New Oriental Education & Technology Group Inc. (NWOEF)

New Oriental Education & Technology Group Inc. operates in the education and livestreaming e-commerce industries in China, with a corporate structure that relies on contractual arrangements with variable interest entities (VIEs) because PRC laws restrict foreign direct investment in educational and value-added telecommunication services ¹. The consolidated affiliated entities contributed 99.2%, 99.8%, and 99.7% of total net revenues for fiscal years 2024, 2025, and 2026, respectively ². The industry is highly competitive, with competition based on brand recognition, product quality, price, and innovation, and the company faces competition from other livestreaming e-commerce players ³.

The company's competitive positioning is anchored in its brand recognition and the scale of its operations, with a network of schools and learning centers across China. Management emphasizes the strength of the New Oriental brand and the trust of students and parents as key competitive advantages. The company also leverages its integrated online and offline platform, including East Buy for livestreaming e-commerce, to differentiate itself in the market ⁴.

The core business model generates revenue through educational services, test preparation courses, overseas study consulting, and private label products sold via livestreaming e-commerce. Revenue is derived from student enrollments, with student enrollments defined as the cumulative total number of courses enrolled in and paid for by students, excluding kindergarten students ⁵. The company also earns revenue from product sales, including private label products, and other services, with a mix of transactional and recurring income streams ⁶.

The Educational Services and Test Preparation Courses segment is the largest, offering a wide range of programs including English training, test preparation for exams such as TOEFL, IELTS, SAT, ACT, GRE, and GMAT, as well as non-English subjects and online courses. This segment generated net service revenues of $4,893,000 thousand in fiscal 2026 ⁷. The Overseas Study Consulting Services segment provides application and admission consulting, and the Private Label Products and Livestreaming E-commerce segment, operated through East Buy, sells self-developed products and other goods via livestreaming, contributing net product revenues of $768,294 thousand in fiscal 2026 ⁸.

During fiscal 2026, the company invested in several strategic initiatives, including acquiring additional equity interests in HBC, a company providing customized private tours and tourism services, with a 9.8% stake in July 2024 and a 16.6% stake in January 2026 ⁹. The company also invested in Songtsam, a culture, tourism, and accommodation company, with a 12.4% equity interest in September 2024 and an additional 6.0% in November 2024 ¹⁰. In September 2025, the company disposed of its investment in EEO for a total consideration of $11,952 thousand, realizing a gain of $2,640 thousand ¹¹. The board approved a three-year shareholder return plan on July 29, 2025, committing no less than 50% of net income to shareholder returns ¹², and on October 27, 2025, approved an ordinary dividend of $0.12 per common share, or $1.20 per ADS, totaling approximately $189 million ¹³. A share repurchase program authorized up to $300 million of common shares and/or ADSs through May 31, 2026 ¹⁴, and as of the date of the annual report, the company had repurchased approximately 54.1 million common shares for approximately $288.7 million under the 2026 program ¹⁵.

Total net revenues increased to $5,661,294 thousand in fiscal 2026 from $4,900,262 thousand in fiscal 2025, representing a growth of 15.5% ¹⁶. Net income attributable to shareholders rose to $475,172 thousand from $371,716 thousand in the prior year ¹⁷. Operating income grew to $643,251 thousand from $428,250 thousand ¹⁸, and diluted earnings per share improved to $0.30 from $0.23 ¹⁹. The company maintained a strong cash position with cash and cash equivalents of $1,821,202 thousand as of May 31, 2026 ²⁰.

A key growth vector is the expansion of the livestreaming e-commerce business through East Buy, which includes private label products and other services. The company continues to invest in this segment, which generated net product revenues of $768,294 thousand in fiscal 2026 ²¹. The company also plans to expand its tourism-related investments, including HBC and Songtsam, to diversify revenue streams beyond education ²².

Another growth vector is the continued development of educational services and test preparation courses, with a focus on non-academic tutoring and overseas study consulting. The company is investing in technology and online platforms to enhance its offerings and reach more students, including through its online classroom products and partnerships ²³.

