LRN · 10-Q · 2026Q1 · Full report

Gross Margin Drivers

Stride, Inc. · 2026-04-29 · Importance 54 · Surprise 40

Instructional costs and services increased to $1,148.7 million for the nine months ended March 31, 2026, a $102.0 million increase, or 9.7%, year-over-year, driven primarily by hiring in growth states and salary increases. These higher instructional costs increased the instructional cost ratio to 61.0% of revenues from 59.8% in the prior year, exerting pressure on gross margins (gross margin was 39.0% for the nine months versus 40.2% prior year). The increase in instructional expense was partially offset by a lease termination gain related to the company's San Francisco lease. Given the scale of instructional spend and its sensitivity to enrollment and client mix, instructional cost trends are a primary driver of near-term gross margin variability.

Key facts

• Gross margin for the three months ended March 31, 2026 was $231.565 million, or 36.8% of revenues, compared to $249.290 million, or 40.6% of revenues, for the three months ended March 31, 2025.
• Gross margin for the nine months ended March 31, 2026 was $733.318 million, or 39.0% of revenues, compared to $705.000 million, or 40.2% of revenues, for the nine months ended March 31, 2025.