FY2026 quarterly build — reported basis
Guidance-anchored; quarterly split is our estimate
| $M | Q1'26A (COUR only) |
Q2'26E (½ qtr UDMY) |
Q3'26E | Q4'26E | FY2026E |
|---|---|---|---|---|---|
| Revenue | 196 | ~330–340 est | ~385–400 est | ~395–410 est | 1,210–1,240 ✓ |
| Adj EBITDA margin | ~6–7% | 11.0% ✓ | ~14% est | 16.0% ✓ | ~13.0% ✓ |
| Adj EBITDA | ~13 | ~36–37 | ~54–56 | ~63–66 | $157–161 |
| Gross margin | — | 61.5% ✓ | ~62% est | 63.0% ✓ | ~61.5% ✓ |
| Q4 annualized EBITDA exit run-rate | ~$255M | ||||
✓ = company guidance from the June 23 modeling call. est = our interpolation. Q2 margin of 11.0% and Q4 margin of 16.0% are explicit company targets; Q3 is interpolated on the synergy ramp. Reported basis includes Udemy only from May 11 close. The single most important number on this table is the Q4 exit run-rate (~$255M annualized) — that, not the FY26 reported figure, is the base from which 2027 builds.
FY2026 free cash flow bridge
Heavy one-time year
| Item | $M | Basis |
|---|---|---|
| Adj EBITDA (reported) | +157 to +161 | Company guidance (13% × $1.21–1.24B) |
| M&A transaction cash expenses | −~70 | Per modeling assumptions; ~$40M weighted to Q2'26 est |
| Integration / cost-to-achieve synergies | −~40 to −55 | 2026 portion of ~$70M program, 2H-weighted est |
| Capex + capitalized software | −~25 | ~2% of revenue, both cos. historically asset-light est |
| Interest income on ~$1.1B cash | +~30 to +40 | ~4% yield on avg balance est |
| Cash taxes / working capital | ±10 | Deferred revenue growth typically a tailwind est |
| FY2026E Free Cash Flow | ~$30–80M | Central estimate ~$55M; artificially depressed by one-timers |
| Memo: FCF excluding one-time merger costs | ~$150–185M | The "clean" underlying cash generation |
2026 is the trough cash year by design. Roughly $110–125M of one-time merger and integration cash costs land in 2026, masking underlying FCF generation of ~$150–185M. These costs substantially disappear by mid-2027. For reference, the S-4 banker model projected combined CY26E unlevered FCF of $100M — our reported-basis estimate is lower because the S-4 assumed a full-year combination while reported results only include Udemy from mid-May.
FY2027 projection — three scenarios
Our model; company has NOT guided 2027
🐻 Bear
Revenue$1.42–1.47B
YoY (normalized)−4% to −3%
EBITDA margin~15–16%
Adj EBITDA$215–235M
FCF$120–150M
Udemy transactional decline accelerates; Consumer subscription growth stalls; dis-synergies worse than modeled; Enterprise NRR stays at 93%. Synergies still deliver but revenue base erodes beneath them.
⚖ Base
Revenue$1.50–1.56B
YoY (normalized)Flat to +2%
EBITDA margin~17–18%
Adj EBITDA$255–280M
FCF$170–210M
Full-year benefit of $115M synergy run-rate; dis-synergies fade by mid-year; Enterprise grows LSD; Consumer subscriptions (+17% Q1 pace moderating) offset transactional decline. Consistent with Q4'26 16% exit + continued ramp.
🚀 Bull
Revenue$1.58–1.62B
YoY (normalized)+4% to +6%
EBITDA margin~19–20%
Adj EBITDA$300–325M
FCF$230–265M
Revenue synergies (excluded from all guidance) start materializing; cross-sell of unified platform; AI-native products drive Enterprise re-acceleration; approaches the S-4 banker model of $298M CY27E EBITDA.
Anchoring note: The S-4 banker model (Feb 2026) projected CY27E combined revenue of $1,736M and Adj EBITDA of $298M. The June guidance implies normalized 2026 revenue ~$100–125M below that model's CY26E ($1,616M), so we haircut the 2027 revenue base proportionally. However, synergies are arriving faster than the S-4 assumed (≥$80M by YE26 vs. 24-month timeline), which partially offsets on margin. Our base case lands EBITDA ~10–15% below the S-4's $298M but FCF conversion improves as one-time costs roll off.
