REVENUEBeat +2.2%
EPSBeat +16.4%
Actuals vs. estimates
| Metric | Actual | Consensus | Surprise |
|---|---|---|---|
| Revenue | $376.7M | $368.5M | ▲ Beat +2.2% |
| EPS(non-GAAP diluted) | $0.21 | $0.18 | ▲ Beat +16.4% |
Highlights & what matters
- Revenue of $376.7 million beat the $368.5 million estimate, and non-GAAP net income per share of $0.21 beat the $0.18 estimate. Reported revenue grew 94%, but it includes Udemy from the May 11, 2026 close and no organic growth rate is disclosed.
- Guidance: fourth-quarter 2026 revenue of $358 million to $366 million and Adjusted EBITDA of $55 million to $59 million; full-year 2026 revenue narrowed to $1.229 billion to $1.237 billion, with an Adjusted EBITDA Margin target of approximately 14%.
- Synergies are arriving early: the full $115 million annual run-rate net synergy target is now due by year-end, within eight months of close versus 24 months, backed by more than $150 million of annualized gross cost savings. Adjusted EBITDA Margin reached 16.3% from 8.0%, and Enterprise gross profit margin 81.3% from 69.6%.
- Capital return is heavy: 18.1 million shares repurchased for $102 million in the quarter, and more than $215 million since May 2026 under a $500 million authorization.
- The one thing that matters: Profitability is the real story, not revenue: the Udemy deal is delivering cost synergies faster than promised and lifted Adjusted EBITDA Margin to 16.3%, but the release offers no sign the combined top line is growing. The fourth-quarter revenue guide sits below the third quarter, Enterprise Customers fell 4% and Enterprise net retention is stuck at 93%.
Key metrics
| Metric | Reported | Prior year | Change |
|---|---|---|---|
| Revenue ($ millions) | 376.7 | 194.2 | 94% |
| Enterprise revenue ($ millions) | 200.9 | 63.9 | 214% |
| Non-GAAP gross profit margin | 63.7% | 55.6% | 810 bps |
| Adjusted EBITDA Margin | 16.3% | 8.0% | 830 bps |
| Free Cash Flow ($ millions) | 4.6 | 26.6 | (83)% |
| Enterprise Customers | 11,897 | 12,338 | (4)% |
Guidance changes
| Item | New guidance | Prior guidance |
|---|---|---|
| Fourth quarter 2026 Revenue | in the range of $358 million to $366 million | — |
| Fourth quarter 2026 Adjusted EBITDA | in the range of $55 million to $59 million | — |
| Full year 2026 Revenue | in the range of $1.229 billion to $1.237 billion | — |
| Full year 2026 Adjusted EBITDA Margin | target of approximately 14% | — |
| Annual run-rate net synergy target | $115 million, achieved by year-end (within eight months of close versus the original 24month timeline) | — |
Quality of earnings
- The adjusted-to-GAAP gap is wide and mostly deal-driven. Non-GAAP net income of $57.1 million compares with a GAAP net loss of $25.6 million; the bridge is $30.8 million of merger, integration and restructuring costs, $25.1 million of acquired-intangible amortization and $22.8 million of stock-based compensation.
- Cash lags the adjusted earnings. Operating cash flow was $15.5 million against $33.9 million a year earlier, and Free Cash Flow of $4.6 million compares with Adjusted EBITDA of $61.5 million; the quarter carried $6.7 million of merger and integration cash payments and $21.0 million of merger-related personnel and severance payments.
- Per-share growth trails earnings growth. Diluted non-GAAP shares rose to 267.5 million from 172.5 million after the Udemy combination, so non-GAAP net income per share grew 110% against 242% for non-GAAP net income, even after 34.6 million shares were repurchased year to date.
Gotchas & watch items
- The growth is bought: revenue of $376.7 million against $194.2 million includes Udemy from May 11, 2026; Consumer transactional and other revenue jumped to $32.8 million from $4.8 million while Degrees revenue fell to $12.4 million from $14.3 million.
- The enterprise base is shrinking: Enterprise Customers fell 4% to 11,897 from 12,338 on a combined basis, with Enterprise Net Retention Rate flat at 93%.
- The fourth-quarter guide steps down: revenue of $358 million to $366 million sits below the $376.7 million just reported, and the release gives no reason.
- Deferred revenue is draining: nine-month cash flow shows a $35.1 million outflow from deferred revenue against a $17.8 million inflow a year earlier.