Online education Stride (NYSE: LRN) reported Q3 CY2025 results exceeding the market’s revenue expectations, with sales up 12.7% year on year to $620.9 million. On the other hand, next quarter’s revenue guidance of $630 million was less impressive, coming in 3.4% below analysts’ estimates. Its non-GAAP profit of $1.52 per share was 20.4% above analysts’ consensus estimates.

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Company Overview

Formerly known as K12, Stride (NYSE: LRN) is an education technology company providing education solutions through digital platforms.

Revenue Growth

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years.

With $2.48 billion in revenue over the past 12 months, Stride is a mid-sized business services company, which sometimes brings disadvantages compared to larger competitors benefiting from better economies of scale. On the bright side, it can still flex high growth rates because it’s working from a smaller revenue base.

As you can see below, Stride’s sales grew at an incredible 16.5% compounded annual growth rate over the last five years. This is a great starting point for our analysis because it shows Stride’s demand was higher than many business services companies.

We at StockStory place the most emphasis on long-term growth, but within business services, a half-decade historical view may miss recent innovations or disruptive industry trends. Stride’s annualized revenue growth of 14.4% over the last two years is below its five-year trend, but we still think the results suggest healthy demand.

This quarter, Stride reported year-on-year revenue growth of 12.7%, and its $620.9 million of revenue exceeded Wall Street’s estimates by 0.7%. Company management is currently guiding for a 7.3% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 9.6% over the next 12 months, a deceleration versus the last two years. Despite the slowdown, this projection is healthy and suggests the market sees success for its products and services.

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Operating Margin

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

Stride has done a decent job managing its cost base over the last five years. The company has produced an average operating margin of 11.3%, higher than the broader business services sector.

Analyzing the trend in its profitability, Stride’s operating margin rose by 9.6 percentage points over the last five years, as its sales growth gave it immense operating leverage.

In Q3, Stride generated an operating margin profit margin of 11.1%, up 2.5 percentage points year on year. This increase was a welcome development and shows it was more efficient.

Earnings Per Share

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Stride’s EPS grew at an astounding 46.6% compounded annual growth rate over the last five years, higher than its 16.5% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

Diving into Stride’s quality of earnings can give us a better understanding of its performance. As we mentioned earlier, Stride’s operating margin expanded by 9.6 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its higher earnings; interest expenses and taxes can also affect EPS but don’t tell us as much about a company’s fundamentals.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Stride, its two-year annual EPS growth of 47.6% is similar to its five-year trend, implying strong and stable earnings power.

In Q3, Stride reported adjusted EPS of $1.52, up from $0.94 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Stride’s full-year EPS of $7.86 to grow 16.9%.

Key Takeaways from Stride’s Q3 Results

It was good to see Stride beat analysts’ revenue expectations this quarter. On the other hand, its full-year revenue guidance missed and its revenue guidance for next quarter fell short of Wall Street’s estimates. Overall, this was a weaker quarter, and the outlook is really spooking the market. The stock traded down 35.6% to $98.92 immediately after reporting.

Stride may have had a tough quarter, but does that actually create an opportunity to invest right now? What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here, it’s free for active Edge members.