Per-share math — where the buyback compounds
Shrinking denominator
| Share count trajectory | Shares (M) | 2027E base FCF/sh | 2027E base EBITDA/sh |
|---|---|---|---|
| At merger close (May 11) est | ~288 | $0.66 | $0.93 |
| Today (>$70M repurchased) est | ~275 | $0.69 | $0.97 |
| If $250M deployed by YE2026 @ ~$6 avg | ~247 | $0.77 | $1.08 |
| If full $500M deployed by YE2027 @ ~$6.50 avg | ~212 | $0.90 | $1.26 |
Share count math: ~169.3M pre-close COUR + ~119M issued at 0.800× exchange ratio ≈ ~288M at close. >$70M repurchased at est. avg ~$5.55 ≈ 12–13M shares retired in ~5 weeks — an aggressive pace of ~2.5M shares/week that also conveniently absorbs Insight Partners' sell-down supply. If the company deploys the full $500M, the share count falls ~26% from close, meaning 2027 base-case FCF/share of ~$0.90 at a ~$6 stock = a ~15% FCF yield. Buyback figures use mid-point prices; SBC dilution (company committed to reducing SBC and managing dilution) partially offsets.
The subscription crossover: Coursera's growth is now covering Udemy's decline
Q1'26 combined subscription revenue grew +17% YoY while non-subscription revenue fell −24% — the sharpest divergence yet. Consumer subscriptions are now two-thirds of Consumer revenue with 1.53M Paid Subscribers (+42% YoY), and >80% of total revenue is recurring. The strategic read: Udemy's transactional business (one-time course purchases) is in structural decline and management is deliberately not defending it — paid marketing optimization accelerates the decline but improves unit economics. The bet is that a shrinking-but-recurring $1.5B revenue base at 18–20% margins is worth more than a flat mixed base at 10%. History suggests the market rewards this once revenue stabilizes — the question is whether stabilization comes in 2027 (base case) or later (bear).
Why the Q4'26 exit margin matters more than the FY26 number
FY2026 reported EBITDA of ~$159M understates the earnings power investors are actually buying. The 13% full-year margin blends Q1's ~6% (pre-close, Coursera standalone) with Q4's 16% target. The Q4 annualized run-rate of ~$255M is the honest starting point for 2027 — and it still excludes ~$35M of synergies yet to be realized ($115M target vs. $80M by YE26), any revenue synergy, and the compounding effect of the buyback. This is why our 2027 base of $255–280M is conservative relative to the exit trajectory: it assumes essentially zero operating leverage beyond the committed synergies.
Cash walk: even after the full buyback, the balance sheet stays strong
Start with $1,150M pro forma cash (Q1), no debt. Subtract remaining buyback (~$430M), remaining one-time merger/integration costs (~$110–140M through 2027), and add back cumulative 2026–27 FCF (~$225–290M central). Year-end 2027 cash lands around $750–850M — still one of the strongest net-cash positions in the space, preserving optionality for a second buyback authorization or bolt-on M&A. The capital allocation slide explicitly listed "evaluate disciplined M&A" as a priority, and management's willingness to deploy $70M in five weeks signals the buyback won't sit idle.
Research verdict
2026 is a bridge year; 2027 is when the model inflects — and the share count does the rest
The reported numbers will look messy through year-end: revenue optics distorted by the mid-year close, cash flow depressed by ~$110–125M of one-timers, and normalized revenue declining. But the underlying machine is improving fast — synergies ahead of schedule, margin exiting 2026 at 16%, recurring mix above 80%, and a buyback retiring ~1% of shares outstanding every two weeks at current pace. Base case: 2027 Adj EBITDA of $255–280M and FCF of $170–210M on ~245–250M shares. At a ~$6 stock (~$1.5B market cap, ~$700M enterprise value after cash), that's roughly 2.5× EV/EBITDA and a double-digit FCF yield — pricing in almost no execution. The risks are real (revenue could keep shrinking; integration could slip) but asymmetry favors the patient holder once the Insight overhang clears and the first clean combined quarter (Q3'26, reported ~Nov) gives the market an uncluttered look.