Educational publishing and media company Scholastic (NASDAQ: SCHL) missed Wall Street’s revenue expectations in Q3 CY2025, with sales falling 4.9% year on year to $225.6 million. Its non-GAAP loss of $2.52 per share was 4.6% below analysts’ consensus estimates.

Is now the time to buy SCHL? Find out in our full research report (it’s free).

StockStory’s Take

Scholastic’s third quarter results were met with a significant negative reaction from the market. Management attributed the underperformance to persistent headwinds in its Education Solutions segment, where delayed and cancelled federal grants weighed on sales. CEO Peter Warwick described the quarter as “reflecting the normal seasonality of our business,” but acknowledged that ongoing funding uncertainty and reduced spending by schools contributed to the revenue decline. The company also highlighted operational improvements and strong performance in its Children’s Book Publishing and Distribution segment, with continued demand for key franchises like Hunger Games and Harry Potter bolstering trade sales.

Looking ahead, Scholastic’s guidance is shaped by anticipated growth in its trade publishing titles and a disciplined approach to cost management. Management believes that a strong pipeline of upcoming releases, including new entries in the Dog Man and I Survived series, will drive performance in the coming quarters. CFO Haji Glover emphasized ongoing efforts to reduce spending and align costs with long-term goals, while also monitoring tariff-related expenses. CEO Peter Warwick stated, “We are affirming our full year guidance and remain confident in our ability to deliver meaningful profit growth,” signaling that the company is focused on leveraging its publishing strengths and operational efficiencies despite a challenging education funding environment.

Key Insights from Management’s Remarks

Management pointed to strong franchise performance in trade publishing, ongoing cost reductions, and early signs of recovery in book fairs, while acknowledging continued pressure in education due to delayed grant funding and state budget impasses.

• Trade publishing resilience: Continued robust demand for global franchises, such as Hunger Games and Harry Potter, supported stable trade sales in the Children’s Book Publishing and Distribution segment, despite broader market softness.

• Book fairs momentum: Early indicators for the fall book fair season are positive, with bookings ahead of last year and higher engagement from hosts, as measured by Scholastic dollar redemptions. Management is optimistic about capturing incremental revenue as the school year progresses.

• Education funding volatility: The Education Solutions business faced lower sales due to delayed and cancelled federal grants and several state budget impasses, prompting a refocus on core offerings and cost discipline to weather near-term uncertainty.

• Entertainment digital strategy: The integration of 9 Story Media Group and a shift toward digital-first content, including YouTube and the launch of a Scholastic-branded streaming app, are expected to grow high-margin revenue streams and extend brand reach, though significant financial impact is projected over the longer term.

• Cost structure optimization: The company executed $15–$20 million in cost reductions, primarily through lower employee and consulting expenses, and continues to seek efficiencies to support profitability across all business units.

Drivers of Future Performance

Scholastic’s outlook is anchored by new trade publishing releases, cost-saving measures, and careful management of external risks, including tariffs and education funding volatility.

• Major trade releases: Management expects upcoming titles in the Dog Man, I Survived, and Harry Potter series to drive higher sales, particularly in the second quarter, with strong preorders indicating robust demand from both schools and retailers.

• Book fairs and club integration: The consolidation of book fairs and clubs into a unified Children’s Book group is designed to streamline operations, improve inventory management, and enable cross-channel marketing, with the aim of increasing both revenue per fair and customer engagement.

• External risk monitoring: Ongoing volatility in federal and state education funding remains a headwind for the Education Solutions segment, and management is monitoring approximately $10 million in incremental tariff expenses, with a focus on adapting the cost structure to offset potential pressures.

Catalysts in Upcoming Quarters

In the coming quarters, our analyst team will watch for (1) the sales performance of new trade publishing titles and the impact of fall book fairs, (2) stabilization or improvement in Education Solutions as federal and state funding conditions evolve, and (3) measurable progress in monetizing digital and entertainment content. The pace of cost reductions and operational integration will also be key signposts for future profitability.

Scholastic currently trades at $24.38, down from $27.65 just before the earnings. In the wake of this quarter, is it a buy or sell? See for yourself in our full research report (it’s free).

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