Executive Summary

Q1 FY26 delivered modest topline growth and margin expansion: revenue $535.7M (+2.4% YoY), gross margin 77.0% (+90 bps YoY), and Adjusted EBITDA $191.4M (+7.2% YoY; 35.7% margin) .
Mix and execution were key: Higher Education grew 14.1% YoY to $182.4M on share gains and digital strength; K-12 declined 1.4% YoY given a predictably smaller market; International fell 11.7% on contract timing .
FY26 guidance (introduced) set Revenue at $1.986–$2.046B and Adjusted EBITDA at $663–$703M; subsequent Q2 raised guidance to $2.031–$2.061B and $702–$722M, respectively, signaling improving visibility .
Street context: FY26 consensus sits at ~$2.05B revenue* and ~$712M EBITDA*, in line with raised guidance; consensus target price ~$20.75 (12 estimates)*. Primary Q1 quarterly EPS/Revenue consensus was unavailable; focus turns to FY guide and share gains as stock catalysts. Values retrieved from S&P Global.

What Went Well and What Went Wrong

What Went Well

Higher Education outperformed: revenue +14.1% YoY to $182.4M on share gains, enrollment tailwinds, and digital momentum; re-occurring revenue +6.8% YoY to $159.6M .
Digital and re-occurring engines: digital revenue rose 7.2% YoY to $325.0M; re-occurring revenue rose 7.1% YoY to $387.6M; Adjusted EBITDA margin expanded >150 bps to 35.7% .
Management tone confident on AI: “Through our deep understanding of learning methodologies, our wealth of data and insights, and our responsible and impactful use of artificial intelligence, we are seeing strong demand for McGraw Hill solutions which personalize the learning experience” — Simon Allen, CEO .

What Went Wrong

K-12 softness as expected: revenue declined 1.4% YoY to $270.9M amid a smaller adoption market; re-occurring growth (+10.1%) partially offset transactional declines .
International decline: revenue down 11.7% YoY to $51.5M, driven by timing of regional contracts and transition to digital; re-occurring revenue down 8.7% YoY .
Seasonal cash burn: operating cash flow used -$96.7M (vs -$2.9M prior year), reflecting working capital seasonality (AR build, deferred revenue) and higher cash taxes .

Financial Results

Consolidated results (YoY)

Metric	Q1 FY2025	Q1 FY2026	YoY Change
Revenue ($M)	$522.95	$535.71	+2.4%
Gross Profit ($M)	$397.66	$412.33	+3.7%
Gross Margin (%)	76.0% (calc)	77.0%	+90 bps
Net Income ($M)	$(9.45)	$0.50	+$9.95
Basic/Diluted EPS ($)	$(0.06)	$0.00	+$0.06
Adjusted EBITDA ($M)	$178.59	$191.42	+7.2%
Adjusted EBITDA Margin (%)	34.2%	35.7%	+150 bps

Note: Gross margin for FY2025 derived from table; management cites 77.0% for Q1 FY26 .

Segment revenue (YoY)

Segment	Q1 FY2025 ($M)	Q1 FY2026 ($M)	YoY Change
K-12	$274.83	$270.93	-1.4%
Higher Education	$159.85	$182.38	+14.1%
Global Professional	$35.29	$35.16	~flat
International	$58.31	$51.46	-11.7%
Total	$522.95	$535.71	+2.4%

KPIs and mix

KPI	Q1 FY2025	Q1 FY2026
Re-occurring Revenue ($M)	$361.80	$387.61
Transactional Revenue ($M)	$161.16	$148.10
Digital Revenue ($M)	$303.23	$325.05
Digital as % of Revenue	58% (calc)	61% (company fact sheet)
RPO ($B), total	$1.676 (as of 3/31/25)	$1.650 (as of 6/30/25)

Estimates vs actuals (Q1 FY26): S&P Global quarterly consensus for Q1 EPS/Revenue was unavailable; no beat/miss assessment for the quarter. Values retrieved from S&P Global.

Guidance Changes

Metric	Period	Previous Guidance (8/14/25)	Current Guidance (11/12/25)	Change
Revenue ($B)	FY2026	$1.986 – $2.046	$2.031 – $2.061	Raised
Re-occurring Revenue ($B)	FY2026	$1.477 – $1.517	$1.504 – $1.524	Raised
Adjusted EBITDA ($M)	FY2026	$663 – $703	$702 – $722	Raised

