McGraw Hill: 3 Key Takeaways for Long-Term Investors
Key PointsFirst-half reoccurring revenue represented 71% of total sales.
McGraw Hill reported its fiscal second-quarter 2027 earnings on November 5, 2026, revealing strong revenue growth and strategic positioning for long-term investors. The company's total first-half revenue reached $1.2 billion, with recurring streams comprising 71% of sales. High customer retention and subscription-based curriculum licenses provide durable revenue visibility.
Philip Moyer, President and CEO, highlighted McGraw Hill's Model Context Protocol (MCP) technology standard, which connects learning content directly to artificial intelligence models while maintaining strict access controls through paid subscriptions.
Bob Sallmann, Executive Vice President and CFO, emphasized the company's strength in automatic digital distribution models like Inclusive Access, contributing to 58% of segment revenue. Sallmann also noted that pricing for their platform has exceeded expectations, benefiting professors and students. The higher education business has demonstrated 41 consecutive quarters of market share growth, even as overall college enrollments declined by about 1%.
In the K-12 segment, early adoption win rates for McGraw Hill's English Language Arts (ELA) program have surpassed internal targets, exceeding 30%, particularly in Pennsylvania and Colorado. These win rates provide a strategic advantage for contract wins in fiscal 2028. McGraw Hill's gross margin remains robust at 79%, supported by high customer retention, multiyear state curriculum adoptions, and debt reduction efforts.
Management emphasizes the durability of their industry-leading margin profile and confidence in continuing margin expansion in the fiscal year and beyond.
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