Q2 FY2026
Filed Aug 20, 2026Sunlands reported lower second-quarter revenue, billings, enrollments and profit year-over-year while remaining profitable for its 21st consecutive quarter and guiding to a further year-over-year revenue decline in Q3 2026.
The company remained profitable and reduced operating expenses, but net revenues fell 24.6%, gross billings declined, new student enrollments decreased, deferred revenue was lower than at December 31, 2025, and Q3 revenue guidance calls for a 33.1% to 36.9% year-over-year decrease.
Key metrics
as reported| Metric | Value | q/q | y/y |
|---|---|---|---|
| Net revenuesGAAP | RMB406.4 million (US$59.9 million) | – | decreased by 24.6% |
| Gross billingsnon-GAAP | RMB286.2 million (US$42.2 million) | – | – |
| Cost of revenuesGAAP | RMB57.2 million (US$8.4 million) | – | decreased by 17.9% |
| Gross profitGAAP | RMB349.2 million (US$51.5 million) | – | decreased by 25.6% |
| Total operating expensesGAAP | RMB265.7 million (US$39.2 million) | – | decreased by 22.5% |
| Sales and marketing expensesGAAP | RMB228.4 million (US$33.7 million) | – | decreased by 24.5% |
| General and administrative expensesGAAP | RMB31.8 million (US$4.7 million) | – | decreased by 4.0% |
| Product development expensesGAAP | RMB5.5 million (US$0.8 million) | – | decreased by 20.8% |
| Income from operationsGAAP | RMB83,479 thousand (US$12,304 thousand) | – | – |
| Interest incomeGAAP | RMB5,753 thousand (US$848 thousand) | – | – |
| Other income, netGAAP | RMB8,314 thousand (US$1,225 thousand) | – | – |
| Gain on disposal of subsidiariesGAAP | RMB661 thousand (US$97 thousand) | – | – |
| Income tax expensesGAAP | RMB14,158 thousand (US$2,087 thousand) | – | – |
| Loss from equity method investmentsGAAP | RMB589 thousand (US$87 thousand) | – | – |
| Net incomeGAAP | RMB83.5 million (US$12.3 million) | – | – |
| Net income marginGAAP | 20.5% | – | – |
| Basic and diluted net income per shareGAAP | RMB12.58 (US$1.85) | – | – |
| EBITDAnon-GAAP | RMB96,648 thousand | – | – |
| Adjusted EBITDAnon-GAAP | RMB96,648 thousand | – | – |
| New student enrollmentsother | 95,280 | – | – |
| Gross billings per new student enrollmentnon-GAAP | – | increased by 19.4% year-over-year |
Q3 2026 outlook
- Revenuebetween RMB330 million to RMB350 million
- Notedecrease of between 33.1% to 36.9% year-over-year
Capital returns
- On May 29, 2026, the board of directors authorized a share repurchase program under which the Company may repurchase up to US$50.0 million of Class A ordinary shares in the form of ADSs over the next 36 months.
- As of August 17, 2026, the Company had repurchased an aggregate of 680,353 ADSs for approximately US$2.3 million under the share repurchase program.
What drove it
- Net-revenue decline was primarily due to the year-over-year decline in gross billings.
- Cost of revenues declined mainly due to declined service fees paid to educational institutions.
- Sales and marketing expense declined mainly due to lower compensation for sales personnel and lower spending on branding and marketing activities focused on interest courses offerings.
- Product development expense declined mainly due to declined compensation expenses related to product development personnel.
- Management cited disciplined cost management and stated that gross billings per new student enrollment increased by 19.4% year-over-year.
Concerns
- Net revenues decreased by 24.6% year-over-year to RMB406.4 million (US$59.9 million).
- Gross billings were RMB286.2 million (US$42.2 million), compared to RMB400.3 million in the second quarter of 2025.
- New student enrollments were 95,280, compared to 159,154 in the second quarter of 2025.
- Net income margin was 20.5%, compared to 23.5% in the second quarter of 2025.
- Deferred revenue balance was RMB433.5 million (US$63.9 million), compared to RMB585.3 million as of December 31, 2025.
- Q3 2026 revenue outlook implies a decrease of between 33.1% to 36.9% year-over-year.
What to watch
- Q3 2026 net revenues expected to be between RMB330 million to RMB350 million.
- Customer demand and market and operating conditions, which the company said are subject to substantial uncertainty.
- Gross billings and new student enrollments.
- The pace of repurchases under the US$50.0 million authorization.