Earnings Call Themes & Trends

Topic	Previous Mentions (Q-2 and Q-1)	Current Period (Q1 FY26)	Trend
AI & data-driven personalization	Q-2 (FY25 Q3/Q4) not in repository; in Q2 FY26, AI tools at scale (AI Reader 11M interactions; four new AI solutions launched)	CEO emphasized “responsible and impactful use of AI” driving demand; focus on personalization and efficacy . Yahoo transcript referenced rollouts like ALEKS Calculus, MH Plus, and awards (Baker Learning Analytics Prize) .	Strengthening narrative; expanding use cases and engagement .
Higher Education momentum	In Q2 FY26, revenue +14% YoY; market share 30% LTM (+160 bps); IA sales +37%	Q1 noted share gains and Evergreen model traction; re-occurring +6.8% YoY .	Positive; sustained share gains and digital expansion .
K-12 market size headwind	In Q2 FY26, K-12 revenue -11.2% YoY as expected; positioning for FY27 (CA Math, FL ELA)	Q1 K-12 -1.4% YoY; re-occurring +10.1% YoY; favorable capture rates .	Near-term headwind, improving setup into FY27 .
International timing/transition	Q2 FY26: decline narrowed vs Q1; mixed by region	Q1 International -11.7% YoY on contract timing, ongoing digital transition .	Stabilizing after Q1 softness .
Balance sheet/deleveraging	Q2 FY26: $150M term loan prepay and repricing; >$40M annualized cash interest savings	Q1: IPO proceeds strengthened balance sheet for growth investments (CFO) .	Improving leverage/cost of capital .

Note: Prior two quarters to Q1 FY26 (FY25 Q3/Q4) were not available in our document repository; Q2 FY26 is included for directional context where relevant.

Management Commentary

“McGraw Hill delivered strong performance in the fiscal first quarter…Through our…responsible and impactful use of artificial intelligence, we are seeing strong demand for McGraw Hill solutions” — Simon Allen, Chairman, President & CEO .
“Our fiscal first quarter performance…results landing at the upper end of the ranges provided in our registration statement filed in July. The proceeds from our IPO have strengthened our balance sheet…ahead of robust market opportunities in fiscal year 2027 and beyond.” — Bob Sallmann, EVP & CFO .
Q1 call (Yahoo/Quartr): Management highlighted product initiatives (ALEKS Calculus, MH Plus), and reiterated AI differentiation as a moat vs. AI-native entrants .

Q&A Highlights

AI differentiation and moat: Management framed AI as a tailwind built on content IP, proprietary learner data, and pedagogical expertise; focus on efficacy and educator time savings (e.g., AI Reader, MH Plus) .
Product runway and TAM expansion: Early traction with ALEKS Calculus and MH Plus; emphasis on supplemental/intervention markets and institutional solutions beyond core .
K-12 outlook: Smaller FY26 market was anticipated; pipeline and capture positioning into FY27 (CA Math) discussed as medium-term catalyst .

Estimates Context

Q1 FY26 quarterly consensus (EPS, Revenue): unavailable in S&P Global; no quarter-specific beat/miss reported. Values retrieved from S&P Global.
FY26 consensus vs guidance: Revenue ~$2.050B*, EBITDA ~$711.9M* vs initial guide $1.986–$2.046B and $663–$703M, later raised to $2.031–$2.061B and $702–$722M, respectively (now broadly aligned) . Values retrieved from S&P Global.
Target price: ~$20.75 (12 estimates)*, offering an external benchmark for medium-term expectations. Values retrieved from S&P Global.

FY26 Street vs Company

Metric	Street FY26 Consensus*	Company Guidance (8/14/25)	Company Guidance (11/12/25)
Revenue ($B)	2.050*	1.986 – 2.046	2.031 – 2.061
EBITDA ($M)	711.9*	663 – 703	702 – 722
Target Price ($)	20.75 (12 ests)*	—	—

Values retrieved from S&P Global.

Key Takeaways for Investors

Durable mix tailwinds: Re-occurring (+7.1% YoY) and digital (+7.2% YoY) growth are expanding margins and revenue visibility; digital at 61% of revenue underscores structural mix improvement .
Higher Education is the outperformer: +14.1% YoY on share gains and Inclusive Access expansion; continued Evergreen adoption supports retention and pricing realization .
K-12 weakness was expected; 2027 setup matters: Capture rates remain favorable; California Math and other adoptions underpin a return-to-growth narrative in FY27 .
Operating leverage building: Q1 gross margin 77.0% (+90 bps) and Adj. EBITDA margin 35.7% (+150 bps); internal AI tooling (e.g., Scribe) cited as a cost/timing efficiency driver in subsequent commentary .
Liquidity and deleveraging optionality: IPO strengthened the balance sheet; subsequent Q2 actions (repricing, $150M prepay) lowered interest outlays and improved flexibility .
Stock catalysts: Raised FY26 guidance (in Q2) aligns with Street and reflects visibility; sustained HE share gains and AI adoption are narrative enhancers; watch K-12 orderflow and international timing .

Appendix: Additional Data Points and Sources

Full Q1 FY26 8-K and press release, including segment, RPO, and non-GAAP reconciliations .
Q2 FY26 8-K and press release (for updated guidance and trend context) .
Q1 FY26 Investor Fact Sheet (mix KPIs) .
Q1 FY26 earnings call transcript (company site link on events page; Yahoo/Quartr transcript excerpts) .

S&P Global disclaimer: Asterisk-marked values are from S&P Global and presented without tool citations.

McGraw Hill, Inc. (MH)·Q1 2026 Earnings Summary