Research and AI Propel Wiley's Margins and Cash Flow as Learning Faces Headwinds

Research Segment Delivers Robust Growth and Expanding Margins

Wiley's second quarter closed with a clear message: the company's Research segment is driving both growth and profitability. Q2 Research revenue climbed 6% year-over-year to $279 million, powered by a 7% jump in Research Publishing (which includes $5 million from AI-related revenues). Strong global demand fueled a 28% increase in article submissions and a 12% increase in article output, while author-funded open access saw double-digit growth.

Crucially, the segment's adjusted EBITDA margin reached 33.5%, a significant improvement from last year's 31.3%. These gains reflect Wiley's success in expanding both traditional recurring revenue and newer, high-value models tied to AI and open access publishing.

AI Licensing Bolsters Earnings and Operational Momentum

Wiley's partnership with AI model developers added meaningful revenue, with $6 million from a content licensing project in the quarter and $35 million realized year-to-date. The company sees AI as a central lever, turning proprietary research into new high-margin streams. These initiatives helped Q2 adjusted operating income rise 14% to $79 million and drove an adjusted EBITDA margin of 27.3%, up from 24.9% last year.

Learning Declines Weigh on Total Revenue But Expected to Stabilize

The Learning segment posted an 11% year-over-year drop in revenue, coming in at $143 million. Market pressures were felt particularly in professional titles (down 16%) and academic sales (down 8%), as digital gains could not offset print declines. Inventory corrections and softer end-user demand contributed, but management expects these headwinds to moderate as the year progresses.

Cash Flow, Share Repurchases, and Debt Position Show Marked Improvement

Wiley continues to prioritize operational efficiency, as corporate expenses on an adjusted EBITDA basis fell 18% year-over-year. Year-to-date, operating and free cash flow improved by 19% and 17%, respectively. The company's net debt-to-EBITDA ratio also declined to 2.0, supported by the deployment of $120 million in divestiture proceeds for debt reduction.

Returns to shareholders are also on the rise, with $40 million allocated this quarter to repurchases ($21 million) and dividends ($19 million), marking a 26% increase over last year. Notably, the company raised its dividend for the 32nd consecutive year, underscoring confidence in sustainable cash generation.

Fiscal 2026 Outlook Points to Margin Expansion and Strength in Research & AI

Wiley reaffirmed its outlook for the year, highlighting a narrowed revenue range due to ongoing softness in Learning. However, the company projects adjusted EBITDA margin of 25.5%–26.5% and adjusted EPS of $3.90–$4.35, with free cash flow targeted at around $200 million. The persistent strength in Research and accelerating AI initiatives are expected to underpin these results, while the Learning segment’s headwinds are seen as temporary.

Key Takeaway: Research and AI Provide Growth Engines, Shareholder Focus Remains Strong

For investors tracking WLY, the main takeaway is clear: the company’s ongoing pivot to research-led recurring revenues and AI-enabled growth is delivering on both margins and cash generation. Learning remains a drag for now, but efficiency initiatives, strong Research results, and capital return strategies help offset the volatility. Wiley's ability to invest in transformative platforms while maintaining disciplined cost controls will be key as fiscal 2026 unfolds.

With Q2 results supporting higher margins, stronger cash flows, and ongoing shareholder returns, the next phase for WLY will be whether its bets on AI and global research demand can sustain outperformance even as traditional segments normalize. For those interested, today's earnings webcast offers deeper insights and a forward-looking perspective from management.

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