Educational publishing and media company Scholastic (NASDAQ: SCHL) missed Wall Street’s revenue expectations in calendar Q3 2026 (fiscal Q1 2027), with sales falling 3.9% year on year to $216.8 million. Its non-GAAP loss of $3.63 per share was 6.1% below analysts’ consensus estimates.

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

StockStory’s Take

Scholastic’s third quarter results fell short of Wall Street’s expectations, prompting a negative market reaction. Management attributed the underperformance to the seasonality of its business, with schools out of session and sales particularly light in its Children’s Books and Education divisions. CEO Peter Warwick emphasized that this period typically contributes a small portion of annual revenue, while noting that the quarter also reflected the full impact of sale-leaseback transactions completed last year. Additionally, lower revenues in Education and Children’s Books were only partially offset by growth in the Entertainment segment.

Looking ahead, management’s guidance is shaped by expectations for stronger performance in the coming quarters, driven by a robust fall publishing slate and key franchise activity. Warwick highlighted the upcoming launches tied to Harry Potter, Dog Man, and The Hunger Games, as well as anticipated growth in Book Fairs and Entertainment. CFO Haji Glover reaffirmed full-year guidance, pointing to improved cost structures in Education and operational leverage in Book Fairs and Entertainment, but also acknowledged that international profitability may be pressured by higher fuel and freight costs.

Key Insights from Management’s Remarks

Management identified seasonal headwinds and lower education sales as key factors behind the shortfall, while highlighting early momentum in Book Fairs and strong franchise activity as positive drivers for the fall.

• Book Fairs momentum: Early bookings and fair count are ahead of last year, with strong traction in Christian schools and expanded formats helping to grow Scholastic’s total addressable market. Management sees Book Fairs as a core driver of sustainable and profitable growth, citing the segment’s unique scale and operational leverage.

• Franchise publishing pipeline: The fall slate features significant activity from household franchises including Harry Potter, Dog Man, and The Hunger Games. The “Read It Before You See It” campaign and tie-ins with upcoming film and TV releases are expected to boost engagement and book sales, with additional milestone events planned for the coming years.

• Entertainment segment growth: The business saw a notable increase in production activity and revenue, driven by contracted projects and expanding digital engagement, particularly with Clifford the Big Red Dog. Management expects this momentum to continue as new shows and content pipelines develop.

• Education segment restructuring: In response to continued market pressure and reduced school and district spending, Scholastic is streamlining products and operations. Management is focused on diversifying the customer base, improving commercial execution, and aligning costs with current conditions to position the segment for future stability.

• International opportunity and challenges: Global franchise activity, such as renewed interest in Hunger Games and Dog Man, is supporting international growth. However, profitability is expected to be tempered by inflation and higher logistics costs in certain markets, particularly due to increased fuel expenses.

Drivers of Future Performance

Management expects full-year performance to be driven by key franchise launches, operational improvements, and continued investment in growth initiatives, while remaining cautious about cost pressures in international markets and education.

• Franchise-driven revenue growth: Anticipated major releases tied to Harry Potter, Dog Man, and The Hunger Games are expected to drive sales in the next two quarters, especially through tie-in campaigns and coordinated publishing efforts. Management believes this activity will support improved trade and international segment performance.

• Book Fairs and operational leverage: The company is counting on a higher number of fairs and increased revenue per fair in the fall, supported by expanded formats and new school participation. Management expects the operating leverage in this business to contribute to overall profitability improvements.

• Education and international cost headwinds: While restructuring in Education aims to boost commercial execution, management remains cautious about persistent spending constraints in U.S. schools and international margin pressures from higher fuel and freight costs. These factors could moderate overall margin expansion.

Catalysts in Upcoming Quarters

Looking ahead, the StockStory team will be monitoring (1) the execution and sales impact of major franchise launches in Trade Publishing, (2) the trajectory of Book Fairs’ expansion into new formats and school segments, and (3) progress on restructuring and commercial effectiveness in the Education segment. Continued margin performance in international markets, particularly in the face of rising fuel costs, will also be a critical signpost for near-term profitability.

Scholastic currently trades at $33.24, down from $34.83 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).

Now Could Be The Perfect Time To Invest In These Stocks

WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don’t just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.

But our AI platform says the party isn’t over. Find out which 9 stocks made the cut this week — FREE. Get Our Top 9 Market-Beating Stocks for Free HERE.

Stocks that have made our list include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+214% between June 2020 and June 2025). Find your next big winner with StockStory today.