking for a clear picture of New Oriental Education & Technology Group Inc. (EDU)'s financial strength, and the profitability margins tell the real story of how well they've executed their post-regulation pivot. The short answer is: the recovery is solid, with double-digit growth in both operating and net income for the 2025 fiscal year (FY2025), but the margins show there's still work to do on cost control when compared to some peers.

For the fiscal year ended May 31, 2025, New Oriental Education & Technology Group Inc. reported total net revenues of approximately $4,900.3 million, marking a strong 13.6% increase year-over-year. This growth is defintely a testament to the success of their new educational initiatives and diversification efforts, which have driven the top line.

Gross Profit and Operational Efficiency

The gross profit margin is your first check on operational efficiency-it shows what percentage of revenue remains after covering the direct costs of delivering services (Cost of Revenues). For FY2025, New Oriental Education & Technology Group Inc. generated a Gross Profit of approximately $2.72 billion.

Here's the quick math on the margins for FY2025:

• Gross Profit Margin: Approximately 55.51%
• Operating Profit Margin (GAAP): 8.7%
• Net Profit Margin (GAAP): Approximately 7.59%

A 55.51% Gross Margin is healthy for a service-oriented business, but it's important to frame this against the industry. Some competitors in the online space, like Sunlands Technology Group, have reported gross margins closer to 88.5% in Q3 2025, while others, like 17 Education, hit 57.5% in Q2 2025 [cite: 2 in step 2, 10 in step 2]. This difference highlights a structural point: New Oriental Education & Technology Group Inc.'s model, which still involves significant physical assets and in-person instruction, naturally carries a higher Cost of Revenues than purely digital platforms.

Operating and Net Profit Trends

The real story of the turnaround lies in the operating and net profit trends. The company's GAAP Operating Income for FY2025 was $428.3 million, translating to an Operating Margin of 8.7%. More importantly, this income figure grew by a significant 22.2% from the previous year, showing management is effectively controlling selling, general, and administrative (SG&A) expenses as revenue scales.

The Net Income attributable to New Oriental Education & Technology Group Inc. for FY2025 was $371.7 million, resulting in a Net Profit Margin of about 7.59%. This 7.59% margin is a strong rebound, increasing 20.1% year-over-year. Still, when you compare this to a competitor like Sunlands Technology Group, which posted a 24.0% net income margin in Q3 2025, you see the pressure points [cite: 10 in step 2]. The difference points to higher non-operating expenses or a heavier tax burden, but mostly, it shows that the new business model is working, just not yet at the peak efficiency of some pure-play online peers.

To put the full profitability picture in context, here is a summary of the key GAAP figures for the fiscal year ended May 31, 2025:

The clear action here is to monitor the new business mix. If the high-growth segments, like overseas study consulting, domestic test preparation, and new educational initiatives, which grew by 34.5%, continue to scale, the margins should keep expanding [cite: 3 in step 2]. For a more complete view, you can review the full analysis at Breaking Down New Oriental Education & Technology Group Inc. (EDU) Financial Health: Key Insights for Investors.

Debt vs. Equity Structure

You want to know if New Oriental Education & Technology Group Inc. (EDU) is fueling its growth with too much debt, and the short answer is a definitive 'no.' The company's capital structure is remarkably conservative, showing a strong preference for equity financing and a healthy cash position, which is a major green flag for stability.

For the fiscal year ended May 31, 2025, New Oriental Education & Technology Group Inc.'s Debt-to-Equity (D/E) ratio stood at approximately 0.20. This means for every dollar of shareholder equity, the company has only 20 cents of debt. That's a very low-leverage profile, especially when you consider the median D/E ratio for the broader Educational Services industry is around 0.87. They are defintely not leaning on lenders.

Low Debt, High Liquidity

The total debt New Oriental Education & Technology Group Inc. carries is minimal and is primarily composed of lease obligations, not traditional bank loans or bonds. As of the May 2025 fiscal year-end, the company's total book value of debt was around $751.95 million, with total long-term liabilities at approximately $561.95 million. This is a business that pays its own way.

Here's the quick math on how New Oriental Education & Technology Group Inc. stacks up against its major competitors:

The company's low D/E is a strong indicator of financial resilience. It means New Oriental Education & Technology Group Inc. has substantial equity, around $4.05 billion as of February 2025, to absorb any unexpected shocks, a crucial factor in a sector that has faced significant regulatory headwinds in recent years.

