Executive Summary / Key Takeaways

• Addressing a Critical Need: Adtalem Global Education (ATGE) stands as a pivotal force in addressing the intensifying U.S. healthcare workforce crisis, leveraging its position as the nation's largest healthcare educator to provide essential talent infrastructure across nursing, medicine, and veterinary fields.
• "Growth with Purpose" Delivers: The company's "Growth with Purpose" strategy has driven nine consecutive quarters of enterprise-wide enrollment growth, expanding adjusted EBITDA margins, and delivering robust financial performance, including a nearly 11% revenue increase and 36% adjusted EPS growth in Q1 FY26.
• Technological and Strategic Innovation: ATGE is differentiating itself through significant investments in AI-enabled learning tools and strategic partnerships, such as those with Hippocratic AI and Google Cloud , to prepare students for a technology-enabled healthcare future and streamline educational pathways.
• Disciplined Capital Allocation & Strong Liquidity: With strong free cash flow generation and a healthy balance sheet, ATGE is strategically deploying capital for growth initiatives, debt reduction, and shareholder returns, including a new $150 million share repurchase program.
• Outlook and Resilience: Despite a temporary deceleration in Chamberlain's Q1 FY26 enrollment due to execution issues, management has taken decisive corrective actions and maintains its full-year fiscal 2026 guidance, demonstrating confidence in its operational capabilities and the enduring demand for its programs.

The Healthcare Education Imperative

Adtalem Global Education Inc. (NYSE:ATGE) is strategically positioned at the forefront of addressing one of the most pressing challenges facing the United States: a deepening healthcare workforce crisis. As the nation's largest healthcare educator, ATGE plays a vital role as essential talent infrastructure, preparing professionals across nursing, medicine, and veterinary sciences. The company's journey, marked by its evolution from DeVry Education Group Inc. to Adtalem Global Education Inc. in May 2017 and the subsequent divestiture of DeVry University in 2018, underscores a deliberate pivot towards a focused healthcare education model. This strategic realignment culminated in the launch of its "Growth with Purpose" strategy, which by fiscal year 2025, was recognized as a defining period, reengineering its institutional footprint for enhanced operating leverage and profitability.

The demand for healthcare professionals continues to intensify, driven by an aging population and accelerating retirements among existing clinicians. Nursing shortages alone are projected to triple by 2027, according to the National Center for Health Workforce Analysis. This structural shortage spans the entire healthcare workforce, from physicians to technicians, creating a persistent and growing market opportunity for institutions like Adtalem. A recent study by Lightcast further emphasizes the critical role of proprietary institutions, noting they supply 17% of registered nurses entering the workforce, and their bachelor's degree graduates are 1.5 times more likely to secure full-time employment with lower unemployment rates compared to peers from public and not-for-profit institutions.

Technological Edge: Innovating for the Future of Healthcare Education

Adtalem's "Growth with Purpose" strategy is deeply intertwined with its commitment to technological differentiation and innovation, aiming to future-proof its educational offerings and enhance student outcomes. The company is actively integrating advanced digital learning platforms and AI-powered tools across its institutions.

A cornerstone of this technological roadmap is the strategic partnership with Google Cloud , announced in Q1 FY26, to co-develop customized AI credentials for healthcare workers. This initiative, described as the first partnership of its scale for healthcare students and clinicians, is complementary to ATGE's existing collaboration with Hippocratic AI. The goal is to equip every Adtalem student with foundational AI fluency and offer specialized courses tailored for specific career pathways, including nursing, physicians' assistance, and counseling. This directly addresses the industry's push to accelerate modernization through AI to augment practitioner efficiency, ensuring ATGE graduates are prepared for an AI-enabled future. The "so what" for investors is clear: this technological leadership enhances ATGE's competitive moat, attracts prospective students seeking cutting-edge skills, and strengthens its value proposition to healthcare employers.

