Executive Summary / Key Takeaways

• Jianzhi Education Technology Group Company Limited ($JZ) is strategically pivoting towards AI-driven educational solutions and strengthening partnerships within China's rapidly evolving digital education market, aiming to leverage its specialized IT expertise.
• The company plans to allocate a significant portion of its recent offering proceeds—60% for AI Agent development and promotion, and 20% for working capital in its digital content business with China Mobile (CHL)—signaling a clear future growth trajectory.
• Despite a history of net losses and thin gross profit margins, Jianzhi Education maintains a unique market positioning through its customized IT solutions and expansive content ecosystem for higher education institutions.
• Key risks include substantial uncertainties surrounding its Variable Interest Entity (VIE) structure and potential future actions by the PRC government, which could significantly impact operations and investor value.
• The company faces intense competition from larger, more diversified players like TAL Education Group and New Oriental Education & Technology Group , necessitating successful execution of its AI and partnership strategies to enhance financial performance and market share.

The Digital Transformation of Chinese Education: Jianzhi's Strategic Evolution

Jianzhi Education Technology Group Company Limited (NASDAQ: JZ) operates at the nexus of technology and learning in China, a market characterized by immense demand for high-quality professional development and IT-related educational solutions. The company's core business revolves around developing digital educational content and providing customized IT services primarily to higher education institutions and, increasingly, to individual end-users. Jianzhi Education is not merely a content provider; it positions itself as a strategic enabler of educational solutions, distinguishing itself through an expansive content ecosystem, proprietary AI-powered platforms, and deep institutional relationships. This strategic focus is particularly pertinent in a rapidly evolving Chinese digital education market.

The company's journey began in May 2011 with Beijing Sentu Huarui Education Technology Co., Ltd., which evolved into Beijing Sentu Education Technology Co., Ltd. and was briefly listed on China's NEEQ before delisting due to low liquidity in 2017. This early period allowed Jianzhi to cultivate a profound understanding of professional development training and IT solutions for educational clients. Strategic acquisitions, such as Shanghai Angyou and Guangzhou Xingzhiqiao, facilitated its expansion into the end-user market. To navigate PRC regulations on foreign investment, Jianzhi Education Technology Group Company Limited was incorporated in the Cayman Islands in March 2018, establishing a Variable Interest Entity (VIE) structure with Beijing Sentu. This structure, while common for Chinese companies listing overseas, introduces unique operational and regulatory complexities.

Jianzhi Education went public on the Nasdaq Stock Market in August 2022. Since then, the company has actively addressed Nasdaq compliance requirements, including multiple ADS ratio changes to maintain its minimum bid price, successfully regaining compliance by July 14, 2025. Its listing was also transferred to The Nasdaq Capital Market in October 2024 to resolve other compliance matters. These corporate actions underscore the company's commitment to its public listing while highlighting the dynamic regulatory environment it operates within.

Technological Edge: AI as a Growth Catalyst

Jianzhi Education is actively integrating AI-generated content (AIGC) technology into its educational products and services, a move that forms a cornerstone of its future growth strategy. The company's proprietary AI-powered platforms are designed to enhance its offerings, providing customized technological support for educational institutions and other institutional customers. This technological differentiation is crucial in a competitive landscape, allowing Jianzhi to offer solutions tailored to specific client needs.

The strategic importance of AI is further underscored by the company's capital allocation plans. Approximately 60% of the net proceeds from its current offering are earmarked for the "development and promotion of AI Agent," with an additional 20% dedicated to "the promotion of and the distribution channels development of AI Agent." While specific quantitative performance metrics for its AI technology are not publicly detailed, the strategic intent is clear: to leverage AI to create more sophisticated and effective educational tools. This investment aims to enhance the efficiency of system integration for institutional clients and improve the overall learning experience, thereby strengthening Jianzhi's competitive moat and potentially leading to improved pricing power in its niche markets.

Jianzhi's educational content database already encompasses a wide array of professional development products, including employability skills, entrepreneurship guidance, professional skills training, and certification quiz banks. These are delivered through self-developed online learning platforms, catering to both institutional and individual customers via an omni-channel sales system. The integration of AI is expected to further personalize and optimize these offerings, making them more adaptive and engaging for users.

Strategic Alliances and Market Positioning

Jianzhi Education's strategic initiatives extend beyond internal technological development to encompass significant partnerships. A notable collaboration was announced on May 12, 2025, with China Telecom (CHA), one of the world's largest integrated communications providers. This partnership is deemed a "critical step forward in integrating Jianzhi's robust education platforms into China Telecom's expansive cloud center infrastructure". Such an alliance is pivotal for enhancing the reach and scalability of Jianzhi's digital content delivery.

Furthermore, the company plans to allocate 20% of its offering proceeds to the "working capital of the digital content business in cooperation with China Mobile." This indicates a clear strategic focus on leveraging major telecommunication infrastructure for broader content distribution, reinforcing its market positioning as a provider capable of reaching a wide audience through established networks. These partnerships are vital for Jianzhi to compete effectively in the rapidly evolving Chinese digital education market, allowing it to expand its footprint and deliver its AI-enhanced educational content more efficiently.

Financial Performance and Liquidity: A Path to Profitability

Jianzhi Education has faced financial headwinds, acknowledging a "history of net loss" and the challenge of achieving or maintaining profitability. The company has also recorded "thin gross profit margins for some of the products". For the trailing twelve months (TTM) as of September 23, 2025, Jianzhi reported annual revenue of $248.83 million and a net income of -$33.51 million. Its gross profit margin stood at 18.82%, with an operating profit margin of -8.19% and a net profit margin of -13.47%. Operating cash flow for the TTM was $10.51 million, but free cash flow was -$7.71 million. These figures reflect the company's ongoing investment in growth and technology, alongside the competitive pressures and operational costs inherent in the sector.

