China education February-quarter preview and March tracker: Revenue growth may exceed expectations, with AI learning terminals and AI agents driving an upgrade in the learning model

Overview

This report is Goldman Sachs' February-quarter earnings preview and March operating data tracker for the China education sector, covering TAL, New Oriental, East Buy and other companies, with a focus on AI learning tablets, AI education apps, AI agents, offline training supply, overseas study visas, and the policy backdrop. The report argues that short-term revenue growth may beat expectations, and that AI hardware and AI agents are pushing learning scenarios from simple tools toward a more complete learning loop, but the risk-reward profile differs meaningfully across companies in terms of growth quality, margins, and valuation.

Core views

The core views are as follows: first, TAL and EDU's February-quarter revenue is expected to beat consensus, with EDU showing stronger profit performance, while TAL's short-term margins may face pressure from learning-tablet revenue recognition and upfront marketing spending. Second, March demand for AI learning tablets improved, with GMV for major brands turning positive YoY and recovering MoM; TAL stood out in unit sales, GMV, and smart app MAU. Third, AI education apps and agents are expanding rapidly, and TAL's OpenClaw, NineClaw and Xiaojinglong suggest the education use case is shifting from single-point Q&A to a closed loop involving teachers, students and parents. Fourth, overseas study visa data remains under pressure, with Canada, Australia and the United States showing weak figures. Fifth, East Buy's GMV has recovered, but valuation is still relatively high, so despite a slight target-price increase, the Sell rating is maintained.

Analysis framework

The report cross-validates earnings models, comparisons with VA consensus, app active users, online e-commerce GMV, learning-tablet sales and ASP, offline training institution licenses, overseas student visas, management discussions, and SOTP/PE valuation frameworks. SOTP valuation is mainly used for TAL and EDU, while East Buy is valued using a FY27E target P/E, combining short-term operating tracking with FY26E-FY29E forecast revisions.

Methodology notes

• Valuation methodsSOTP

  sum-of-the-parts valuation

  The target prices for TAL and EDU are derived by summing EV/NOPAT multiples, net cash, and holding-company discounts across different business segments to reflect the distinct growth and profitability profiles of education services, content solutions, and new businesses.

• Valuation methodstarget P/E

  target price-to-earnings ratio

  East Buy's target price is based on a 15x FY27E target P/E, referencing valuation multiples for Chinese e-commerce platforms, food and beverage companies, and home-consumer brands.

• operating_trackerGMV and MAU tracking

  operating data tracking

  The report uses Douyin, Taobao, Tmall, JD, app MAU, DAU, billings, and visa data to track changes in education hardware, AI applications, live-streaming e-commerce, and overseas study demand.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• TAL Education Group (TAL)

  Core beneficiary, rated Buy

  Strengths

  K-12 learning services are recovering, AI learning tablet GMV and MAU are growing strongly, OpenClaw/NineClaw/Xiaojinglong form a closed-loop AI education agent ecosystem, and roughly US$4.0bn in net cash plus buybacks support valuation.

  Weaknesses

  Delayed revenue recognition for learning tablets and upfront marketing expenses may weigh on short-term margins, while AI, hardware, and overseas expansion continue to require investment.

  Comparison

  Compared with EDU, TAL has greater growth optionality in AI learning hardware and education agents; compared with hardware peers, TAL's March GMV grew 30% YoY, though Zuoyebang and iFlytek grew faster.

  Risks

  Underwhelming offline expansion, changes in education regulation, weak performance of new smart-learning-tablet products, and difficulty expanding overseas.

• New Oriental Education & Technology (EDU/9901.HK)

  Stable growth name, rated Neutral

  Strengths

  Long-standing brand, broad education-service coverage, February-quarter revenue and profit are expected to beat consensus, and the target price was nudged higher.

  Weaknesses

  FY25-28E revenue CAGR is expected to slow to 12%, overseas-related demand is under pressure, and the scale-up record for new businesses remains limited.

  Comparison

  Compared with TAL, EDU has less growth optionality but a more balanced business mix; East Buy's forecast changes affect EDU's consolidated valuation.

  Risks

  Further deterioration in overseas study demand, changes in education regulation, management team turnover, and downward pricing pressure from generative AI products.

• East Buy (1797.HK)

  Livestream e-commerce and New Oriental ecosystem asset, rated Sell

  Strengths

  March Douyin GMV was up 38% YoY and 51% MoM, conversion on the main account and Beautiful Life channel improved YoY, and the target price was slightly raised.

  Weaknesses

  The post-anchor-host departure growth outlook remains unclear, 3P live-streaming e-commerce GMV pressure persists, and current valuation is high relative to growth and peers.

  Comparison

  Compared with the education core business, East Buy relies more on live-streaming traffic, channel expansion, and own-brand execution, leading to greater volatility in earnings and valuation.

  Risks

  Upside risks include stronger-than-expected GMV growth, faster ramp-up of new channels, better-than-expected self-operated product performance, parent company support, and improved shareholder returns.