Financing Strategy: Equity Over Debt

New Oriental Education & Technology Group Inc. clearly favors financing its operations and expansion through internally generated cash flow and equity, rather than debt. This strategy is a direct reflection of its post-regulatory pivot, focusing on sustainable, profitable growth in new areas like non-academic tutoring and its East Buy livestreaming e-commerce business. Since the debt is mostly lease-related, there is no significant news of recent traditional debt issuances, credit ratings, or refinancing activity to report.

Instead of debt, the focus is on returning capital to shareholders. In a significant move, the board approved a three-year shareholder return plan in July 2025, committing to dedicate no less than 50% of the preceding fiscal year's net income to shareholders, starting with the fiscal year 2026. Plus, they extended and increased their share repurchase program to $700 million, which was active through May 2025. This capital allocation strategy signals management's confidence in future cash flows and their belief that the stock is undervalued.

The bottom line for you is that New Oriental Education & Technology Group Inc. is a financially sound company that is not taking on material financial risk to grow. They have the balance sheet strength to weather market volatility and the cash to reward shareholders. This conservative approach is key to understanding the Mission Statement, Vision, & Core Values of New Oriental Education & Technology Group Inc. (EDU).

Liquidity and Solvency

You want to know if New Oriental Education & Technology Group Inc. (EDU) can cover its near-term obligations, and the short answer is a resounding yes. The company's liquidity position is defintely a core strength, backed by a massive cash reserve and strong operational cash flow that far outweighs its current liabilities.

Assessing Liquidity Ratios

When I look at a company's immediate financial health, I start with the current and quick ratios-these are the acid tests for liquidity. For New Oriental Education & Technology Group Inc. (EDU), the most recent figures are exceptionally strong. The Current Ratio, which measures current assets against current liabilities, sits at approximately 1.65. This means the company has $1.65 in liquid assets for every dollar of short-term debt.

Even more telling is the Quick Ratio (or acid-test ratio), which strips out less-liquid assets like inventory. This figure is around 1.47. A Quick Ratio this high signals that New Oriental Education & Technology Group Inc. (EDU) can cover its immediate debts using only cash, marketable securities, and receivables. That's a very comfortable buffer.

Working Capital and Cash Position

The strength here comes down to a massive war chest of cash and a business model that collects cash upfront. As of the most recent reporting period, New Oriental Education & Technology Group Inc. (EDU) reported total cash, term deposits, and short-term investments of approximately $4.67 billion. That's a staggering amount of liquid capital. Compare that to the company's total debt, which is only about $784.05 million. The working capital is clearly robust.

A key driver of this liquidity is the deferred revenue (customer prepayments). As of August 31, 2025 (Q1 FY2026), deferred revenue was approximately $1,906.7 million, a 10.0% increase year-over-year. This prepayment is a current liability, but it's also a clear indicator of customer commitment and future revenue, and it provides significant, non-debt-related working capital. You can see how this strategy aligns with their broader goals by reading their Mission Statement, Vision, & Core Values of New Oriental Education & Technology Group Inc. (EDU).

Cash Flow Statement Overview

The cash flow statement confirms the company's financial health isn't just a balance sheet snapshot; it's an ongoing, positive trend. Here's the quick math on the Trailing Twelve Months (TTM) cash flow:

• Operating Cash Flow (OCF): Approximately $905.70 million. This is the money generated from core educational and business activities-it's the engine of the company.
• Investing Cash Flow: Approximately -$249.98 million. This negative number is a good sign, showing the company is actively reinvesting in its future, likely through capital expenditures (CapEx) for new learning centers or technology.
• Financing Cash Flow: The company is returning capital to shareholders, which is a major use of cash. For example, the board approved a new share repurchase program of up to $300 million.

The company is generating nearly a billion dollars in cash from operations annually, which is more than enough to fund its growth investments and shareholder returns. There are zero liquidity concerns here; the company is a cash-generating machine.

Valuation Analysis

You're looking at New Oriental Education & Technology Group Inc. (EDU) and asking the crucial question: Is the stock priced right? Honestly, the valuation picture is mixed right now, suggesting New Oriental Education & Technology Group Inc. is likely fairly valued based on a blend of trailing and forward-looking metrics, but with clear growth expectations baked in.

