Stride (NYSE:LRN) walked into its August 4 fourth-quarter fiscal 2026 earnings call with a brand-new face running the company. Robert E. Knowling Jr., a Stride board member since 2018, was named CEO just days before the call, stepping in to lead an online education company that grew revenue 4.7% for the year and served roughly 244,000 students. The timing puts fresh leadership in charge right as the next enrollment season kicks off, and it leaves investors weighing genuinely strong numbers against a stock the market has already priced with real doubt.
Bull Case: The Career Learning Engine Keeps Revving
Fiscal 2026 revenue reached $2.518 billion, up 4.7% from the prior year, while adjusted EBITDA climbed 8.2% to $617.6 million and adjusted EPS came in at $8.33. The standout was career learning, Stride’s middle and high school career-focused programs, where revenue jumped 19% to $1.04 billion as enrollments grew 14% to 110,000 students. That segment is expanding far faster than the company overall, and it is where management is putting its growth story.
Capital returns back that story up. Stride repurchased about $189 million of stock during the year, extended its buyback authorization to October 31, 2027, and still has roughly $311 million left under that program, backed by $1.034 billion in cash and marketable securities. Knowling himself has run companies before, including taking COVAD Communications public, and told investors he intends to actively consider more opportunistic buybacks once Stride’s trading window reopens at the end of October.
Bear Case: The Other Half Of The Business Is Shrinking
General education, Stride’s larger segment by revenue, moved in the opposite direction. Revenue fell 2% to $1.42 billion, and enrollments dropped 2.5% to 134,000 students. Part of that softness showed up in Texas, where the Roscoe Independent School District chose not to renew its contract for Stride’s Lone Star Online Academy, even as the company works to place affected families in its other programs. Profitability also took a hit: gross margin slipped 140 basis points to 37.8% as the company absorbed costs tied to new technology platforms, and free cash flow declined by $17.8 million to $355 million.
Management’s own tone on the year ahead carried caution, too. Because Stride moderated in-year enrollment growth during fiscal 2026, the first quarter of fiscal 2027 will face a tougher comparison, and applications were tracking slightly behind last year’s pace even as conversion rates and re-registration activity improved. Stock compensation and the tax rate are both expected to tick up next year as well.
What The Market Is Pricing In
Hedge fund interest in Stride is building, with the number of funds holding a position rising from 43 to 47 in the most recent quarter. Short interest tells a very different story, sitting at 22.92% of the float, which points to a substantial bear camp already positioned against the stock. Meanwhile, shares trade at a forward P/E of just 9.24 as of August 12, a multiple that assumes little in the way of future growth.
Where This Leaves Stride Investors
Stride enters fiscal 2027 with a career learning segment growing at a rapid clip, a shrinking general education base, and a CEO who has been on the board for years but is brand new to the job. For the growth story to keep winning out, career learning needs to keep offsetting general education’s decline while margins stabilize. For the skeptics to be proven right, the tougher enrollment comparisons and rising costs flagged for next year would need to bite harder than management expects.
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