• Gaotu Techedu (GOTU)

  Covered company, rated Neutral

  Strengths

  Still within the China education coverage universe and may benefit from a broader industry demand recovery.

  Weaknesses

  The report provides relatively little core tracking data and no clearly positive catalyst.

  Comparison

  Rated below TAL and above East Buy and Offcn Education.

  Risks

  Education regulation, demand volatility, competition, and margin pressure.

• Offcn Education (002607.SZ)

  Covered company, rated Sell

  Strengths

  Has exposure to vocational education-related business.

  Weaknesses

  The report only provides a Sell rating and Rmb2.65 price information, with no positive operating catalyst.

  Comparison

  Placed at the more cautious end of the report's rating spectrum.

  Risks

  Slower-than-expected demand recovery, intensifying competition, and insufficient profit improvement.

Key data

• TAL 4QFY26E revenueUS$817mn, +34% YoYGoldman Sachs forecast, 5% above VA consensus.
• TAL 4QFY26E non-GAAP operating profitUS$51mn, non-GAAP OPM 6.3%10% below VA consensus, but margin improved by 6.5 percentage points YoY.
• EDU February-quarter revenueUS$1,400mn, +18% YoY3% above VA consensus; core revenue US$1,204mn, +16% YoY.
• EDU February-quarter non-GAAP operating profitUS$214mn, non-GAAP OPM 15.3%17% above VA consensus; non-GAAP net profit is expected to be US$166mn.
• Major AI learning tablet online GMVMarch +29% YoY, +12% MoMCovers Douyin, Taobao, Tmall and JD; a clear improvement from February's -9% YoY.
• TAL learning tablet March performanceAbout 89k units, GMV Rmb334mn; sales +57% YoY, GMV +30% YoYASP declined 18% YoY, but rose 4% MoM, marking a third consecutive month of sequential improvement.
• Education device app MAUMajor brands' March MAU 17.2mn, +51% YoY, +11% MoMTAL Xueersi Smart App MAU 3.6mn, +116% YoY, +9% MoM.
• Doubao StudyDAU +112% YoYAs of end-March, it remained No. 6 in DAU ranking among China AI-native apps.
• GauthOverseas monthly billings US$1.2mn, +21% YoYMonthly billings / average DAU was about US$0.4, +28% YoY.
• East Buy Douyin GMVMarch Rmb1,066mn, +38% YoY, +51% MoMMain account GMV was Rmb341mn, and the Beautiful Life channel GMV was Rmb240mn.
• Overseas study visasCombined January Chinese student visas for Canada and Australia were -22% YoYThe body text also notes Canada/Australia at -36%/-15% YoY, and United States Chinese student visas at -30% YoY in Jan-Sep 2025.
• TAL target priceUS$16.912-month SOTP target price unchanged.
• EDU/9901.HK target priceUS$67/HK$52Slightly raised from US$66/HK$51 previously.
• East Buy target priceHK$11.1Raised from HK$10.9 previously, but Sell is maintained.

Impact & implications

In terms of investment implications, the China education sector is moving from post-policy-repair capacity expansion into a new growth phase driven by AI hardware, AI software, and offline learning services. TAL is the biggest beneficiary in terms of growth and long-term competitiveness, supported by AI learning products, Peiyou business recovery, and net cash, but near-term profitability may be held back by investment spending. EDU is more defensive, but slowing K-12 growth, pressure in overseas-related businesses, and potential pricing pressure from generative AI limit re-rating upside. East Buy's March GMV has recovered, but the visibility of live-streaming e-commerce growth, the mix of 1P sales, and valuation remain key constraints.

Risks

• Changes in education-industry regulation, especially for high-school tutoring, high-school entrance exam reform, extension of compulsory education, and non-academic training oversight.
• TAL's offline learning-center expansion falling short of expectations, or weaker-than-expected sales, ASP, and user retention for new learning tablets.
• AI agent and AI learning hardware investment causing medium-term losses or margin pressure, with commercialization potentially slower than expected.
• Continued pressure on overseas study visas and overseas education demand.
• East Buy's live-streaming e-commerce GMV, channel expansion, and own-brand performance missing expectations, while valuation remains high versus peers.
• Generative AI products may create deflationary pressure on traditional education service pricing and demand.

What to watch

• TAL and EDU's February-quarter revenue, non-GAAP profit, and margins to be released on April 22-23.
• Subsequent sales, ASP, GMV, and Xueersi Smart App MAU for TAL X5 and X5 Ultra learning tablets.
• User adoption, token consumption, and paid conversion for NineClaw, Xiaojinglong, and the parent-version OpenClaw.
• DAU/MAU trends for Doubao Study, Gauth, Xueersi.com, Peiyou, and the EDU app.
• Changes in the number of licenses for offline non-academic and academic training institutions.
• Whether Canadian, Australian, and United States visa data for Chinese students stabilizes.
• Specific implementation details in China's 15th Five-Year Plan regarding high-school capacity, free-education coverage, and high-school entrance exam reform.
• East Buy Douyin GMV, 1P private-domain/self-operated mix, main-account traffic, and Beautiful Life channel follower growth.