The current market price, around $53.44 as of mid-November 2025, sits comfortably above its 52-week low of $40.66 but well below its 52-week high of $68.53. This tells us the market has been volatile, but the stock has stabilized in the middle of its recent trading range. Over the last 12 months, the stock price actually saw a slight decrease of 4.38%, a reality check for a company still navigating a post-regulatory environment.

Here's the quick math on the core valuation multiples:

• The trailing Price-to-Earnings (P/E) ratio is 23.23.
• The forward P/E ratio drops significantly to 15.49.
• The Price-to-Book (P/B) ratio is 2.37.
• The Enterprise Value-to-EBITDA (EV/EBITDA) is 6.94.

A P/E of 23.23 (Trailing Twelve Months) is higher than the broader sector average, suggesting investors are paying a premium for New Oriental Education & Technology Group Inc.'s earnings. But, the forward P/E of 15.49 is a game-changer. This sharp drop signals that analysts and the market expect substantial earnings growth in the coming fiscal year, which is why the stock isn't considered grossly overvalued. The P/B of 2.37 is reasonable for a company with a strong brand and significant intangible assets that aren't fully captured on the balance sheet. The EV/EBITDA of 6.94 is defintely attractive, suggesting the company's operating cash flow generation is cheap relative to its total enterprise value.

The dividend profile is modest but healthy for a growth-focused Chinese company. New Oriental Education & Technology Group Inc. announced a recent dividend of $0.60 per share, giving a trailing dividend yield of about 1.13%. The payout ratio is a sustainable 38.22%, meaning the company retains most of its earnings to fund expansion, which is what you want to see in a growth stock. They are giving you a little something back, but they are mostly reinvesting.

What this estimate hides is the geopolitical and regulatory risk inherent in a Chinese education stock, which is why the analyst consensus is cautious. Based on a survey of eleven firms, the consensus rating is a 'Hold'. The average 12-month price target is $59.53, which suggests a modest upside from the current price, but not a screaming 'Buy.' This consensus reflects a realistic view: the company has successfully pivoted its business model, but the market wants to see sustained, predictable growth before assigning a higher valuation multiple. For a deeper dive into the business model pivot and its impact on financials, check out our full report: Breaking Down New Oriental Education & Technology Group Inc. (EDU) Financial Health: Key Insights for Investors.

Risk Factors

You're looking at New Oriental Education & Technology Group Inc. (EDU) and seeing a remarkable pivot, but you need to know the risks still baked into the model. The direct takeaway is this: while the company has successfully navigated the 2021 regulatory shock, its near-term financial health is battling fierce competition and a slowdown in key legacy segments, meaning profit growth is defintely not guaranteed.

The biggest risk remains the regulatory environment in China. The 2021 'Double Reduction' policy fundamentally changed the business, banning for-profit academic after-school tutoring (AST) for K-12 students on weekends and holidays. New Oriental Education & Technology Group Inc. (EDU) has shifted, but the potential for new, unforeseen regulatory action-especially around pricing or content for non-academic offerings-is an ever-present external threat. Honestly, the government holds the ultimate control over the education sector's structure.

Operational and Financial Headwinds

Looking at the recent filings, the financial risks are clear, even as the company grows its top line. For the fiscal year ended May 31, 2025, total net revenues were $4,900.3 million, a solid 13.6% increase year-over-year. But the first quarter of fiscal year 2026 showed a different story for the bottom line: net income attributable to New Oriental Education & Technology Group Inc. (EDU) actually decreased by 1.9% year-over-year to $240.7 million.

Here's the quick math: revenue is up, but net profit is down. This suggests the operational focus is shifting to cost-cutting to maintain margins, rather than relying on pure sales growth for profit. Plus, two previously strong segments are slowing down significantly in Q1 FY2026:

• Overseas Test Preparation: Revenue growth of only 1%.
• Overseas Study Consulting: Revenue growth of only 2%.

That's a significant slowdown from the double-digit growth we used to see. The company is now relying heavily on its new educational initiatives and domestic adult exam prep, which grew 15.3% and 14.4% respectively.

