"Business Models Are Diverging": What's Happening to EdTech Companies' Stock Prices

In late August and early September, tens of millions of schoolchildren and college students around the world return to school. For EdTech companies, this time of year is a significant seasonal factor: user activity and student enrollment depend on the academic calendar, and the number of platform users has historically grown in the third quarter. However, the market capitalization of publicly traded EdTech companies has fallen by nearly a third over the past year and by a quarter over the past two years, reaching $126 billion by early August 2026. What’s happening with EdTech stocks, and which companies make sense to invest in?

The combined market value of publicly traded EdTech companies is $142 billion—roughly ten times Paris’s annual budget. However, the market capitalization of publicly traded EdTech companies has fallen by 31% over the past year and by 25% over the past two years, reaching $126 billion by early August 2026, according to data from the analytics platform Multiples.vc.

The index of publicly traded EdTech companies it tracks has declined by 4.5% over the past three years, while the S&P 500 has risen by approximately 67% and the Nasdaq by approximately 81%. The index tracks 79 publicly traded companies worldwide and is calculated based on market capitalization: a single company’s weight is capped at 24%, and the combined weight of companies each accounting for more than 4.5% of the index cannot exceed 48%. Over the past year, the index has lost 22.5%, and since the beginning of 2026, it has declined by 7.3%.

When looking at individual companies, the picture is more varied: slightly more than half of EdTech companies reported losses over the past year, about 28% reported profits, and Multiples does not have data for the rest.

Online education is being disrupted by AI, says Olek Skwarczek, founder of the Multiples platform, in a comment to Oninvest. The expert clarifies that many platforms face existential threat i.e. people use ChatGPT to learn vs. paying for a separate platform like Duolingo. Markets price future, so valuations have gone down massively.

Business models based on expensive marketing, large sales departments, and the sale of relatively standard content are under the most pressure, notes Dmitry Gavdur, founder of the AI project AiVensis.com and former CEO of Lerna CIS.

The first reason is the end of zero interest-rate policy (ZIRP) era, when investors were ready to pay high prices for user and revenue growth, counting on the rapid scaling of digital education, claims Olek Skwarczek.

The second reason, he adds, is a weak business model for acquiring and retaining customers. Investors today still look at the same things - retention, top line growth, user base behavior etc. But because AI is so disruptive to this industry, bar is much higher, many of EduTech companies simply do not have moat anymore.

Venture capitalist Pavel Myasnikov cites another reason for the decline in the appeal of EdTech companies: the market itself is already saturated with players and services. “Because of this, companies are no longer able to raise capital,” he explains, adding that if a company’s valuation has already started to fall, it will most likely continue to decline.

According to Myasnikov, the EdTech market essentially consists of two types of companies. The first are those that sell access to content or the educational process. The second are companies that possess know-how that is more difficult to replicate—for example, infrastructure.

"Essentially, the main question has shifted from 'How fast can you grow?' to 'Can you grow profitably without constantly raising new capital?'" Dmitry Gavdur concludes.

The experts with whom Oninvest discussed the EdTech market agree: the companies most attractive to investors are those that effectively attract and retain users, grow revenue, maintain high profit margins, and consistently generate positive cash flow.

At the same time, it’s important to be aware of signs that a now-cheaper EdTech company has fallen into a “value trap.” According to Gavdur, there are four such signs: the company is losing not just revenue, but the relevance of its product. If the cost of acquiring a customer is rising while customer retention is falling, organic demand is shrinking, and more and more marketing is needed to maintain sales—this is already a structural problem.

The second is a negative cash flow in the absence of a clear strategy for achieving profitability. The third signal is when management responds to technological changes by cutting costs but does not change the product itself.

"The latter is the value of the product that, in two or three years, users will be able to obtain directly from AI at virtually no cost," the expert concludes.

Based on these criteria, we can identify five potentially interesting companies.

1. Duolingo —a language-learning app—ranks fourth in market capitalization at $6.9 billion.

The company's stock has fallen 55% over the past year, but experts rate its brand as strong, praising its game mechanics, loyal audience, and strong organic engagement. Olek Skvarczek believes that Duolingo can withstand the pressure from AI precisely because the app is “more like a mobile game than an educational product,” and AI enhances conversational features and scales up learning.

As of the second quarter of 2026, the platform had an average of 140.6 million monthly active users, compared to 128.3 million a year earlier—a 10% increase. At the same time, engagement grew much faster: 58.7 million users logged into Duolingo daily, compared to 47.7 million a year earlier. In other words, the daily audience grew by 23% over the course of the year.

The stock is currently trading at about $140.88 per share—a decline of approximately 19.7% since the beginning of the year.

2. TAL Education is a Chinese company with the fifth-largest market capitalization—$6.4 billion. It is trading at approximately 1x forward revenue, with projected growth of 21%. Over the past year, its stock has risen 8%.

For the 2026 fiscal year, which ended in April, the company's revenue rose 33.7% to $3.01 billion, and operating cash flow totaled $601.5 million.

The company offers schoolchildren extracurricular activities, online and in-person courses, as well as digital learning tools. The company reported in late February that it had 602 learning centers in 45 cities, compared to 526 centers in 40 cities a year earlier—its physical educational infrastructure grew by approximately 14%. The use of digital products grew even faster—2 million learning devices were active weekly, an 82% increase from the previous year.

The stock is currently trading at about $11.69 per share—an increase of approximately 6.3% since the beginning of the year.

3. John Wiley & Sons ranks 12th in terms of market capitalization ($2.7 billion); unlike the previous companies, it is not a mass-market consumer service like Duolingo, so the company does not disclose its comparable monthly audience.

In fiscal year 2026, the company's revenue changed by only 1% and totaled $1.68 billion. The company's strength lies in the fact that about half of its revenue comes from recurring revenue streams, including subscriptions and long-term contracts.

At the same time, operating income rose 25% over the year to $277 million, and earnings per share (EPS) came in at $4.16, compared with $1.53.

The stock is currently trading at $53.11 per share—nearly double its price at the start of the year.

4. Coursera. Ranked 17th in market capitalization at $1.6 billion. In the second quarter, the company reported a net profit of $40.4 million. Revenue rose 77% to $185 million.

Following its merger with Udemy in the second quarter, the company had 1.65 million paying subscribers—a 44% increase from a year earlier.

The stock is currently trading at about $6.06 per share—a decline of approximately 18% since the beginning of the year.

5. Afya ranks 19th in terms of market capitalization, with $1.3 billion. It is a medical education ecosystem based in Brazil that supports individuals from the moment they are admitted to medical school through residency training, postgraduate education, and their careers as physicians. In addition to education, the company sells digital products for practicing physicians.

Net income for the first half of the year was 463.1 million reais, the adjusted operating margin was 46.2%, and the company converted 87.8% of its adjusted EBITDA into free cash flow.

In the first half of 2026, the company had 26,000 students enrolled in medical programs, 212,000 monthly active users, and approximately 295,000 users across its entire ecosystem.

The stock is currently trading at about $14.43 per share—a decline of approximately 6.4% since the beginning of the year.

This does not constitute a personalized investment recommendation.