Stride’s Tumble: When a $2 Billion Education Giant Trips on Its Own Homework
How does a company post record-breaking revenues and a 58% earnings per share surge—then watch its stock plummet nearly 60% in half a year? Stride, Inc. (NYSE: LRN), the Goliath of online K-12 education, has rewritten the script on market whiplash. The lesson: not all growth is created equal.
Growth That Glitters—But Doesn’t Shine
By the numbers, Stride’s report card should be the envy of any EdTech rival. Fiscal 2025 revenue soared to $2.41 billion, a 17.9% year-over-year leap. Net income rocketed 41% to $287.9 million, and adjusted EPS shot up 47.5%. Gross profit margin? An elite 39.2%. Free cash flow to sales? A robust 14.6%. These aren’t the figures of a laggard—they’re the marks of a sector leader riding a digital learning boom.
Yet, from May to November 2025, Stride shares spiraled downwards—crashing 58.9% in six months, and 60.5% over three months. On November 20, the stock stands battered, trailing the S&P 500 and peers in spectacular fashion. What gives?
The Schoolyard Scandal: When Enrollment Becomes a Liability
Stride’s stumble wasn’t just a misstep—it was a faceplant on the main stage. In late October, the company revealed a disappointing outlook for fiscal 2026: projected revenue growth of just 5%, a steep drop from its historic 19% annual average. But guidance alone doesn’t trigger a 51% single-day collapse.
The real catalyst: allegations that Stride inflated enrollment figures and mishandled compliance—echoes of its K12 Inc. past. A class-action lawsuit followed, with claims that the company misled investors and regulators, particularly regarding COVID-19 relief funds and student welfare. The lawsuit, paired with an estimated 10,000–15,000 lost enrollments after a botched platform upgrade, struck at the core of Stride’s credibility and future growth engine.
Wall Street’s Red Pen: A Swift Regrade
Before the scandals, Stride enjoyed bullish analyst targets—averaging $129.25 per share. Since October, those targets have been ruthlessly slashed: BMO Capital cut its price target from $164 to $108 and shifted to a “Market Perform” rating. Canaccord, while still optimistic, notes the “disappointing” 2026 sales outlook and operational headaches.
Short interest has ballooned to 12.6% of float, with 5.37 million shares betting on further decline. The market, once charmed by Stride’s growth, now questions if those numbers were ever sustainable—or even real.
Rally in the Schoolyard: Competitors and the Macro Report Card
The K-12 online education market is itself in flux, projected to grow at a robust 10–16% CAGR through 2035. Yet, Stride’s leadership is now under siege from both old-school rivals—like Connections Academy—and fast-growing disruptors leveraging AI-powered learning. Meanwhile, the pivot to career learning (up 34.6%) couldn’t offset a 19.4% slump in adult learning, leaving the company exposed to sectoral currents and shifting government funding priorities.
Legal clouds and compliance questions have put Stride’s lucrative contracts at risk, at a time when major states and districts are re-evaluating digital education partners. The company’s $500 million buyback plan and bulging $1 billion cash pile offer some defense, but cannot erase the operational missteps or reputational bruises.
When the Bell Rings: Lessons From the Fall
Stride’s saga is a cautionary tale for investors: spectacular growth can be a mirage if built on shaky foundations. A company can boast best-in-class margins and dazzling revenue—yet one scandal, one compliance breach, can undo years of trust and market value in a matter of days. For Stride, the homework isn’t just about fixing technology or boosting enrollments—it’s about restoring confidence in a sector where credibility is everything. Until then, the market remains on detention.