How Skillsoft Maintained Margins Through Prudent Cost Management in Q3 2026

Skillsoft Corp. (SKIL) faced a significant headwind in the third quarter of 2026, with revenues declining 6% year-over-year. The company’s prudent approach to expense management proved crucial in protecting profitability despite this revenue contraction. By implementing disciplined operational controls across multiple cost categories, Skillsoft demonstrated how strategic cost optimization can cushion financial performance during challenging periods.

The Revenue Challenge and Market Response

The company’s top-line contraction was largely driven by a steep 18% decline in Global Knowledge (GK) revenues, one of its major business segments. Rather than panicking, Skillsoft employed a prudent strategy focused on offsetting revenue losses through targeted expense reductions. This measured approach reflects management’s commitment to maintaining shareholder value during uncertain market conditions.

Total operating expenses fell to $101 million, representing a 4.1% year-over-year decrease. This reduction was not achieved through across-the-board cuts, but through deliberate optimization of specific expense categories that could be streamlined without compromising core operations.

Breaking Down Skillsoft’s Expense Optimization

The company’s cost management strategy touched three key operational areas. Content and software development expenses declined by 2.4% year-over-year, benefiting from productivity enhancements through artificial intelligence deployment and a more focused product strategy. This demonstrates that efficiency gains can be achieved through technology modernization rather than pure headcount reductions.

Selling and marketing expenses saw a more aggressive 7.1% year-over-year cut, driven primarily by workforce optimization. The company right-sized its go-to-market team to align with the current revenue environment, a prudent decision given the market dynamics. General and administrative expenses were reduced by 11.9%, achieved through lower staffing levels and reduced vendor spending, indicating comprehensive cost discipline across the entire organization.

Segment Performance: Where Prudent Strategy Paid Off

These collective expense reductions enabled Skillsoft to report adjusted EBITDA of $28 million for the quarter. While the adjusted EBITDA margin compressed to 22% from 23.3% in the prior-year quarter, the decline was notably modest given the double-digit revenue collapse in the GK segment. This margin resilience underscores the effectiveness of management’s operational discipline.

On a segment basis, the company’s Talent Development Solutions segment remained profitable, while GK posted a negative EBITDA of $3.3 million. Looking forward, management’s strategic priority appears to be transitioning away from lower-margin business lines toward its high-margin SaaS platform, a prudent long-term positioning that could stabilize profitability.

Valuation Disconnect: SKIL vs. Industry Peers

Despite the company’s prudent financial management, the stock market has been unforgiving. SKIL shares have plummeted 71.3% over the past year, vastly underperforming the broader industry’s 10.2% gain. This stark divergence raises questions about whether the market is undervaluing the company’s operational improvements.

Comparatively, industry peer Nable (NABL) has declined 30.3%, while Agora (API) lost 8.6%. From a valuation perspective, SKIL trades at a 12-month forward price-to-earnings ratio of 1.99X—a significant discount to the industry average of 25.21X. Nable trades at 12.9X, while Agora commands a 26.81X multiple. This valuation gap suggests either substantial market skepticism about Skillsoft’s future or a potential opportunity for contrarian investors.

Forward-Looking Estimates and Investment Outlook

The Zacks Consensus Estimate for 2025 EPS stands at $4.17, which has been revised upward by 19.8% over the past 60 days—a signal of improving analyst sentiment. For 2026, the consensus projects EPS of $4.54, though this estimate has been revised down 9.9% in recent weeks. The mixed revision pattern suggests cautious optimism tempered by lingering uncertainties.

Notably, SKIL currently carries a Zacks Rank #1 rating (Strong Buy), indicating that at least some research analysts believe the prudent cost management initiatives and compelling valuation present an attractive risk-reward opportunity. Whether the market will eventually recognize Skillsoft’s operational turnaround remains to be seen, but the company’s disciplined approach to margin protection provides a foundation for potential recovery.