CEO called the results “disappointing”. Maybe to him, but the business was in-line with full year expectations. I actually like what I heard on the call. I explain why.
Great analysis, as always, Ariel. Two thoughts I’d add:
1. There’s a lot of discussion these days about moats in software and curriculum. While AI will undoubtedly commoditize basic curriculum creation, I’d argue that Stride’s moat is much deeper. It’s the entire operating system of curriculum, technology, school supports, and, importantly, access to public school funding. If anything, Stride should benefit significantly from AI-generated curriculum by reducing costs and improving quality.
2. The bigger threat may be ESAs, and I don't see enough discussion about their impact on this sector. Looking at national enrollment trends in online schools across states with and without ESAs, my read is that this is having a much bigger impact than the major providers currently realize. Online charter schools have served several important needs for families, including providing a more flexible learning environment without out-of-pocket costs. As ESAs expand, they introduce more competition for that same need, potentially accelerating the shift from online public schools toward in-person alternatives like microschools.
I’d be curious whether you’ve seen any of the large online school providers acknowledge the impact of publicly funded school choice programs on their business. I suspect this will become an increasingly important part of the story.
Thank you for the thoughtful comment. I agree with you on the ESA front, this is something I'm working on and as such I'll refrain from putting it in the comments section. Let's connect to discuss this further.
Great analysis, as always, Ariel. Two thoughts I’d add:
1. There’s a lot of discussion these days about moats in software and curriculum. While AI will undoubtedly commoditize basic curriculum creation, I’d argue that Stride’s moat is much deeper. It’s the entire operating system of curriculum, technology, school supports, and, importantly, access to public school funding. If anything, Stride should benefit significantly from AI-generated curriculum by reducing costs and improving quality.
2. The bigger threat may be ESAs, and I don't see enough discussion about their impact on this sector. Looking at national enrollment trends in online schools across states with and without ESAs, my read is that this is having a much bigger impact than the major providers currently realize. Online charter schools have served several important needs for families, including providing a more flexible learning environment without out-of-pocket costs. As ESAs expand, they introduce more competition for that same need, potentially accelerating the shift from online public schools toward in-person alternatives like microschools.
I’d be curious whether you’ve seen any of the large online school providers acknowledge the impact of publicly funded school choice programs on their business. I suspect this will become an increasingly important part of the story.
Appreciate you!
Amar
Thank you for the thoughtful comment. I agree with you on the ESA front, this is something I'm working on and as such I'll refrain from putting it in the comments section. Let's connect to discuss this further.