Furthermore, Walden University's digital learning platform leverages predictive analytics and advanced learning tools to enhance student retention and academic outcomes. This technology enables faculty and advisors to dedicate more time to student-facing support, contributing to Walden's strong persistence rates. Michael Betz, President of Walden University, now also serves as Adtalem’s Chief Digital Officer, underscoring the company's commitment to accelerating digital transformation and AI integration across all institutions and operations. These technological advancements contribute to operational efficiencies, potentially leading to better margins and sustained enrollment growth.

Competitive Landscape: Carving a Niche in a Dynamic Market

Adtalem operates within a competitive postsecondary education market, but its specialized focus on healthcare education provides a distinct advantage. Direct competitors include other for-profit education providers such as Grand Canyon Education Inc. , Strategic Education Inc. , and Lincoln Educational Services Corporation .

Compared to Grand Canyon Education (LOPE), which emphasizes broad online and campus-based programs, ATGE differentiates itself through its specialized medical and veterinary segments and a broader global reach. While LOPE may exhibit greater efficiency in scaling online operations, potentially leading to stronger cash flow generation, ATGE's established brands like Chamberlain University foster deeper employer partnerships and student loyalty in niche health fields. ATGE's focus on workforce-aligned education positions it as highly adaptable to employer needs, a critical factor in the current healthcare landscape.

Against Strategic Education Inc. (STRA), a leader in online adult learning, ATGE's Walden segment directly competes in areas like psychology, business, and health degrees. However, ATGE's comprehensive health-focused programs, particularly in nursing and veterinary medicine, offer a unique value proposition. While STRA might demonstrate a more streamlined online delivery model, potentially leading to lower operating costs, ATGE's program depth in health professions and its global outlook enhance student retention and resilience.

Lincoln Educational Services Corporation (LINC) focuses on vocational and technical training. ATGE's Chamberlain and Medical/Veterinary segments offer broader degree options and advanced professional pathways, contrasting with LINC's more trade-focused approach. ATGE's emphasis on advanced degrees and global accreditation makes it appealing for professional advancement, while LINC prioritizes quicker, job-ready training. ATGE's online segments offer greater growth prospects, though LINC's cost-effective, in-person vocational model may provide greater accessibility in certain segments.

Indirect competitors include online platforms offering free or low-cost courses and traditional non-profit universities. The burgeoning AI industry, as highlighted by recent reports, is driving demand for tech-related skills, which could indirectly benefit ATGE's online education segments through its AI credentialing partnerships. However, this also necessitates continuous investment in technology to remain competitive. Adtalem's strong brand recognition, proprietary online platforms, and regulatory licenses for specialized programs serve as significant barriers to entry, protecting its market position and financial performance against both new entrants and existing rivals.

Operational Excellence Driving Growth: Segment Deep Dive

Adtalem's "Growth with Purpose" strategy has translated into tangible operational achievements across its three reportable segments: Chamberlain, Walden, and Medical and Veterinary.

Chamberlain University: Addressing the Nursing Shortage

Chamberlain University, the nation's largest nursing school, reported revenue of $179.20 million in Q1 FY26, a 6.70% increase year-over-year. Despite this revenue growth, adjusted operating income decreased by 8.00% to $25.61 million, and adjusted EBITDA margin contracted to 19.60% from 22.00% in the prior year period. This margin contraction was primarily due to increased labor, marketing, and growth initiative investments, outpacing revenue growth.

Total student enrollment at Chamberlain grew just over 2% in Q1 FY26, marking its 11th consecutive quarter of growth, but this fell short of internal standards. The primary driver was "execution failures" in marketing and enrollment operations, including underperformance in local marketing effectiveness during the critical September intake cycle and a failure to convert inquiry volume at historical rates. Management views this as an "execution miss" rather than a fundamental competitive issue, emphasizing that the platform remains "capacity constrained, but not execution constrained." Decisive actions have been taken, including operational improvements to the marketing mix, streamlining enrollment processes, and key leadership changes. The company anticipates continued softness in post-licensure enrollment through Q2 and Q3 FY26 as these changes are implemented, with a return to stronger new enrollment expected in the back half of the year.

