Is Wiley's (WLY) Recent Earnings Downturn a Buy Opportunity or a Warning Signal?

The recent earnings performance of John Wiley & Sons (WLY) has sparked debate among investors. While the Learning segment's revenue decline and weak cash flow in Q3 2025 raise concerns, the company's strategic resilience-driven by AI-powered research growth, capital return initiatives, and long-term innovation-suggests a nuanced picture. This analysis evaluates whether the current downturn reflects a temporary setback or a deeper warning, and whether WLY's strategic moves justify a long-term investment case.

Learning Segment Challenges: Cyclical Pressures and Cost Discipline

Wiley's Learning segment reported a 6% year-over-year revenue decline in Q3 2025, driven by softness in academic books and challenging comparisons to a $6 million license renewal in the prior year. Additional headwinds included inventory adjustments at Amazon, reduced consumer spending, and declining computer science enrollments. However, the segment's margin expanded to 35.4%, reflecting disciplined cost control and operational efficiency. Management attributes these challenges to cyclical factors, with expectations of stabilization as retail inventory normalizes in the second half of 2026.

While the Learning segment's struggles are evident, Wiley's broader financial health remains robust. Total adjusted revenue for Q3 2025 rose 1% year-over-year to $404.6 million, supported by the Research segment's 5% growth. Free cash flow, though negative in Q3 (-$8.03 million), is projected to reach $125 million for fiscal 2025, aided by cost rationalization and Research segment momentum. These metrics underscore Wiley's ability to mitigate Learning segment headwinds through cross-segment strength.

AI-Driven Research Growth: A Strategic Catalyst

Wiley's Research segment has emerged as a critical growth engine, fueled by AI licensing and open-access publishing. In Q2 2026, the company executed a $6 million AI content licensing project for large language model (LLM) training, bringing year-to-date AI-related revenue to $35 million. These initiatives are part of a broader strategy to monetize high-quality content in the AI era, with partnerships with Anthropic and AWS enabling recurring corporate subscriptions.

The Research segment's adjusted EBITDA margin improved by 180 basis points to 32.7% in Q3 2025, driven by favorable renewals and operational efficiency. Looking ahead, Wiley's AI gateway platform and expanding corporate AI applications position it to capitalize on the projected global EdTech market by 2030. This shift from traditional publishing to AI-driven content licensing represents a transformative pivot, aligning Wiley with long-term industry trends.

Wiley's commitment to capital returns has strengthened its appeal to long-term investors. In Q2 2026, the company increased share repurchases by 69% to $21 million and allocated $40 million to both repurchases and dividends. A $250 million share repurchase program, coupled with a 32nd consecutive year of dividend increases, underscores management's confidence in free cash flow sustainability. The dividend yield of 3.9% further enhances Wiley's attractiveness in a low-yield environment.

Financial discipline is evident in Wiley's improving net debt-to-EBITDA ratio, which fell to 2.0 in 2026 from 2.2 in 2025. With adjusted EBITDA margins projected to reach 25.5%–26.5% in 2026 and free cash flow expected to hit $200 million, the company appears well-positioned to sustain its capital return programs despite Learning segment volatility.

Long-Term Strategic Resilience: Innovation and Market Expansion

Beyond cost optimization, Wiley is pursuing innovation and market expansion to address Learning segment challenges. The launch of Wiley Focus, a corporate education platform, targets underpenetrated markets such as engineering, healthcare, and life sciences. By offering freely accessible, industry-sponsored content with transparent authorship, Wiley is tapping into the growing demand for professional development and corporate learning solutions.

In the Learning segment, AI-driven tools like zyBooks STEM courseware are enhancing digital offerings, while strategic partnerships aim to integrate AI into educational products. These initiatives align with the EdTech sector's shift toward scalable B2B SaaS models and AI integration. While Learning segment declines are expected to moderate in H2 2026, Wiley's focus on innovation and market diversification signals a proactive approach to long-term resilience.

Conclusion: A Calculated Buy Opportunity

Wiley's earnings downturn reflects cyclical pressures in the Learning segment, but its strategic resilience-rooted in AI-driven research growth, disciplined capital returns, and innovation-justifies a long-term investment case. The company's ability to offset Learning segment declines with Research segment momentum and AI licensing revenue demonstrates operational agility. Moreover, its capital return programs and improving financial metrics reinforce shareholder value.

For investors, the current downturn may represent a buying opportunity rather than a warning signal. Wiley's strategic pivot to AI and corporate education, combined with its track record of margin expansion and dividend growth, positions it to navigate near-term challenges while capitalizing on transformative industry trends. As inventory normalization and AI adoption gain traction, WLY's stock could reward patient investors with both capital appreciation and income.