The margin and cost outlook is focused on managing operating expenses while investing in growth areas. The company's cost of revenues increased to $2,568,167 thousand in fiscal 2026 from $2,183,291 thousand in fiscal 2025 ²⁴, and selling and marketing expenses rose to $855,864 thousand from $783,959 thousand ²⁵. General and administrative expenses increased to $1,594,012 thousand from $1,444,463 thousand ²⁶. The company aims to achieve operating leverage through scale and efficiency improvements.

Operationally, the company continues to invest in its physical infrastructure, including schools and learning centers, and technology infrastructure to support online learning and livestreaming. The company also manages its workforce and headcount to align with business needs, with a focus on retaining quality teachers and staff ²⁷.

Capital allocation priorities include the three-year shareholder return plan, which commits no less than 50% of net income to dividends and/or share repurchases ²⁸. The company approved a dividend of $0.12 per common share, or $1.20 per ADS, for fiscal 2026 ²⁹, and a new share repurchase program for fiscal 2027 authorizing up to $200 million of ADSs or common shares ³⁰. The company also continues to invest in strategic acquisitions and partnerships, such as the investments in HBC and Songtsam ³¹.

Headwinds include regulatory risks related to the PRC government's oversight of the education industry and variable interest entity structures, which could impact operations and the value of securities ³². The company also faces competition from other livestreaming e-commerce players and risks associated with offering new educational programs and products ³³.

Macro factors such as changes in PRC laws and regulations, including those related to cybersecurity and data privacy, could constrain growth. The company must comply with various licenses and permits, and any failure to maintain these could materially adversely affect business ³⁴.

Management's message emphasizes a commitment to shareholder returns, as evidenced by the three-year shareholder return plan approved on July 29, 2025, which dedicates no less than 50% of net income to dividends and/or share repurchases ⁴⁰. The tone is confident and forward-looking, with a focus on strategic investments in tourism and livestreaming e-commerce to diversify beyond core education services. Key priorities include expanding the East Buy platform, enhancing educational offerings, and maintaining financial discipline through cost management and capital allocation.

Total net revenues for fiscal 2026 were $5,661,294 thousand, compared to $4,900,262 thousand in fiscal 2025 ⁴¹. Net income attributable to New Oriental Education & Technology Group Inc.'s shareholders was $475,172 thousand in fiscal 2026, up from $371,716 thousand in fiscal 2025 ⁴². Diluted earnings per share were $0.30 in fiscal 2026, compared to $0.23 in fiscal 2025 ⁴³. Operating income increased to $643,251 thousand in fiscal 2026 from $428,250 thousand in fiscal 2025 ⁴⁴. The company reported cash and cash equivalents of $1,821,202 thousand as of May 31, 2026, compared to $1,612,379 thousand as of May 31, 2025 ⁴⁵. In fiscal 2025, the company recorded an impairment of goodwill of $60,299 thousand, which reduced operating income for that year ⁴⁶. For segment performance, the Educational Services and Test Preparation Courses segment generated net service revenues of $4,893,000 thousand in fiscal 2026 ⁴⁷, and the Private Label Products and Livestreaming E-commerce segment generated net product revenues of $768,294 thousand ⁴⁸.

The company's reliance on contractual arrangements with VIEs in China poses a significant risk, as these arrangements are not as effective as direct ownership and have not been tested in court; if the PRC government disallows the VIE structure, operations could be materially adversely affected ³⁵. Regulatory changes in the education industry, including potential new laws on private education and online livestreaming, could require additional licenses or impose penalties ³⁶. The company faces intense competition from other livestreaming e-commerce players, which could impact market share and profitability ³⁷. Additionally, the company's investments in tourism-related entities, such as HBC and Songtsam, are subject to market and operational risks, and the company recorded impairment losses on long-term investments of $5,215 thousand in fiscal 2025 ³⁸. The company's ability to pay dividends depends on dividends from PRC subsidiaries, which are subject to statutory reserve requirements and currency conversion controls ³⁹.