Stride, Inc. (LRN)·Q3 2025 Earnings Summary

Executive Summary

• Stride delivered another record quarter: revenue $613.4M (+17.8% y/y), diluted EPS $2.02, adjusted operating income $141.7M (+47%), and adjusted EBITDA $168.3M (+39.6%) . Gross margin reached 40.6% (+190 bps y/y), driven by enrollment growth and efficiency efforts .
• Versus consensus: revenue beat ($613.4M vs $590.1M*) while EPS slightly missed ($2.02 vs $2.147*)—management attributed the EPS gap to diluted share count mechanics tied to the convertible note and timing effects . Values retrieved from S&P Global.*
• Guidance raised: FY25 revenue to $2.370–$2.385B (from $2.320–$2.355B) and adjusted operating income to $455–$465M (from $430–$450M); CapEx ($60–$65M) and effective tax rate (24–26%) maintained .
• Strategic catalysts: continued in-year enrollment strength (+21% y/y), robust Career Learning momentum (+33% y/y), efficiency-driven margin expansion, and favorable funding environment into FY26; management highlighted new student socialization initiatives (K12 Zone, geographic pods) and planned adjusted EPS disclosure next quarter .

What Went Well and What Went Wrong

What Went Well

• Record profitability: adjusted operating income $141.7M (+47%) and adjusted EBITDA $168.3M (+39.6%)—both quarterly records .
• Enrollment strength and mix: total average enrollments up 21.1% y/y to 240.2K; Career Learning enrollments up 33.7% to 98.7K; general education enrollments up 14% to 141.5K, supporting revenue growth across segments .
• Confirmed margin trajectory: gross margin 40.6% (+190 bps y/y); management expects ~200 bps improvement for FY25, ahead of long-term targets .
  Quote: “Gross margins were 40.6%, up 190 basis points from last year… we expect to see gross margin improve around 200 basis points for the full year” .

What Went Wrong

• EPS below consensus and share count complexity: diluted EPS $2.02 versus consensus $2.147*; management suggested the gap largely reflects the as-if-converted treatment of convertible notes increasing diluted shares, partially offset by a capped call structure . Values retrieved from S&P Global.*
• Adult Learning softness: adult revenue fell 22.2% y/y to $18.7M in Q3; management indicated the category remains pressured, consistent with prior quarters .
• Revenue per enrollment modestly down: total RPE $2,415 versus $2,420 prior year; management cited state mix effects from in-year enrollments, though they now expect full-year decline to be less than 1% .

Financial Results

Segment revenue trend:

KPIs:

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• Strategic demand backdrop: CEO highlighted favorable macro indicators—parent dissatisfaction with public education and growing interest in full-time online programs; application volumes since Jan 1 are nearly 2x two years ago and 4x four years ago, supporting sustained demand heading into fall .
• Profitability and margins: CFO underscored gross margin expansion and record AOI/adjusted EBITDA; expects ~200 bps FY25 GM improvement, reflecting efficiency efforts .
• Funding mix and exposure: CFO reiterated “well less than 5%” of revenues come from federal sources; early FY26 state budgets look favorable .
• Capital allocation and transparency: CapEx $15.8M in Q3; plan to introduce adjusted EPS metric in future materials to clarify underlying EPS growth dynamics .
• Student experience: CEO outlined enhanced socialization via K12 Zone and in-person geographic pods, driven by high engagement .

Notable quotes:

• “We finished the quarter with enrollment up over 21% from last year… give us confidence to again raise our FY ’25 revenue and adjusted operating income guidance” — CFO .
• “Gross margins were 40.6%, up 190 basis points from last year… we expect… around 200 basis points for the full year” — CFO .
• “Well less than 5% of our overall revenues come from federal sources” — CFO .
• “Application volumes are almost twice what they were two years ago and four times what they were four years ago” — CEO .

Q&A Highlights

• Career Learning marketing funnel: Management continues testing to build a dedicated funnel; progress is incremental and timing uncertain, though the market opportunity remains attractive .
• Socialization initiatives: Strong usage of virtual K12 Zone; pilots for geographic pods enable local meetups, enhancing student experience .
• Marketing spend approach: Focus on testing, optimization, and efficiency; no significant increase in spend anticipated heading into summer .
• Policy/regulatory stance: DOE’s pro-choice posture and state-level empowerment viewed constructively; minimal direct impact from federal shifts at K-12 level .
• Enrollment constraints: Enrollment windows close during Q3, limiting ability to meet demand spikes; phenomenon is longstanding but more acute given higher demand .
• Margin outlook vs investment: GM expansion is at high end of targets; continued reinvestment in tutoring, tools, and teacher support to sustain product quality .
• EPS consensus variance: Analysts’ share count assumptions may have understated dilution; CFO discussed average quarterly stock price effects on diluted shares and capped call offsets .

Estimates Context

Actual vs Wall Street consensus (Q3 2025):

• Revenue: $613.4M vs $590.1M* — bold beat driven by enrollment growth and segment performance in Career Learning middle/high school (+33% y/y) . Values retrieved from S&P Global.*
• EPS (diluted): $2.02 vs $2.147* — bold miss largely due to higher diluted shares from convertible notes; management plans adjusted EPS disclosure next quarter . Values retrieved from S&P Global.*
• EBITDA: $159.7M vs $159.7M* — essentially in line; company also reported adjusted EBITDA of $168.3M . Values retrieved from S&P Global.*

Coverage depth:

• EPS estimates count: 3*; Revenue estimates count: 4* (low coverage can amplify share count assumption variance). Values retrieved from S&P Global.*

Key Takeaways for Investors

• Enrollment momentum is the primary driver: multi-quarter in-year enrollment growth and rising application volumes underpin revenue outperformance and FY25 guidance raise .
• Mix effects manageable: RPE down modestly due to state mix from in-year enrollments, but full-year decline now expected to be <1%, limiting top-line drag .
• Margin expansion durable: gross margin improvements reflect structural efficiency; management still targets investment in product/teacher tools to sustain quality .
• Expect continued guidance credibility: raised FY25 revenue/AOI outlook with clear non-GAAP reconciliations; favorable funding backdrop into FY26 .
• EPS mechanics matter: diluted share count from convertible notes can drive variance vs consensus; watch for adjusted EPS disclosure to improve comparability .
• Adult Learning remains a headwind: category softness persists; focus remains on K-12 core and Career Learning middle/high school strength .
• Near-term trading lens: revenue beat vs EPS miss suggests narrative centered on volume growth and margins; clarity on adjusted EPS next quarter could be a catalyst for estimate recalibration .

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Additional detail and source references:

• Q3 2025 earnings press release and financials (including segment, enrollments, margin and outlook):
• Q3 2025 8-K 2.02 and exhibits (full reconciliation and outlook):
• Q3 2025 earnings call transcript (prepared remarks and Q&A quotes):
• Prior quarters for trend analysis: Q2 2025 release/8-K/transcript ; Q1 2025 release/8-K/transcript .

S&P Global disclaimer: Asterisked estimate values (consensus means and # of estimates) were retrieved from S&P Global.