Executive Summary / Key Takeaways

• AI Licensing Inflection: Wiley generated $40 million in AI licensing revenue in fiscal 2025 and is tracking "moderately ahead" of that pace in 2026, with a landmark $20 million Q1 deal that included partner content for the first time. This represents a high-margin, capital-light revenue stream that leverages Wiley's 218-year content library without cannibalizing core publishing.

• Research Segment Durability: The Research business delivered 5% constant-currency growth with 33.5% EBITDA margins in Q2 FY2026, driven by 25% growth in open access articles and 99% institutional customer retention. This segment is a quasi-utility for scientific publishing, with pricing power protected by multi-year agreements and an ever-growing article pipeline.

• Learning Segment Cyclical Reset: Learning revenue declined 11% due to Amazon (AMZN) inventory destocking and soft consumer spending, but EBITDA margins remain healthy at 40%. Management is "ruthlessly prioritizing" digital products and expects declines to moderate in H2, suggesting this is cyclical pressure rather than structural decay.

• Cost Transformation: Corporate expenses fell 18% in Q2 as Wiley reduced real estate footprint by 35% and streamlined technology operations. Combined with portfolio pruning (three divestitures completed), this is driving 250 basis points of operating margin expansion to 18.8%.

• Attractive Risk/Reward: Trading at 8.2x EV/EBITDA and 12.7x free cash flow with a 4.6% dividend yield, Wiley offers a compelling entry point. Net debt/EBITDA of 2.0x is on a clear path to 1.5x, while the corporate R&D market represents an 8x revenue opportunity that is just beginning to materialize.

Setting the Scene: From Manhattan Print Shop to AI Content Gatekeeper

John Wiley & Sons, founded in 1807 as a Lower Manhattan print shop, has spent 218 years building what is now one of the three global gatekeepers of scientific knowledge. This isn't a legacy publishing story; it's a content infrastructure play that has quietly evolved into an 83% digital, 48% recurring-revenue business serving the $2 trillion global R&D ecosystem. Wiley's research article output has grown every year since 1944 (with a minor dip in 1971), a testament to the non-discretionary nature of scientific publishing—researchers must publish to advance their careers, and institutions must subscribe to remain relevant.

The company sits at the center of an oligopolistic market structure. As one of the "big three" global publishers, Wiley hosts nearly 50% of the world's English-language journals and maintains society partnerships where 45% of relationships exceed 20 years. This creates a durable moat: four key society health science partners have been with Wiley for over 50 years. The switching costs aren't technological—they're reputational and structural. When a journal is the official publication of a leading academic society, moving to a competitor means abandoning decades of brand equity and citation networks.

What makes this moment different is the AI inflection. Wiley isn't just digitizing print; it's becoming the authoritative content layer for the AI economy. The company completed its first AI licensing project in January 2024 and has since generated nearly $100 million in AI training revenue in less than two years. This isn't a side business—it's a fundamental expansion of Wiley's addressable market from human readers to machine learning models, with dramatically different economics.

Technology, Products, and Strategic Differentiation: The AI Gateway Advantage

Wiley's core technological differentiation is the Research Exchange platform, which by July 2025 had transitioned over 1,000 journals onto a unified, AI-native infrastructure. This matters because it transforms Wiley from a collection of individual journals into a scalable content platform. The platform uses AI and machine learning to improve submission capture, automate journal transfers, and reduce turnaround times. In fiscal 2025, this improved automated transfer referral conversion by 30%. For authors, faster publication means faster career advancement. For Wiley, it means higher throughput without proportional cost increases.

The AI Gateway represents Wiley's most strategic innovation. Unlike competitors who are building closed AI platforms, Wiley is taking a "CapEx light and open platform approach," partnering with with AWS, Anthropic, Perplexity, and Mistral AI. The Gateway uses Retrieval Augmented Generation (RAG) models where Wiley's content supplements AI models without being absorbed into them—preserving IP rights while enabling real-time content delivery. This is crucial: with approximately 60 copyright lawsuits involving AI currently underway and the Anthropic settlement setting precedent, Wiley's approach de-risks IP infringement while creating a recurring revenue stream.

The Wiley Nexus platform extends this strategy by aggregating content from 30+ publisher partners, generating $16 million in revenue year-to-date. This transformation positions Wiley as a content marketplace for AI training. The corporate R&D market, which accounts for 80% of total U.S. R&D spend but only 10% of Wiley's revenue, represents an 8x expansion opportunity. Companies like Novartis (NVS), Regeneron (REGN), and the European Space Agency are already licensing Wiley's content for vertical-specific AI applications. This is "Wave 2" of AI licensing—moving from archival training data to real-time knowledge feeds for inference.

