Scholastic Corporation Shares Decline Following Q1 FY2026 Earnings Report
## Scholastic Corporation Reports Q1 FY2026 Financial Results
**Scholastic Corporation (NASDAQ:SCHL)** shares declined over 12% on September 19, 2025, after the company announced its financial results for the first quarter of fiscal year 2026. The publishing giant reported figures that fell short of analyst projections, leading to investor concern.
## First Quarter Financial Performance Details
For **Q1 FY2026**, Scholastic recorded revenue of **$225.6 million**, a 4.9% decrease from **$237.2 million** in the prior year and **$13.3 million** below analyst expectations. The company's loss per share widened to **$2.83** from **$2.21** year-over-year, missing analysts' estimates by **$0.39** per share. The overall net loss increased from **$62.5 million** to **$71.1 million**. Adjusted earnings per share also declined from negative **$2.13** to negative **$2.52**, missing expectations by **$0.11** per share. Operating cash flow significantly worsened, moving from negative **$41.9 million** to negative **$81.8 million**.
Segment performance presented a mixed picture. The **Children's Book Publishing and Distribution** segment saw revenues rise 4% to **$109.4 million**, with **Book Fairs** revenue specifically increasing 18% to **$34.1 million**. The **International** segment also demonstrated growth, with revenues reaching **$59.4 million**, driven by strong performances in Australia, Asia, and the U.K. Conversely, the **Education Solutions** segment experienced a significant revenue drop of 28% to **$40.1 million**, attributed by the company to "increased funding uncertainty for schools and school districts." The **Entertainment** segment also saw a decline, with revenues falling from **$16.6 million** to **$13.6 million**.
## Market Reaction and Underlying Factors
The pronounced decline in **Scholastic's** share price reflects investor reaction to the substantial earnings and revenue miss, coupled with significant downturns in key operating segments. The **Education Solutions** segment's underperformance, historically a growth driver, highlights broader challenges in the educational market, including delayed or reduced purchases of supplemental curriculum materials by schools due to funding volatility. This pressure on bottom-line results, with an operating loss of **($92.2) million** and a net loss of **($71.1) million** for Q1 FY2026, intensified concerns despite management's expressed optimism.
**Scholastic's** financial track record has been volatile, with shares underperforming the broader market. Since August 2021, **SCHL** shares have decreased by **23.7%**, while the **S&P 500** gained **48.2%** over the same period. The company's current valuation indicates an EV/EBITDA ratio of **12.74** and an EV/FCF ratio of **13.27**, against a market capitalization of **$674.07 million**.
## Strategic Responses and Future Outlook
Despite the immediate headwinds, **Scholastic's** management affirmed its **fiscal 2026 guidance**, projecting overall revenue growth of 2% to 4% and Adjusted EBITDA between **$160 million** and **$170 million**. This optimism is partly based on anticipated stronger performance in the second quarter, driven by major trade releases and a back-end loaded **Education Solutions** business. The company is actively pursuing strategic initiatives to address segment challenges.
For **Education Solutions**, a strategic review is underway to adapt to evolving educational landscapes, with a focus on new structured literacy programs and a re-prioritized go-to-market strategy. Cost-saving initiatives are also being implemented. In the **Entertainment** segment, the acquisition of **9 Story Media Group** for approximately **$186 million** in June 2024 is central to leveraging intellectual property across various media platforms and diversifying revenue streams. The company is also exploring sale-leaseback transactions for key real estate assets to enhance liquidity for debt reduction and share repurchases.
Analysts have largely maintained a "Hold" rating on **SCHL**, acknowledging an attractive valuation but emphasizing the high execution risk associated with these strategic shifts. While **Investing.com** noted a stock uptick of 1.62% in regular trading and 4.37% in aftermarket trading following the earnings call, suggesting a perception of undervaluation, **Zacks** currently holds a **"Strong Sell"** rating, indicating potential near-term underperformance. The success of **Scholastic's** recovery hinges on its ability to effectively execute its strategies and reverse declining trends in its challenged segments.
