Youdao, an education technology company, faces severe challenges. Its Q1 performance shows declining revenue and expanding losses. Revenue has dropped by 3.1 percent since a year ago to 1.2 billion yuan (US$170 million). Losses doubled to 206 million yuan. 

Youdao’s three main sources of revenue are education, intelligent hardware and advertising. Only advertising revenue saw any growth (79.7 percent). Learning services fell by 11.3 percent, intelligent hardware by 16 percent. 

However, the company remains a patina of optimism about the future of smart hardware. 

Youdao attempted to highlight its progress in generative AI and large-scale language models but has very little to show. 

The company expects demand for digital learning products to remain strong. 

Youdao is being kept alive by funding support from parent company NetEase, receiving cash and investments amounting to 606 million yuan.