Skillsoft (SKIL) Q3 2026: GK Drives 73% of Revenue Decline, Reshaping Portfolio for Platform Growth
Skillsoft’s Q3 exposed the drag from its Global Knowledge (GK) unit, which accounted for 73% of the revenue decline despite representing only 22% of total sales. Management is now moving to exit direct GK ownership, sharpening focus on its Talent Development Solutions (TDS) platform and AI-driven offerings. The portfolio shift and operational resets are setting the stage for a leaner, platform-led model in FY27, but execution risk remains as Skillsoft transitions from content to integrated skills management.
Summary
- Portfolio Realignment Accelerates: GK’s outsized drag forces Skillsoft to pursue a partnership model, refocusing on higher-margin TDS.
- AI Integration Drives Productivity: Over half of content production now leverages AI, supporting cost reduction and platform differentiation.
- Growth Pivot Hinges on Platform Uptake: FY27 growth ambitions depend on successful adoption of the new Percipio skills platform and enterprise migration.
Performance Analysis
Skillsoft’s third quarter underscored a sharp divergence between its core TDS business and the underperforming GK segment. TDS revenue, which comprises the majority of the business, declined only modestly year over year, with most of the softness isolated in the B2C learner product—now just 9% of TDS. The enterprise portion, making up 91% of TDS, was down 1% due to earlier churn but showed stabilization in dollar retention rates (DRR), with large enterprise customers delivering a robust 115% DRR.
GK’s structural challenges were acute, with revenue down 17.6% and the segment responsible for nearly three-quarters of the total company’s revenue decline. The GK business also drove most of the EBITDA contraction and triggered a $20.8 million goodwill impairment. Operationally, cost discipline and AI-driven productivity gains helped offset some margin pressure, but free cash flow guidance was cut due to the GK drag and costs associated with its strategic review.
- Segment Drag Concentrated in GK: GK accounted for 73% of the revenue decline and most of the EBITDA shortfall.
- B2C Weakness Persists: Learner product struggles with digital acquisition, but is now a small share of TDS.
- Enterprise Retention Strengthens: Large enterprise clients show high retention, supporting the platform migration narrative.
Cost actions and AI adoption have improved operating leverage, but the pivot away from GK is central to restoring growth and margin expansion in the core business.
Executive Commentary
"Our next generation Skillsoft Percipio platform directly addresses these needs by unifying content, blended learning, hands-on practice, and skills intelligence into one platform. This integrated approach helps customers act faster, reduce skills gaps, and accelerate transformation efforts."
Ron Hosepian, Executive Chair and Chief Executive Officer
"The process of removing this top and bottom line drag will be accretive growth, margins, and improved free cash flow and leverage as well."
John Frederick, Chief Financial Officer
Strategic Positioning
1. GK Exit to Unclog Growth and Margin
Skillsoft’s decision to exit direct ownership of GK is a structural reset. The segment’s negative trajectory—both in revenue and profitability—was unsustainable, with management signaling urgency to remove the drag. The preferred outcome is a partnership model, where GK provides instructor-led training (ILT, live or virtual classroom learning) to Skillsoft’s clients, while Skillsoft supplies content and platform capability. This move is expected to be accretive to growth, margins, and free cash flow, and aligns the portfolio with market demand for integrated, platform-led solutions.
2. Platform and AI as Growth Engines
The Percipio platform (Skillsoft’s unified learning and skills intelligence environment) is central to the company’s future, targeting large enterprise clients with high retention and deeper adoption potential. AI is now used in more than 50% of content design and production, delivering cost savings and enabling personalized, multimodal learning experiences. Early customer wins and a competitive win-back signal market appetite, but broad rollout and monetization remain FY27 priorities.
3. Enterprise Focus and Sales Realignment
Sales coverage has shifted to prioritize large enterprise accounts, which show materially higher retention (115% DRR) and are more likely to adopt advanced platform features. Subject matter experts were added to support solution selling, and the new sales model was implemented in Q3. The company is targeting a subset of its 800+ enterprise customers for early platform migration, leveraging higher win rates and cross-sell potential.
4. Financial Discipline and Capital Allocation
Management emphasized a leaner cost structure and disciplined capital allocation, with operating expenses down year over year and improved productivity from AI. Investment will be focused on TDS, which offers a 28% EBITDA margin profile, with incremental dollars directed toward driving growth and platform adoption rather than supporting legacy segments.
Key Considerations
Skillsoft’s Q3 was defined by decisive portfolio action and operational resets, but the path to sustainable growth is contingent on successful execution of its platform and AI strategy.
Key Considerations:
- Portfolio Simplification: The exit from GK will clarify the business model and improve reported metrics, but execution risk around the transition remains.
- AI Differentiation: Adoption of AI in content creation is driving cost savings and supports Skillsoft’s platform value proposition, but competitors are also investing aggressively in AI capabilities.
- Enterprise Migration Critical: Growth depends on migrating existing enterprise clients to the new Percipio platform and expanding wallet share via skills management offerings.
- Cash Flow Volatility: Free cash flow was pressured by GK and government payment delays; normalization in Q4 is expected, but ongoing transformation costs could weigh on near-term liquidity.
- Sales and Marketing Execution: New branding and a rebuilt marketing team are set to launch in FY27, but the impact on pipeline and conversion must materialize quickly to support the growth narrative.
Risks
Execution risk is elevated as Skillsoft pivots away from GK and bets on platform-led growth, with the need to rapidly transition enterprise customers and demonstrate monetization of new AI capabilities. Competitive intensity in digital learning and skills management remains high, while public sector and B2C exposure introduce additional volatility. The company’s high leverage and history of segment drag further increase sensitivity to operational missteps or delayed platform adoption.
Forward Outlook
For Q4 and FY26, Skillsoft guided to:
- TDS revenue of $400–410 million for the full year
- TDS adjusted EBITDA of $112–116 million (about 28% margin)
Consolidated guidance was withdrawn due to GK’s uncertain trajectory. Management expects:
- Positive free cash flow of $0–5 million for FY26 (down from prior $13–18 million)
- Cash flow to normalize in Q4 as government receivables are collected
Management highlighted that FY27 will be the first full year of a platform-led, GK-light model, with growth ambitions linked to enterprise migration and platform adoption.
Takeaways
Skillsoft’s Q3 marks a pivotal transition, with decisive action to exit GK and a sharpened focus on enterprise skills management and platform innovation.
- Core Business Reset: Removing GK’s drag is expected to improve growth, margins, and cash flow, but successful execution of the transition is critical.
- Platform Bet Underpins Growth: Early wins support the platform thesis, but broad enterprise migration and monetization must accelerate in FY27.
- AI Productivity and Differentiation: AI-driven content and platform capabilities are delivering cost savings and supporting the value proposition, but competitive pressures are intensifying.
Conclusion
Skillsoft’s Q3 was a turning point, with the company decisively moving to shed its GK segment and double down on platform and AI-driven enterprise learning. FY27 will be a proving ground for the new model, with execution on enterprise migration and platform monetization as the key watchpoints for investors.
Industry Read-Through
Skillsoft’s portfolio realignment and AI integration reflect broader industry shifts in the corporate learning and talent management sector. The move away from standalone instructor-led training toward integrated, AI-powered platforms is accelerating, with enterprise clients demanding measurable skills outcomes and seamless integration with HR systems. Competitors in digital learning, HR tech, and workforce management should note the rising importance of platform scale, AI-driven personalization, and content-to-platform migration as key differentiators. The sector is likely to see further consolidation, portfolio pruning, and heightened investment in AI as legacy modalities lose relevance and enterprise buyers demand end-to-end solutions.