The technology moat is reinforced by AI-powered screening tools that conduct 25 comprehensive checks in under ten minutes, reducing problematic citations by 70%. This isn't just efficiency; it's quality control that preserves the integrity of peer review in an AI-accelerated world. As 84% of researchers now use AI in their work (up from 57% last year), Wiley's ability to maintain scientific rigor while embracing AI becomes a competitive differentiator.

Financial Performance & Segment Dynamics: Margin Expansion in Real Time

Wiley's Q2 FY2026 results provide clear evidence that the cost transformation is working. Adjusted operating margin expanded 250 basis points to 18.8%, driven by disciplined cost management, technology transformation, and AI-driven productivity gains. This isn't a one-time benefit—it's structural. Corporate expenses fell 18% on an EBITDA basis as restructuring savings ramped up. The 35% reduction in real estate square footage isn't just cost cutting; it's a permanent reduction in the fixed cost base of a now-predominantly digital company.

The Research segment is the engine of value creation. At $278.5 million in quarterly revenue (+5% constant currency) and 33.5% EBITDA margins, this business generates $93.3 million of EBITDA per quarter. The drivers are powerful: open access article output grew 25%, recurring subscription models maintained 99% retention, and AI licensing contributed $4.8 million in the quarter. The mix shift toward open access is particularly important—while traditional subscriptions face pressure, author-funded open access grows at double digits with strong pricing power. Advanced Science, Wiley's open access flagship, grew nearly 50% year-over-year.

Learning segment performance reveals cyclical, not structural, challenges. Revenue declined 11% to $143.2 million, but EBITDA margins remained robust at 40.1%. The decline stems from three external factors: Amazon inventory destocking, soft consumer spending, and an 8% enrollment decline in undergraduate computer science. These are macro and channel issues, not content quality problems. Management is responding by "ruthlessly prioritizing" digital products, where inclusive access programs grow double digits and ZiBooks STEM courseware remains a growth engine. New title signings rose 27% in professional publishing, indicating strong underlying demand once channel issues resolve.

The balance sheet transformation is equally significant. Net debt to EBITDA fell to 2.0x from 2.2x year-over-year, with management targeting 1.5x. The $120 million University Services proceeds received in June 2025 will save $5 million annually in interest expense. Free cash flow for the six months ended October 31 was a use of $108 million—an improvement of 17% or $22 million from the prior year. This reflects the seasonal nature of Wiley's business (cash use in H1, generation in H2) and the improving underlying profitability.

Outlook, Guidance, and Execution Risk

Management's guidance frames a clear trajectory: revenue growth in low single digits (narrowed from low-to-mid), adjusted EBITDA margin of 25.5-26.5% (up from 24% last year), and free cash flow of approximately $200 million. The $200 million FCF target represents a 59% increase from fiscal 2025's $126 million, driven by EBITDA growth, lower interest payments, and favorable working capital. This is achievable because Wiley's business model is becoming more capital efficient—CapEx is expected to be comparable to last year's $77 million despite revenue growth.

The quarterly phasing reveals management's confidence and caution. Q3 FY2026 will be "lighter than typical" due to a $9 million year-over-year AI revenue headwind, with growth weighted to Q4 driven by journal renewal timing and customer pipeline conversions. This shows AI revenue is lumpy and project-based, not yet a smooth recurring stream. However, the "continuing pipeline" of AI deals and the "moderately ahead" trajectory for full-year AI revenue suggests the lumpiness is manageable.

Management's assumptions appear conservative and achievable. Research demand is tracking better than expected, with article submissions up 18% and output up 8%. The 99% institutional retention rate provides a stable foundation, while open access growth and AI licensing offer upside. The key risk is Learning segment stabilization—management expects declines to moderate in H2 as Amazon inventory actions stabilize, but this remains uncertain. Craig Albright's comment that the softness is "more cyclical than structural" is supported by robust new title signings and strong pricing power in assessments.

The corporate R&D market represents the largest execution swing factor. Wiley currently captures only 10% of this $100+ billion U.S. market. The company's strategy—subscription-based models, science analytics, and knowledge services—targets R&D-intensive corporations using AI to accelerate product development. Success here could add hundreds of millions in high-margin revenue, but failure to penetrate would leave Wiley dependent on the slower-growing academic market.

Risks and Asymmetries: What Could Break the Thesis

The most material risk is U.S. government research funding uncertainty. While management states they "don't anticipate any near-term impact" due to article pipeline volume and multi-year agreements, the political environment remains volatile. Direct U.S. federal funding accounts for only a single-digit percentage of Wiley's article output, but indirect effects on university budgets could pressure subscription renewals. The risk is asymmetric: downside could be 5-10% of Research revenue if funding cuts cascade, while upside from corporate R&D expansion is potentially 50-100% of current revenue.

