Skillsoft's Strategic Pivot: Separating the Underperforming GK Segment to Unlock TDS Growth

Skillsoft's decision to reposition its business by distancing from the underperforming Global Knowledge (GK) segment marks a pivotal shift in its strategic trajectory. This move, driven by declining revenue and negative EBITDA from GK, aims to refocus the company on its high-growth Talent Development Solutions (TDS) segment. By shedding the drag of a struggling unit and reallocating resources to AI-driven innovation, Skillsoft is positioning itself to capitalize on evolving corporate learning trends while unlocking margin expansion opportunities.

A Tale of Two Segments: Decline of GK and Resilience of TDS

The divergence in performance between Skillsoft's two core segments has become starkly apparent in recent quarters. For Q3 2026, the GK segment reported a 18% year-over-year revenue decline to $28 million, while TDS revenue held steady at $101 million, reflecting a 2% decrease from the prior year. Earlier in 2026, during Q1, TDS demonstrated resilience with a 1% year-over-year revenue increase to $99.1 million, contrasting sharply with GK's 15.7% drop to $25.1 million according to data.

This underperformance has been a significant drag on Skillsoft's overall financial health. According to a report by Skillsoft's investor relations team, the GK segment accounted for 73% of the company's total revenue decline in Q3 2026, contributing to negative EBITDA and worsening cash flow metrics. Meanwhile, the TDS segment has remained a core growth driver, with adjusted EBITDA projected to reach $112 million to $116 million for FY26-a 28% margin-thanks to strategic investments in AI-powered solutions like the Skillsoft Percipio Platform.

Margin Expansion and Strategic Reallocation

The financial strain from GK has necessitated a strategic pivot. Historical EBITDA margin trends underscore the imbalance: TDS's adjusted EBITDA margin improved from 15% in 2020 to 22% in Q2 2026, while GK's margins have deteriorated amid declining revenue and rising operational costs. By exploring partnerships or divesting GK, Skillsoft aims to eliminate this drag and redirect capital to high-impact initiatives.

Data from Skillsoft's Q2 2026 earnings call highlights the potential benefits of this separation. The company emphasized that exiting the GK segment would allow it to focus on "platform-centric offerings" and AI-driven content creation, which have already reduced costs and boosted productivity in TDS. Management anticipates that this reallocation will accelerate margin expansion, with TDS's operating expenses expected to trend lower as AI tools streamline content delivery and customer engagement according to market analysis.

### Strategic Rationale and Market Implications
Skillsoft's pivot aligns with broader industry trends. As enterprises increasingly prioritize AI-enhanced upskilling, the TDS segment's focus on scalable, data-driven learning solutions positions it to capture market share. The company's full-year FY26 guidance-GAAP revenue of $510 million to $530 million and adjusted EBITDA of $112 million to $118 million-reflects confidence in this strategy. Analysts note that separating GK could also improve Skillsoft's valuation metrics by isolating the high-margin TDS business from the liabilities of a struggling unit.

However, risks remain. The TDS segment's flat revenue in Q2 2026 ($101 million) suggests that even the core business faces headwinds, particularly in a macroeconomic environment marked by cautious corporate spending according to market reports. Success will depend on Skillsoft's ability to scale AI-driven offerings without compromising customer retention and to execute the GK divestiture without disrupting cross-selling synergies.

Conclusion

Skillsoft's strategic pivot to separate the underperforming GK segment represents a calculated bet on long-term profitability. By refocusing on TDS and leveraging AI to drive efficiency, the company is addressing structural weaknesses while aligning with market demands for adaptive learning solutions. While challenges persist, the potential for margin expansion and revenue growth in TDS makes this repositioning a compelling case study in strategic business transformation.