Strategic Education’s third quarter was marked by a negative market reaction, as the company’s non-GAAP profit fell short of Wall Street’s expectations despite revenue coming in line. Management attributed the mixed results to continued strength in its U.S. healthcare and Education Technology Services segments, which were offset by significant challenges in its Australia business. CEO Karl McDonnell described the international enrollment environment as more severe than anticipated, citing tightened government restrictions and a sharp decline in new visa approvals for international students.

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

While we enjoy listening to the management’s commentary, our favorite part of earnings calls is the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.

Our top 5 analyst questions from Strategic Education’s Q3 earnings call

• Jeff Silber (BMO Capital Markets) asked about segment-level revenue and margin outlook for next year. CEO Karl McDonnell said growth is expected in Education Technology Services and U.S. healthcare, but Australia will remain challenged until new investments translate to enrollment gains.
• Alex Paris (Barrington Research) inquired about unaffiliated undergraduate enrollment and whether new AI search platforms are impacting demand. McDonnell noted no material impact from AI search yet and said declines in this segment are moderating, with hopes for stabilization by late next year.
• Paris (Barrington Research) also questioned the outlook for Australia’s regulatory environment. McDonnell acknowledged ongoing visa restrictions and said the company is not building a strategy around potential easing, instead focusing on domestic growth.
• Jasper Bibb (Truist Securities) sought clarity on margin expectations and the trajectory for U.S. Higher Education new student starts. CFO Daniel Jackson indicated some margin compression relative to prior models, while McDonnell expects healthcare-driven enrollment gains to help stabilize growth.
• Bibb (Truist Securities) further asked about the recent slowdown in Sophia Learning subscription growth. McDonnell explained the trend was due to difficult comparisons from a large corporate client, with direct-to-consumer growth remaining steady.

Catalysts in upcoming quarters

In the coming quarters, the StockStory team will be tracking (1) the pace of enrollment growth in U.S. healthcare programs and how quickly new investments translate into student gains, (2) the impact of domestic campus expansions and program launches on Australia segment performance, and (3) the effect of continued investments in Education Technology Services on both subscriber growth and profitability. We will also monitor regulatory developments in Australia and shifts in student acquisition patterns tied to digital channels.

Strategic Education currently trades at $53, down from $74.32 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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