- Management’s selective investments in courses, services and technology.
Balance sheet and cash flow
- As of June 30, 2026, cash and cash equivalents were RMB520.6 million (US$76.7 million), compared to RMB576.8 million of cash, cash equivalents and restricted cash as of December 31, 2025.
- As of June 30, 2026, short-term investments were RMB336.9 million (US$49.6 million), compared to RMB235.9 million as of December 31, 2025.
- Deferred revenue balance was RMB433.5 million (US$63.9 million) as of June 30, 2026, compared to RMB585.3 million as of December 31, 2025.
- Total assets were RMB1,969,168 thousand (US$290,219 thousand) as of June 30, 2026, compared to RMB2,047,218 thousand as of December 31, 2025.
- Total liabilities were RMB899,872 thousand (US$132,625 thousand) as of June 30, 2026, compared to RMB1,103,151 thousand as of December 31, 2025.
- Total shareholders’ equity was RMB1,069,296 thousand (US$157,594 thousand) as of June 30, 2026, compared to RMB944,067 thousand as of December 31, 2025.
- Lease liabilities, current portion, were RMB9,347 thousand (US$1,378 thousand) and lease liabilities, non-current portion, were RMB123,761 thousand (US$18,240 thousand) as of June 30, 2026.
Analysis
Sunlands reported a smaller second quarter on both demand and revenue measures. Net revenues decreased by 24.6% to RMB406.4 million (US$59.9 million), primarily due to the year-over-year decline in gross billings. Gross billings were RMB286.2 million (US$42.2 million), compared to RMB400.3 million in the second quarter of 2025, while new student enrollments were 95,280 versus 159,154. Management highlighted that gross billings per new student enrollment increased by 19.4% year-over-year.
Cost control offset part of the revenue contraction but did not prevent lower profitability. Cost of revenues decreased by 17.9% to RMB57.2 million (US$8.4 million), and operating expenses decreased by 22.5% to RMB265.7 million (US$39.2 million). Sales and marketing expenses declined by 24.5% to RMB228.4 million (US$33.7 million), reflecting lower sales personnel compensation and lower branding and marketing spending for interest-course offerings. Gross profit decreased by 25.6% to RMB349.2 million (US$51.5 million), and net income was RMB83.5 million (US$12.3 million), compared with RMB126.6 million.
Margins remained positive but moved lower. Net income margin was 20.5%, compared to 23.5% in the second quarter of 2025, and basic and diluted net income per share was RMB12.58 (US$1.85), compared to RMB18.75. EBITDA was RMB96,648 thousand, compared to RMB140,939 thousand, while adjusted EBITDA was also RMB96,648 thousand. The company nevertheless described the quarter as its 21st consecutive profitable quarter.
Liquidity included RMB520.6 million (US$76.7 million) of cash and cash equivalents and RMB336.9 million (US$49.6 million) of short-term investments as of June 30, 2026. Deferred revenue was RMB433.5 million (US$63.9 million), compared to RMB585.3 million as of December 31, 2025. Capital allocation includes a program authorized on May 29, 2026 for up to US$50.0 million of ADS repurchases over 36 months, with approximately US$2.3 million used as of August 17, 2026.
The outlook signals continued revenue pressure. For Q3 2026, Sunlands expects net revenues between RMB330 million to RMB350 million, representing a decrease of between 33.1% to 36.9% year-over-year. The company said the outlook reflects current and preliminary estimates of market and operating conditions and customer demand, all subject to substantial uncertainty.
Management, verbatim
During the second quarter of 2026, we continued to refine our course offerings and customer acquisition activities in response to evolving learner needs. Our focus remained on strengthening the quality and sustainability of the business while continuing to improve operating efficiency.
Tongbo Liu, Chief Executive Officer
We delivered our 21st consecutive profitable quarter, supported by disciplined cost management, while gross billings per new student enrollment increased by 19.4% year-over-year.
Hangyu Li, Finance Director
Not in the filing
stated, not guessed- Prior-quarter comparisons for reported Q2 metrics
- Segment revenue and segment profitability
- GAAP gross margin
- Operating cash flow
- Free cash flow
- Cash-flow statement and capital expenditures
- Debt other than reported lease liabilities
- Dividend information
- Non-GAAP operating cost and expenses figures
- Non-GAAP income from operations figures
- Non-GAAP net income per share figures
- Q2 2026 tax rate
- Previous-quarter outlook for comparison
AlphaAI analysis generated from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure was cross-checked against the filing text; consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.