Competitive Pressure and Mitigation

The most immediate operational risk is the sustained competitive pressure across all segments, including non-academic and new educational offerings. The pivot created a crowded field. Every player in the Chinese education market is now fighting for a piece of the same non-academic and adult education pie. The company's mitigation strategy is a multi-pronged approach:

• Business Diversification: A strategic pivot to online vocational training and adult education to replace lost K-12 revenue.
• Technology Focus: Heavy investment in Artificial Intelligence (AI) and data analytics to create personalized learning experiences, aiming to differentiate their offerings.
• Compliance Vigilance: Proactively working with government authorities to ensure all new business lines comply with the ever-evolving regulations.

The company's ability to execute this pivot-moving from a tutoring powerhouse to a diversified education and technology provider-is the core strategic risk. You can read more about their new direction in the Mission Statement, Vision, & Core Values of New Oriental Education & Technology Group Inc. (EDU).

To summarize the near-term risk profile, look at the guidance for the full fiscal year 2026: revenue is projected to be between $5.1453 billion and $5.3903 billion, an increase of 5% to 10%. This is solid, but the slowing profit growth in the most recent quarter is a flashing yellow light on margin pressure.

Growth Opportunities

You're looking past the regulatory shake-ups and want to know where New Oriental Education & Technology Group Inc. (EDU) is actually going to make its money. The short answer is diversification, plain and simple. They've successfully pivoted, and the growth drivers are now clear: non-academic education, overseas services, and their unexpected but highly profitable e-commerce arm, East Buy.

Here's the quick math on their last fiscal year. For the fiscal year ended May 31, 2025, New Oriental Education & Technology Group Inc. reported net revenues of $4,900.3 million, a solid 13.6% increase year-over-year. That growth wasn't accidental; it was driven by strategic shifts into new, less regulated markets. Operating income also saw a healthy jump of 22.2% to $428.3 million.

Key Growth Drivers and Product Innovations

The company's future is less about traditional K-12 tutoring and more about a portfolio of new initiatives. The new educational business initiatives, which include non-academic tutoring, were the real engine, showing a revenue growth of 32.5% in the fourth quarter of fiscal year 2025. That's where the investment focus is, and it's paying off.

• Non-Academic Tutoring: This is a massive new market. In Q4 FY2025 alone, these courses were offered in approximately 60 cities, attracting about 918,000 student enrollments. This scale is a huge competitive advantage.
• Overseas Services: Demand for international education is still strong. Revenues from overseas test preparation and overseas study consulting businesses increased by approximately 14.6% and 8.2% year-over-year, respectively, in Q4 FY2025.
• Intelligent Learning Systems: They are pushing into EdTech hardware and software. The intelligent learning system and devices were adopted in around 60 cities with approximately 452,000 active paid users in the first quarter of fiscal year 2026 (Q1 FY2026). That's a defintely promising recurring revenue stream.

Future Revenue Projections and Strategic Direction

Looking ahead, the company's guidance for the full fiscal year 2026 (ending May 31, 2026) projects total net revenues to be in the range of $5,145.3 million to $5,390.3 million. That represents a year-over-year increase of 5% to 10%. Analysts are even more optimistic on the bottom line, forecasting earnings per share (EPS) to grow from $2.75 to $3.44 in the next year, a 25.09% increase.

What's driving this confidence? It's the commitment to core education while aggressively expanding the new businesses. The company is planning to increase the number of its educational centers by 20% to 25% in FY2025, which shows they are still investing heavily in their physical footprint for non-academic offerings. Plus, the board approved a new three-year shareholder return plan in July 2025, committing no less than 50% of the preceding fiscal year's net income to dividends and/or share repurchases starting in FY2026. That's a clear signal of financial stability and a focus on shareholder value.

Competitive Advantages: The Moat is Diversification

New Oriental Education & Technology Group Inc. is a leading private educational service provider in China, and its core competitive advantage is no longer just its brand, but its successful, rapid diversification. They have a massive network of over 1,000 offline schools and training centers, which they are repurposing for non-academic and adult education. This physical presence, combined with the digital reach of East Buy-which has essentially created a second, nearly $1 billion revenue stream in just two years-gives them a unique, hybrid business model that competitors are struggling to replicate. This ability to pivot quickly and execute on a massive scale is what positions them for continued growth. If you want to dive deeper into the company's long-term vision, you can check out the Mission Statement, Vision, & Core Values of New Oriental Education & Technology Group Inc. (EDU).

Finance: Monitor Q2 FY2026 earnings for confirmation of the $5,145.3 million to $5,390.3 million revenue guidance by the end of November 2025.