Strategic Education delivered quarterly revenue that surpassed Wall Street expectations, supported by robust performance in its Education Technology Services division and steady results in U.S. Higher Education. Management pointed to the 15% revenue growth in the technology segment and a focus on employer-affiliated and health care enrollment in the U.S. as key drivers. CEO Karl McDonnell credited the company’s “continued significant strength in our ETS division, increased momentum in U.S. Higher Education and meaningful progress in returning our Australia business to growth.” The quarter also included a one-time operating expense in Australia, but management emphasized that underlying trends in core segments remained positive.
Is now the time to buy STRA? Find out in our full research report (it’s free for active Edge members).
Strategic Education (STRA) Q2 CY2026 Highlights:
- Revenue: $337.3 million vs analyst estimates of $327.5 million (4.9% year-on-year growth, 3% beat)
- Adjusted EPS: $1.76 vs analyst expectations of $1.80 (2.2% miss)
- Adjusted EBITDA: $71.68 million vs analyst estimates of $72.29 million (21.3% margin, 0.8% miss)
- Operating Margin: 15%, in line with the same quarter last year
- Domestic Students: in line with the same quarter last year
- Market Capitalization: $1.84 billion
While we enjoy listening to the management’s commentary, our favorite part of earnings calls is 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 Strategic Education’s Q2 Earnings Call
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Jeffrey Silber (BMO Capital Markets) asked about declining non-healthcare enrollment and potential impacts from search using large language models (LLMs). CEO Karl McDonnell said LLMs have not affected inquiries and that unaffiliated enrollment is not a current marketing focus.
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Silber also questioned the slower growth rate in Sophia Learning amid concerns about AI-enabled academic dishonesty. McDonnell responded that enhancements to academic integrity controls were already underway and that growth remains robust despite the segment’s increasing scale.
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Alexander Paris (Barrington Research) sought clarification on the rise in revenue per student in U.S. Higher Education. CFO Daniel Jackson explained that lower scholarships and more classes per student drove the increase, though these metrics may fluctuate.
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Paris also pressed for details on the $13 million labor charge in Australia and the likelihood of further expense. Jackson stated the charge reflects current legal outcomes, but future costs should be manageable due to planned instructional adjustments.
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Jasper Bibb (Truist Securities) inquired about the mix of student acquisition channels in the U.S., to which McDonnell shared the stable balance between brand-building, paid search, and proprietary channels like Workforce Edge, emphasizing their efficiency.
Catalysts in Upcoming Quarters
Looking ahead, our analysts will watch (1) the ongoing adoption and monetization of Sophia Learning and Workforce Edge, (2) the outcome of the Australian High Court appeal and any changes to faculty cost structure, and (3) the pace of domestic student growth in Australia against continued international headwinds. Execution on margin expansion and employer-affiliated program scaling will also be key indicators of progress.
Strategic Education currently trades at $83.72, up from $81.39 just before the earnings. In the wake of this quarter, is it a buy or sell? The answer lies in our full research report (it’s free).
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