What Strategic Education (STRA) Said on Its Q3 Earnings Call

Key Points

• Strategic Education expects 2027 revenue to be roughly flat, as Australian international-student restrictions offset growth in technology and U.S. healthcare. It plans about $50 million in growth investments, with productivity savings expected to limit operating-expense growth to 2%.
• Australia’s international enrollment fell 9%, amid sharply slower visa approvals and tighter transfer rules. Domestic new enrollment grew 9%, and the company is expanding programs and campuses without relying on restrictions easing.
• Third-quarter revenue was essentially flat at $320 million, while EPS rose 4% to $1.69. Education Technology Services revenue grew 12%, healthcare enrollment rose 9%, and student retention reached a record 89.2%.

Strategic Education NASDAQ: STRA expects 2027 revenue to be roughly flat as continued restrictions on international students in Australia offset growth in its education technology and U.S. healthcare businesses, executives said on the company’s third-quarter earnings call.

The education provider plans approximately $50 million in growth investments next year, targeting its technology platforms, U.S. healthcare programs and Australian domestic market. Chief Executive Officer Karl McDonnell said productivity savings achieved this year should offset nearly half that spending, limiting the year-over-year increase in operating expenses to 2%.

For the third quarter, revenue was essentially flat at $320 million, while operating income fell 2% to $50 million. Operating margin narrowed by 30 basis points to 15.7%, but earnings per share rose 4% to $1.69, helped by a lower share count following repurchases.

McDonnell said the results he discussed were adjusted and on a constant-currency basis unless otherwise noted. They excluded a $134 million non-cash impairment of goodwill and intangible assets in Australia. Free cash flow for the first nine months of 2026 increased 8% to $137 million.

Australia Pressures Outlook

McDonnell said the Australian international enrollment environment had deteriorated since the first half of the year, making it unlikely that full-year results would fall within the company’s notional outlook.

Australian enrollment declined 9% to approximately 17,100 students, and revenue fell 7% to AUD 64 million. Operating income declined to AUD 10 million from AUD 12.5 million a year earlier, despite a 4% reduction in operating expenses.

McDonnell attributed the enrollment decline entirely to international students. He said new visa approvals had slowed sharply, falling as much as 80% year over year in some months, while a requirement that international students obtain a new visa to change institutions had effectively closed the onshore transfer market.

Domestic new enrollment, by contrast, grew 9% in both the second and third quarters and accounted for nearly 70% of new enrollment in Australia. Strategic Education plans to expand its Adelaide campus, introduce health science programs and open a Perth campus in late 2027.

McDonnell said Australian new student enrollment could grow year over year in the second half of 2027, with total enrollment growth potentially following in early 2028. The company is not building its strategy around an easing of international restrictions, he said.

Technology and Healthcare Drive Growth

Education Technology Services revenue rose 12% to $43 million, and operating income increased 14% to $18 million. Sophia Learning’s average subscriber count grew 22%, while its revenue rose 20% to $21 million.

Workforce Edge ended the quarter with 83 corporate agreements covering approximately 4 million employees. Enrollments through Workforce Edge at Strayer or Capella increased 4% to roughly 4,000 students.

McDonnell said additional technology spending should support higher revenue growth over the company’s current five-year plan, defend Sophia’s market position and help Workforce Edge sign corporate clients. He estimated the segment’s operating margin could decline by 300 to 400 basis points in 2027, with somewhat smaller declines in U.S. Higher Education and Australia.

U.S. Higher Education enrollment fell 1% to approximately 84,700 students, as lower unaffiliated enrollment offset growth among employer-affiliated students. Revenue was essentially flat at $214 million, while operating income fell 4% to $22 million. Student retention reached a record 89.2%.

Healthcare enrollment increased 9% and represented 54% of total U.S. Higher Education enrollment, up from 49% a year earlier. McDonnell said early demand for Capella’s pre-licensure nursing program and Strayer’s radiologic technology program exceeded initial assumptions. The company plans to invest in new programs, clinical faculty and instructional capacity.

McDonnell expects the decline in unaffiliated enrollment to continue moderating through 2027, potentially reaching breakeven or growth by year-end. He said the company had not been able to attribute enrollment changes specifically to the use of large language models in search.

Strategic Education repurchased approximately 347,000 shares for $28.5 million during the quarter and ended the period with $139 million in cash and marketable securities and no debt.

About Strategic Education (NASDAQ:STRA)

Strategic Education, Inc NASDAQ: STRA is an education services company that provides postsecondary programs through Strayer University and Capella University. Its institutions serve working adults and other nontraditional students through online and campus-based learning options.

Strayer University offers undergraduate and graduate degree programs, professional certificates and other career-focused educational programs in areas such as business, information technology, health services and criminal justice.

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