Chamberlain's pre-licensure BSN programs continue to show robust enrollment, with its online offering adding nearly 750 students sequentially to serve over 4,000 students in aggregate. The institution is expanding its physical footprint, with its second Atlanta campus now serving 600 students and its 24th location in Kansas City enrolling its first cohort in January. The "Practice Ready Specialty Focused" model, expanded through a partnership with the American Association of Post-acute Care Nursing, addresses critical shortages in areas like post-acute care, further positioning Chamberlain to meet evolving workforce needs.

Walden University: Digital Leadership for Adult Learners

Walden University delivered an impressive performance in Q1 FY26, with revenue increasing by 17.60% year-over-year to $189.96 million. Adjusted operating income surged by 31.50% to $56.07 million, and adjusted EBITDA margin expanded by 300 basis points to 32.60%. This strong growth was driven by a nearly 14% increase in total enrollment, reaching a record of over 52,000 students, marking Walden's ninth consecutive quarter of enrollment growth.

Walden's success is attributed to its digital learning platform, flexible offerings for working adults, and strategic investments in student experience and brand. The "Get the W" campaign, coupled with digital innovations, has boosted inquiries and conversion rates. The university has streamlined its professional doctoral programs, simplifying tuition structures, integrating scholarship support, and redesigning the capstone process to enhance the student experience. Technology plays a crucial role, enabling faculty and advisors to focus more on student-facing support. Walden's strong value proposition is reflected in robust enrollment growth across all degree levels and very high persistence rates.

Medical and Veterinary: Cultivating Critical Talent

The Medical and Veterinary segment, encompassing AUC, RUSM, and RUSVM, reported revenue of $93.13 million in Q1 FY26, a 5.90% increase year-over-year. Adjusted operating income grew by 13.90% to $16.77 million, and adjusted EBITDA margin expanded to 23.00% from 21.80% in the prior year period. This segment demonstrated consistent progress, with total enrollment growing 2.4% to approximately 5,300 students in Q1 FY26.

Key leading indicators point to sustainable long-term growth, with Ross Med achieving its largest September new student start in the last five years. Ross Vet continues to operate near capacity, maintaining its leadership in veterinary education with a unique experiential learning model. Strategic partnerships are expanding global reach, including collaborations with the University of Lancashire and the University of Wolverhampton in the U.K., and Sage in India, creating additional pipelines for prospective medical students. Domestically, the partnership with ScribeAmerica launched the MedPath program, offering a pathway for frontline healthcare workers to advance into medical school, directly addressing the physician gap. For the fourth consecutive year, AUC and Ross Vet achieved a 95%+ first-time residency attainment rate, placing over 615 students in more than 325 healthcare facilities, with over 40% of these placements in medically underserved areas, addressing a projected U.S. physician shortfall of 187,000 by 2037.

Financial Strength and Disciplined Capital Allocation

Adtalem's "Growth with Purpose" strategy has translated into robust financial performance and a strengthened balance sheet. The company is generating strong free cash flow, with a trailing 12-month free cash flow of $319 million as of Q1 FY26. Cash and cash equivalents stood at $265 million as of September 30, 2025.

For Q1 FY26, Adtalem reported revenue of $462.29 million, a significant increase from $417.40 million in the prior year period. Net income from continuing operations was $61.06 million, up from $46.25 million, and diluted earnings per share from continuing operations increased to $1.65 from $1.18. Adjusted EBITDA for the quarter was $112.01 million, up 15.8% year-over-year, with adjusted EBITDA margin expanding by 100 basis points to 24.2%. This growth was driven by increased revenue and operational efficiencies, partially offset by strategic growth investments.

The company's disciplined capital allocation prioritizes investments in student growth and strategic initiatives. Adtalem has actively managed its debt, making an additional prepayment of $50 million on its Term Loan B on October 29, 2025, reducing the principal balance to $103.30 million. The revolving credit facility was increased by $100 million to $500 million and its maturity extended to August 2030, enhancing financial flexibility. Adtalem also returned value to shareholders through share repurchases, buying back $8 million of shares in Q1 FY26, with $142 million remaining on its $150 million Board-authorized share repurchase program through May 2028. The company believes its strong cash flows and existing liquidity will be sufficient to fund its obligations and strategic initiatives for the foreseeable future.