Liquidity is partly sustained by payments from its operating entities, with dividends and other distributions from its Wholly Foreign-Owned Enterprise (WFOE), Jianzhi Beijing, being a key source. However, PRC regulations impose restrictions on cash transfers and dividend payments, limiting the ability to distribute funds outside of China. The company currently lacks formal cash management policies for inter-entity transfers, relying on applicable PRC laws. This regulatory environment introduces a degree of uncertainty regarding cash accessibility for foreign investors. Notably, interest-free loans from RongDe Holdings Limited, an entity wholly-owned by Ms. Peixuan Wang, totaling approximately RMB47.2 million in 2021 and RMB13.7 million in 2022, were waived during 2024, providing a significant non-cash benefit to the company.

Competitive Dynamics in China's Edtech Arena

Jianzhi Education operates in an intensely competitive Chinese digital education market. Its primary direct competitors include established players like TAL Education Group (TAL), New Oriental Education & Technology Group (EDU), and Gaotu Techedu Inc. (GOTU). Jianzhi's market positioning is characterized by its niche focus on providing specialized IT solutions and professional development content to higher education institutions. This specialization offers an advantage in delivering customized technological support and system integration, potentially leading to stronger customer loyalty in its institutional segments.

Compared to TAL Education Group, which has a broader market reach in K-12 tutoring and online courses, Jianzhi's offerings are more tailored to institutional clients. While TAL has demonstrated stronger revenue growth and operational execution, Jianzhi's expertise in bespoke IT solutions could provide a qualitative edge in efficiency and reliability for specific projects. Similarly, against New Oriental Education & Technology Group, known for its extensive network and brand loyalty in test preparation, Jianzhi differentiates through its technology-centric approach to higher education. New Oriental's diversified portfolio likely contributes to more robust financial metrics, including higher profitability and cash flow generation.

Gaotu Techedu Inc., focused on scalable online K-12 and adult learning, emphasizes cost-efficient online delivery and AI-driven personalization. Jianzhi's end-to-end IT support for complex educational infrastructures contrasts with GOTU's agility in user acquisition and rapid innovation. While GOTU may lead in innovation speed and overall financial health, Jianzhi's specialized IT capabilities could offer superior reliability for institutional clients.

Indirect competitors, such as traditional educational publishers and emerging AI-driven learning applications, also pose a threat by offering more accessible or cheaper digital tools. Jianzhi's competitive advantages lie in its proprietary IT systems and strong customer support services, which can translate into enhanced system reliability and recurring revenue from maintenance contracts. These advantages help counter the broader market reach of larger competitors by providing specialized differentiation and potentially improving pricing power within its niche. However, Jianzhi's relatively smaller scale and potential dependence on regulatory approvals represent vulnerabilities that could impact its financial performance and market share.

Outlook and Key Risks

Jianzhi Education's outlook is firmly anchored in its strategic investments in AI Agent technology and its expanding partnerships, particularly with China Mobile. The planned allocation of offering proceeds clearly signals management's conviction in these areas as future growth drivers. The company's decision to retain all available funds and future earnings for business expansion, rather than paying dividends, further emphasizes this growth-oriented strategy.

However, investors must consider several significant risks. The Variable Interest Entity (VIE) structure, which underpins a substantial part of Jianzhi's operations in China, faces "substantial uncertainties regarding the interpretation and application of current and future PRC laws, regulations, and rules". A finding of non-compliance by the PRC government could lead to "severe penalties or be forced to relinquish our interests in the VIEs or forfeit our rights under the contractual arrangements". The PRC government's potential to "disallow the VIE structure completely" remains a material adverse risk.

Furthermore, uncertainties persist regarding the interpretation and implementation of PRC regulations, including the Cybersecurity Review Measures and the Overseas Listing Trial Measures. While Jianzhi believes it is not currently subject to cybersecurity review due to its institutional customer base and limited personal information processing, regulatory changes could impose new requirements. The Holding Foreign Companies Accountable Act (HFCA Act) also presents a regulatory risk, despite the PCAOB's recent access to inspect auditors in China. Finally, the company's dual-class voting structure, which grants Ms. Peixuan Wang significant control (approximately 85.60% of total voting power), limits the ability of other shareholders to influence corporate matters and could deter change-of-control transactions.

Conclusion

Jianzhi Education Technology Group Company Limited stands at a pivotal juncture, strategically committing to AI-driven innovation and robust telecommunications partnerships to solidify its position in China's dynamic digital education landscape. The significant allocation of capital towards AI Agent development and collaboration with industry giants like China Mobile underscores a clear vision for future growth, leveraging its specialized IT solutions and content ecosystem. While the company has demonstrated resilience in addressing Nasdaq compliance and reaffirming its unique market niche, its investment narrative is tempered by a history of net losses and the inherent complexities of its VIE structure within China's evolving regulatory environment.

For discerning investors, Jianzhi represents a compelling, albeit higher-risk, opportunity to participate in the technological transformation of Chinese education. Its ability to translate strategic investments in AI into tangible operational efficiencies and expanded market share, particularly against larger and more diversified competitors, will be paramount. Monitoring the execution of its AI roadmap, the stability of its strategic partnerships, and the evolving regulatory landscape in China will be critical indicators of Jianzhi Education's long-term value creation potential.