Stride’s third quarter results were marked by strong revenue growth and a notable expansion in operating margin, yet the market reacted negatively. Management pointed to robust demand for online education and double-digit enrollment increases, but also acknowledged execution challenges around technology platform upgrades. CEO James Rhyu stated, “We made a couple of strategic decisions that we believe will pay dividends over the longer term, but limited our growth in the short term.” Technical implementation issues led to a less positive customer experience, resulting in higher withdrawal rates and lower-than-expected conversion.
Is now the time to buy LRN? Find out in our full research report (it’s free for active Edge members).
Stride (LRN) Q3 CY2025 Highlights:
- Revenue: $620.9 million vs analyst estimates of $616.5 million (12.7% year-on-year growth, 0.7% beat)
- Adjusted EPS: $1.52 vs analyst estimates of $1.26 (20.4% beat)
- Adjusted EBITDA: $108.4 million vs analyst estimates of $94.9 million (17.5% margin, 14.3% beat)
- Revenue Guidance for the full year is $2.52 billion at the midpoint, below analyst estimates of $2.67 billion
- Operating Margin: 11.1%, up from 8.6% in the same quarter last year
- Enrollments: 247,700, up 25,100 year on year
- Market Capitalization: $3.10 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Stride’s Q3 Earnings Call
- Jeffrey Silber (BMO Capital Markets) asked for details on how platform issues and strategic enrollment limits contributed to the 10,000–15,000 shortfall in enrollments. CEO James Rhyu responded that most of the impact stemmed from platform problems, leading to higher withdrawals and lower conversions, but said fixing these is the top priority.
- Jason Tilchen (Canaccord Genuity) pressed for specifics on what went wrong with the tech implementation and whether it affected certain segments more. Rhyu clarified that both front-end (learning) and back-office (administrative) platforms experienced issues, but there was no material difference in impact between programs.
- Gregory Parrish (Morgan Stanley) inquired about whether the limits on in-year enrollment were temporary or represent a structural shift. Rhyu said the constraint is expected to last only as long as platform issues persist, with a return to prior growth patterns possible once fixes are implemented.
- Matthew Filek (William Blair) sought clarification on the timing and extent of platform issues, as well as the roadmap for resolution. Rhyu explained that the most critical fixes should occur in the next few months, but ongoing improvements will continue throughout the year.
- Alexander Paris (Barrington Research) asked about the impact of these challenges on revenue per enrollment and the outlook for funding mix. CFO Donna Blackman noted that while the funding environment remains positive, changes in enrollment and mix will drive some revenue per student variability.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will monitor (1) the pace and success of Stride’s technology platform stabilization and customer experience improvements, (2) the company’s ability to return to positive in-year enrollment growth after platform issues are resolved, and (3) the impact of funding mix and state-level trends on revenue per enrollment. We will also track management’s progress in balancing quality with growth amid intensifying competition.
Stride currently trades at $71.26, down from $153.64 just before the earnings. At this price, is it a buy or sell? See for yourself in our full research report (it’s free for active Edge members).
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