What TAL Education Group (TAL) Said on Its Q2 Earnings Call

Key Points

• Revenue grew 15% year over year to $995 million in fiscal 2027’s second quarter, driven primarily by double-digit growth and higher enrollment in Peiyou’s offline programs. Management expects overall growth to moderate as TAL scales.
• The Learning Device business faced a double-digit market contraction, intense competition, weaker consumer sentiment and higher chip costs, though user engagement remained strong and TAL does not expect significant full-year losses from the segment.
• Profitability improved operationally: gross margin rose to 59.8% and non-GAAP operating margin doubled to 24.9%, but TAL posted a $36 million non-GAAP net loss due largely to investment fair-value declines and higher tax expense. The company also approved a $55.2 million special dividend.

TAL Education Group NYSE: TAL reported fiscal 2027 second-quarter revenue growth of 15% in U.S. dollar terms, while management said growth moderated as the company expanded in scale and its Learning Device business faced a more difficult market environment.

Net revenue for the quarter reached $995 million, or CNY6.7 billion, up 15% year over year in U.S. dollar terms and 9% in RMB terms. President and Chief Financial Officer Alex Peng said the company expects overall revenue growth to become more moderate going forward, citing both the growing size of the business and diverging conditions among its operating lines.

Offline Programs Support Growth

TAL said its Peiyou offline programs continued to post double-digit year-over-year revenue growth during the quarter, with enrollment growth serving as the largest contributor. Demand for face-to-face learning remained steady, while student retention stayed healthy, according to management.

Jackson Ding, TAL's deputy chief financial officer, said retention in Peiyou enrichment learning classes exceeded 80%. The company emphasized the role of in-person classrooms in enabling students to interact with teachers and peers, ask questions and build confidence.

“Our Peiyou offline programs continue to perform well,” Peng said during the question-and-answer session. “The business delivered double-digit revenue growth in the quarter, supported primarily by enrollment growth.”

The company said it continued to focus on teaching quality, teacher development and consistent service across its learning-center network during the summer period. TAL also described continued development in online enrichment offerings, including science-related courses that combine online learning with hands-on activities.

During the quarter, the company launched its first National Youth Maker Show, an event designed to encourage students to develop ideas inspired by everyday life and turn them into practical projects.

Learning Devices Face Market Pressures

TAL’s Learning Device business weighed on company-wide revenue growth in the quarter as the broader market contracted by double digits year over year, management said. The company cited intense competition, changing consumer sentiment and higher chip costs as factors affecting the industry.

Peng said TAL still views learning devices as strategically important for helping students learn independently at home, but said it is managing the segment with discipline amid current market conditions. The company plans to continue investing in content, technology and product experience while monitoring costs and resource allocation.

“We do not anticipate significant losses from this Learning Device business for the full fiscal year,” Peng said.

Despite industry conditions, TAL said user engagement in the segment remained stable. The average weekly active rate across the learning-device user base was about 80%, while active devices were used for an average of one hour per day during the quarter.

Peng also said growth in TAL’s online enrichment business moderated during the quarter. Overall, he said the company’s learning services operations continue to develop on a healthy foundation, while the Learning Device segment works through industry headwinds.

Margins Improve as Costs Are Managed

TAL reported gross profit of $595 million, up 21% year over year. Gross margin rose to 59.8% from 57.0% in the prior-year period, while cost of revenue increased 8% to $400 million.

Non-GAAP income from operations more than doubled to $248 million from $108 million a year earlier. Non-GAAP operating margin increased to 24.9% from 12.5%.

Non-GAAP selling and marketing expenses declined 16% to $223 million, while non-GAAP general and administrative expenses rose 4% to $124 million.

Ding attributed the margin expansion to operating leverage, more efficient cost management and greater discipline in resource allocation. He said TAL expects its operating margin for fiscal 2027 to improve compared with fiscal 2026, though profitability may fluctuate between quarters due to seasonality, market conditions and investment timing.

“Improving profitability remains a priority for us,” Ding said. “We will continue to invest in our products and services while also driving greater operating efficiency.”

However, the company recorded non-GAAP net loss attributable to TAL of $36 million, compared with non-GAAP net income of $136 million in the prior-year quarter. Other expense was $190 million, compared with other income of $67 million a year earlier, primarily due to declines in the fair value of certain investments. Income tax expense increased to $136 million from $51 million, which management attributed mainly to changes in deferred tax liabilities related to withholding tax.

Cash Dividend and Repurchases

As of Aug. 31, 2026, TAL held about $2.0 billion in cash and cash equivalents, $796 million in short-term investments and $254 million in current and non-current restricted cash. Deferred revenue totaled approximately $930 million. Net cash used in operating activities was $179 million during the quarter.

Between July 29 and Oct. 23, TAL repurchased approximately 64,226 common shares for about $2 million in aggregate.

The board also approved a special cash dividend of $0.30 per common share, or $0.10 per American depositary share, representing an aggregate payment of about $55.2 million. Ding said the dividend complements the company’s ongoing repurchase program and that TAL intends to make shareholder returns a more systematic part of its capital-allocation approach.

Management said future decisions on dividends and repurchases will consider the company’s financial position, business needs, investment opportunities and market conditions.

About TAL Education Group (NYSE:TAL)

TAL Education Group is a Chinese education services provider that offers learning programs, educational content and related services for students. Its offerings have included tutoring and enrichment programs in subjects such as mathematics, science, Chinese and English, along with online learning tools, educational technology and other products designed to support students, parents and teachers.

The company was founded in 2003 as Xueersi and later adopted the name TAL Education Group. It historically operated a network of learning centers and online platforms serving students in China, with a focus on primary and secondary education.

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