Skillsoft Q2 FY2026 slides: AI learning surges amid revenue headwinds

Skillsoft Corp (SKIL) reported mixed Q2 FY2026 results, with revenue declining 3% year-over-year to $128.8 million, primarily driven by a 10% drop in its Global Knowledge segment, while its larger Talent Development Solutions segment remained nearly flat. Despite the top-line decline, the company maintained profitability with flat Adjusted EBITDA of $28.3 million, achieving a 22% margin, and reduced operating expenses by 3%. Strategic highlights included significant growth in AI-related learning engagement, with a 158% increase in AI learning hours, and new partnerships, as Skillsoft executes a transformation plan focused on returning to growth and generating positive free cash flow for FY2026, despite revising its full-year revenue guidance downwards.

Analysis

Skillsoft Corp. (SKIL) presents a mixed Q2 FY2026 financial profile, characterized by near-term revenue pressure offset by operational discipline and promising strategic developments. Total revenue declined 3% year-over-year to $128.8 million, a weakness concentrated in its Global Knowledge segment which fell 10%, while the core Talent Development Solutions segment, accounting for 79% of revenue, remained nearly flat with a less than 1% decline. Despite the top-line contraction, the company demonstrated effective cost management, reducing adjusted operating expenses by 3% and holding Adjusted EBITDA steady at $28.3 million, which expanded the Adjusted EBITDA margin by 60 basis points to 22%. A key strength is the high customer loyalty indicated by an approximate 99% Last Twelve Months Dollar Retention Rate. The most significant forward-looking indicator is the explosive growth in its AI-related offerings, with AI learning hours surging 158% year-over-year. This, combined with new go-to-market partnerships with AWS and Salesforce, underpins the company's transformation strategy. Management's decision to revise full-year revenue guidance downward reflects ongoing macroeconomic challenges, but their commitment to maintaining adjusted EBITDA and positive free cash flow targets signals confidence in their ability to manage profitability through this period.

Key Decisions for Investors

• Investors should assess Skillsoft as a transformation story, weighing the current top-line pressure, evidenced by a 3% revenue decline and lowered guidance, against its successful cost controls and significant long-term growth potential in AI, where learning hours grew 158%.
• Monitor the performance of the struggling Global Knowledge segment for signs of stabilization, while also tracking the company's ability to meet its maintained full-year adjusted EBITDA and positive free cash flow targets as key validation points for its operational turnaround.
• The high 99% dollar retention rate provides a strong base of recurring revenue, suggesting investors could view the current revenue weakness as transient, with new partnerships with AWS and Salesforce acting as potential medium-term catalysts for a return to growth.