Strategic Education Posts Impressive Quarterly Results, Beating Forecasts

Strategic Education has delivered robust financial performance for the second quarter of 2025, reporting figures that surpassed market expectations. Revenue climbed to $321.5 million, marking a 2.9% year-over-year increase. When adjusted for foreign currency impacts, the growth rate was even stronger at 3.6%. The company’s adjusted earnings per share (EPS) reached $1.52, significantly outpacing the analyst consensus estimate of $1.43. Operating income also saw substantial improvement, rising to $45.8 million. This resulted in an operating margin of 14.2%, a notable expansion from the 13.4% margin reported in the same quarter last year.

A significant driver of this performance was the company’s Education Technology Services (ETS) division, which is undergoing a major transformation. ETS revenue surged by an impressive 49.6% to $36.7 million. This explosive growth was fueled by two primary factors: a nearly 40% jump in subscribers for the Sophia Learning platform and new corporate partnerships secured through its Workforce Edge initiative. The segment’s operating profit soared to $15.0 million, underscoring its increasing contribution to the bottom line.

In contrast, the traditional US Higher Education (USHE) segment experienced a slight headwind. Total student enrollments dipped by 0.8% to 86,339. However, this was partially offset by a record-high proportion of enrollments from employer partners, which reached 31.8%. The Australia/New Zealand (ANZ) division faced more pronounced challenges. Student numbers declined by 3.1%, a decrease largely attributed to recent regulatory changes affecting the international student visa process.

Should investors sell immediately? Or is it worth buying Strategic Education?

• ETS Revenue Growth: +49.6% to $36.7 million
• Sophia Learning Subscribers: Increased by nearly 40%
• USHE Enrollments: -0.8%, but employer partner share hit a record 31.8%
• ANZ Enrollments: -3.1% due to regulatory headwinds
• Adjusted EPS: $1.52, beating the $1.43 estimate

Shareholder Returns and Institutional Sentiment

Despite a cautious stance from some major funds, Strategic Education remained committed to returning capital to its shareholders. The company distributed a quarterly cash dividend of $0.60 per share on September 15, 2025. Furthermore, it aggressively repurchased its own stock, buying back 325,844 shares for $28.0 million during Q2. When combined with first-quarter activity, total buybacks for the first half of 2025 reached 717,146 shares, valued at approximately $60.0 million.

This shareholder-friendly activity unfolds against a mixed backdrop of institutional investment. Several large holders reduced their stakes in the first quarter. AQR Capital Management decreased its position by 15.0%, bringing its total holding to 84,993 shares. Other prominent firms, including Blackrock, Vanguard Group, and Marshfield Associates, also trimmed their investments. Conversely, Burgundy Asset Management and Royal Bank of Canada were among those that increased their holdings in the company.

The question remains whether positive analyst sentiment can counterbalance this institutional hesitation. Truist Financial recently reaffirmed its “Buy” rating on the stock. The consensus 12-month price target among analysts continues to suggest significant potential for appreciation from current trading levels.