Regulatory Environment and Risk Factors

The regulatory landscape for postsecondary education is complex and dynamic, posing ongoing risks for Adtalem. The "One Big Beautiful Bill Act" (OBBBA), signed in July 2025, introduces substantial changes to federal student aid, including increased unsubsidized loan limits for professional programs but a gradual phase-out of the Grad PLUS loan program for new students starting July 1, 2026. New aggregate federal loan caps are also established. Adtalem is actively exploring alternative financing solutions with Sallie Mae (SLM) to mitigate the impact of these changes, viewing the legislation as potentially leveling the playing field across all Title IV participating institutions.

The "Do No Harm" provisions of OBBBA could lead to loss of Title IV eligibility for programs if completers' earnings do not meet specific thresholds, though implementing regulations are still pending. Additionally, new Financial Value Transparency (FVT) and Gainful Employment (GE) rules, effective July 1, 2024, require programs to meet debt-to-earnings and earnings premium tests, with non-compliant programs facing warnings and potential loss of Title IV eligibility. A federal district judge upheld these rules on October 2, 2025, a decision subject to appeal. Adtalem is reviewing the potential impact of these regulations on its programs.

Furthermore, Adtalem's institutions operate under provisional certifications for Title IV programs due to a decline in its fiscal year 2022 composite score to 0.20, a consequence of the Walden acquisition and other transactions. This requires heightened cash monitoring and additional reporting, along with a $179 million surety-backed letter of credit in favor of the U.S. Department of Education. While management does not anticipate a material adverse effect on operations, these conditions underscore the ongoing regulatory scrutiny. The company's 90/10 Rule rates for fiscal year 2024 were well within compliance, with a consolidated rate of 77%.

Outlook: Sustained Momentum Ahead

Adtalem Global Education maintains a confident outlook for fiscal year 2026, reiterating its full-year guidance of revenue between $1.9 billion and $1.94 billion, and adjusted earnings per share in the range of $7.60 to $7.90. This guidance reflects an anticipated 6% to 8.5% revenue growth and 14% to 18.5% adjusted EPS growth year-over-year. The company is committed to expanding its fiscal year 2026 adjusted EBITDA margin by approximately 100 basis points, driven by operational leverage where revenue growth is expected to outpace year-over-year investments.

Despite the Q1 FY26 deceleration in Chamberlain's post-licensure enrollment due to marketing and enrollment execution issues, management expects a return to stronger new enrollment in the back half of the year, following decisive corrective actions. The company anticipates revenue and EPS growth to be slightly higher in the first half of fiscal year 2026 than the second, partly due to a shift of one academic week for Walden from Q3 to Q2. The underlying assumption for this positive outlook is the continued intensification of the healthcare workforce crisis, which provides a robust and enduring market opportunity for Adtalem's career-focused education model. The company's strategic investments in technology, program expansion, and partnerships are expected to drive sustained growth and profitability.

Conclusion

Adtalem Global Education is a compelling investment thesis rooted in its critical role in addressing the persistent U.S. healthcare workforce crisis. The company's "Growth with Purpose" strategy has demonstrably delivered strong financial and operational results, marked by consistent enrollment growth and expanding profitability. Its strategic focus on specialized healthcare education, coupled with a proactive approach to technological innovation through partnerships with Google Cloud (GOOGL) and Hippocratic AI, positions ATGE as a leader in preparing the next generation of clinicians.

While the company faces a dynamic regulatory environment and recently experienced operational challenges at Chamberlain, management's decisive actions and clear roadmap for recovery underscore its commitment to execution and accountability. With a robust balance sheet, strong free cash flow generation, and a disciplined capital allocation strategy, Adtalem is well-equipped to invest in future growth, manage risks, and return value to shareholders. The company's ability to leverage its competitive advantages in specialized programs and digital learning, alongside its strategic partnerships, suggests a continued trajectory of sustainable long-term value creation for investors.