John Wiley & Sons' Q1 2026 Earnings Call: Contradictions Emerge on AI Partnerships, Margins, AI Allocation, and Publishing Revenue Performance

The above is the analysis of the conflicting points in this earnings call

Date of Call: September 4, 2025

Financials Results

• Revenue: Adjusted revenue up 1% YOY (Q1, seasonally smallest quarter)
• EPS: Adjusted EPS up 2% YOY

Guidance:

• FY26 revenue growth: low to mid-single digits.
• Adjusted EBITDA margin: 25.5%–26.5% (vs 24% last year).
• Adjusted EPS: $3.90–$4.35 (vs $3.64 last year).
• Free cash flow: ~ $200M.
• CapEx: comparable to FY25 ($77M).
• Corporate expenses to decline starting Q2; down for the year.
• Research margins expected to improve for full year as mix/timing normalize.
• AI demand robust; quarterly variability expected; growing subscription inference opportunities.
• Strong journal renewals, accelerating Open Access growth, and ~6+ months publishing backlog support outlook.

Business Commentary:

* AI Licensing Revenue Growth: - Wiley reported $29 million in AI licensing revenue for Q1 2026, an increase from $17 million in the prior year period. - This growth was driven by AI demand from both existing and prospective customers and the inclusion of content from other publishers in licensing projects.

• Research and Open Access Momentum:
• Research submissions increased by 25%, and output grew by 13% year-on-year.

• The growth in research output supports Wiley's recurring revenue models, and Open Access submissions are up, with flagship journal Advanced Science seeing a 50% revenue increase over the prior year.

• Strong Journal Renewal Season:

• Wiley experienced a strong journal renewal season, delivering double-digit Gold Open Access growth.

• The growth in journal renewals was driven by high-quality journal brands and strong output growth globally.

• Corporate Spending and Market Dynamics:

• Wiley noted market headwinds around consumer spending in the retail channel for its Professional Publishing segment.
• The company is watching these trends closely as they may be an early indicator of broader economic slowdowns, affecting consumer demand for Wiley's products.

Sentiment Analysis:

• “We are confidently reaffirming our full year outlook.” “AI licensing demand remains robust from both existing and prospective customers.” “Adjusted revenue grew 1% and adjusted EPS rose 2%.” “We expect corporate expenses to decline starting in Q2… and we expect to finish down for the year.”

Q&A:

• Question from Dan Moore (CJS Securities, Inc.): Please detail the nature and terms of the Anthropic agreement—content provisioning vs. tool collaboration?
  Response: Integration enables Claude institutional users to connect to Wiley’s vectorized, high-quality content to support safe, authoritative research; initial focus is academic workflows.

• Question from Dan Moore (CJS Securities, Inc.): What’s the revenue model for the Anthropic partnership?
  Response: Primarily to reinforce and upsell institutional library subscriptions rather than a standalone revenue driver initially.

• Question from Dan Moore (CJS Securities, Inc.): Will this change AI-related investment levels over the next 1–2 years?
  Response: Projects are comparatively inexpensive; no major new capex; modernizing stack for easy AI access; tool-agnostic approach to integrate with multiple AI platforms.

• Question from Dan Moore (CJS Securities, Inc.): Of the $16M Nexus revenue, how much is Wiley vs. partner content, and what’s the margin impact?
  Response: $16M was partner (Nexus) content within a ~$20M blended deal; Nexus EBITDA margins ~45% vs. ~75% on Wiley-only; additive, not a replacement.

• Question from Dan Moore (CJS Securities, Inc.): Status of journal renewals for calendar 2025/2026?
  Response: Early in the cycle; outlook solid with reaffirmed guidance; no concerns so far for calendar 2026; prior season ended strong.

• Question from Dan Moore (CJS Securities, Inc.): Why did Research Publishing revenue decline 1% despite strong submissions/output, and when does it inflect?
  Response: Seasonality and a $5M prior-year timing benefit skewed Q1; underlying submissions up 25% and output up 13%; expect growth in line with market (3–4%).

• Question from Dan Moore (CJS Securities, Inc.): Discuss Professional Publishing softness and outlook.
  Response: Retail channels were weak industry-wide; monitoring potential consumer slowdown; assessments and courseware trends constructive; AI licensing potential for STEM books remains strong.

• Question from Dan Moore (CJS Securities, Inc.): Are the ~$4M corporate costs nonrecurring?
  Response: Yes; they were onetime strategic consulting projects now completed; corporate expenses should decline from Q2 as savings ramp.

• Question from Dan Moore (CJS Securities, Inc.): Does higher Nexus revenue affect FY26 margin outlook?
  Response: De minimis at the company level; additive to revenue and gross profit; margin expansion plan remains on track.

• Question from Dan Moore (CJS Securities, Inc.): Capital allocation priorities and buyback stance given valuation?
  Response: Maintain disciplined allocation: continue dividend, opportunistic buybacks under expanded $250M authorization, debt reduction, and investment in high-return organic growth.