Educational publishing and media company Scholastic (NASDAQ: SCHL) missed Wall Street’s revenue expectations in Q2 CY2026, with sales falling 6.3% year on year to $476.1 million. Its non-GAAP profit of $2.19 per share was 1.4% above analysts’ consensus estimates.

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StockStory’s Take

Scholastic’s second quarter results were received negatively by the market, as revenue missed Wall Street expectations and declined compared to last year. Management pointed to a challenging comparison in trade publishing and continued volatility in education funding as key factors. CEO Peter Warwick noted that the strong prior-year performance of The Hunger Games release created an unusually high bar, while education segment revenue fell short of internal hopes due to weaker-than-expected school spending. Despite these headwinds, Book Fairs grew and entertainment revenues improved, helping to partially offset the softness.

Looking forward, Scholastic’s updated guidance reflects both optimism in its core Book Fairs business and caution around education funding and cost pressures. Management stated that growth in Book Fairs, upcoming franchise launches, and efficiency efforts should support margin expansion, but acknowledged that adjusted EBITDA guidance for the year is lower than what analysts anticipated. Warwick emphasized a focus on executing a robust publishing pipeline, leveraging new media tie-ins with franchises like Harry Potter and The Hunger Games, and stabilizing the education segment as critical to achieving the company’s objectives in the coming quarters.

Key Insights from Management’s Remarks

Management attributed the quarter’s underperformance to tough year-over-year comparisons in publishing and continued uncertainty in education budgets, while highlighting operational progress in Book Fairs and entertainment.

• Publishing comparison headwinds: The prior-year release of Sunrise on the Reaping (part of The Hunger Games series) set a high bar for this quarter’s trade publishing results. Management acknowledged this was a predictable challenge that impacted reported revenue.

• Education segment volatility: School and district funding remained unpredictable, affecting demand for supplemental curriculum. CEO Peter Warwick noted that anticipated year-end spending by schools did not materialize, impacting overall segment results despite internal efforts to reposition the business and launch a stronger product portfolio.

• Book Fairs momentum and innovation: Book Fairs posted growth, driven primarily by increased fair counts and modest gains in revenue per fair. Management pointed to higher adoption of digital payment tools like eWallet, improved product mix, and targeted outreach in under-served school communities as contributing factors.

• Entertainment revenue growth: The entertainment division saw higher production revenue, supported by new content contracts and continued franchise development. Warwick highlighted long-term growth visibility for the segment, with multiple greenlit projects and a new Clifford the Big Red Dog series set to premiere, as well as a forthcoming live-action Magic School Bus film.

• Capital structure optimization: Scholastic completed sale-leaseback transactions, generating significant proceeds used to fund share buybacks and a 25% dividend increase. Management stated this strengthened liquidity and set a long-term leverage target, providing flexibility for continued investment and returns to shareholders.

Drivers of Future Performance

Looking ahead, Scholastic’s outlook is shaped by strength in Book Fairs, upcoming franchise launches, and ongoing cost discipline, offset by continued funding uncertainty in the education segment.

• Book Fairs as growth engine: Management expects Book Fairs to drive revenue and margin gains through increased fair count, higher revenue per fair, and new formats such as fairs in Christian schools and sponsored events. Technology adoption, like eWallet, is also seen as an enabler of further growth and operational leverage.

• Major franchise activations: The company is positioning to benefit from high-profile media events, including a new Lionsgate Hunger Games film and an HBO Harry Potter series. Management believes these tie-ins will create retail opportunities and attract new readers, supporting both publishing and cross-segment demand.

• Education stabilization and risks: While management anticipates improved performance in education due to a repositioned product suite and new sales leadership, they caution that school and district funding remains volatile, with improvement expected to be gradual and weighted toward the latter part of the year.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will be watching (1) momentum in Book Fairs participation and revenue per fair, (2) the impact of major media tie-ins on publishing and franchise sales, and (3) signs of stabilization in the education segment as new product initiatives and go-to-market strategies roll out. Execution on cost controls and capital allocation will also be important as management aims to deliver on margin and cash flow targets.

Scholastic currently trades at $44.87, down from $46.51 just before the earnings. At this price, is it a buy or sell? See for yourself in our full research report (it’s free).

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