Learning segment cyclicality poses a near-term earnings risk. If Amazon inventory destocking persists or consumer spending weakens further, the 11% decline could deepen. More concerning is the 8% enrollment decline in computer science—if this reflects structural shifts in higher education rather than cyclical factors, Wiley's academic business could face headwinds beyond 2026. Management's "targeted actions to stabilize revenue" include pricing strategies and category optimization, but these may not offset volume declines.

AI licensing revenue unpredictability is a growing concern. While management guides to "moderately ahead" for FY2026, the lumpiness of these deals (e.g., the $20 million Q1 FY2026 deal and $4.8 million in Q2 FY2026) makes quarterly modeling challenging and could cause volatility if large deals slip. The competitive risk is that larger players like RELX (RELX) could underprice Wiley or offer more comprehensive content bundles, capturing the AI training market.

Competitive scale disadvantage remains Wiley's structural vulnerability. RELX's Elsevier division has 3,000+ journals and superior analytics integration; Wolters Kluwer (WTKWY) has deeper workflow integration in professional markets. Wiley's 33.5% Research EBITDA margins are healthy but trail RELX's implied margins. If competitors use scale to price aggressively or out-invest in AI capabilities, Wiley's market share could erode, particularly in the corporate R&D segment where relationships are less entrenched.

Competitive Context: Wiley's Niche in the Oligopoly

Wiley's competitive positioning is defined by what it is not: it is not the scale leader (RELX), not the education specialist (Pearson (PSO)), and not the professional tools provider (Wolters Kluwer). Instead, Wiley occupies a defensible niche as the most balanced STM publisher, with strength across scientific, technical, medical, and humanities content. This diversification insulates it from single-market disruption—unlike RELX, which is concentrated in STEM, and Pearson, which focuses on education.

The AI licensing strategy highlights Wiley's differentiation. While competitors build closed platforms, Wiley's "CapEx light and open platform approach" partners with multiple LLM providers. As Matthew Kissner noted, "We're kind of tool agnostic. We want to play with all of the tools because we don't know who the winners are going to be." This reduces technology risk and creates network effects as more publishers join Wiley Nexus. The risk is that this openness limits pricing power compared to a proprietary platform.

Financial comparisons reveal Wiley's relative attractiveness. RELX trades at 20x EV/EBITDA with 30.9% operating margins but slower growth in its core publishing business. Pearson trades at 11.9x EBITDA but faces structural education market challenges. Wiley's 8.2x EV/EBITDA and 12.7x P/FCF represent a discount that doesn't account for its AI optionality. The 4.6% dividend yield, supported by 32 consecutive years of increases, provides income while investors wait for the AI strategy to mature.

Wiley's moat is its society relationships and content quality. With 45% of society partnerships exceeding 20 years and institutional retention above 99%, the revenue base is exceptionally sticky. The "lasting competitive moat" Kissner describes is real: peer-reviewed publishers set the global standard for scientific excellence, and Wiley's journals are independently rated and widely recognized. This foundation of trusted, authoritative content means AI licensing revenue isn't just transactional; it cannot be replicated by scraping the open web.

Valuation Context: Pricing a Transformation

At $31.82 per share, Wiley trades at 17.0x trailing earnings, 8.2x EV/EBITDA, and 12.7x free cash flow. These multiples are not demanding for a business with 83% digital revenue, 48% recurring revenue, and a 32-year dividend growth streak. The 4.6% dividend yield is well-covered by a 75.7% payout ratio and supported by $200 million in projected free cash flow for FY2026.

The balance sheet provides flexibility. Net debt to EBITDA of 2.0x is down from 2.2x and trending toward management's 1.5x target. The $120 million University Services proceeds will save $5 million annually in interest expense. With $67.4 million in cash and $423.5 million in unused borrowing capacity, Wiley has dry powder for acquisitions or accelerated shareholder returns. The board's $250 million share repurchase authorization, a 25% increase over the previous program, signals confidence.

Relative valuation highlights the opportunity. RELX trades at 20x EBITDA despite slower organic growth. Wolters Kluwer trades at 12.4x EBITDA with similar margins but less AI exposure. Wiley's discount appears unwarranted given its AI licensing momentum and cost transformation. The key valuation driver will be AI revenue scalability—if Wiley can grow AI licensing from $40 million to $100+ million while maintaining 80%+ incremental margins, the multiple should re-rate toward platform companies rather than traditional publishers.

The free cash flow yield of approximately 7.8% (derived from the 12.7x P/FCF multiple) versus a 4.6% dividend yield suggests room for dividend growth or debt reduction. Management's guidance for $200 million FCF in FY2026 is consistent with this valuation, making it compelling if execution continues. The risk is that Learning segment headwinds or AI revenue lumpiness could pressure near-term FCF, but the long-term trajectory appears intact.

Conclusion: A 218-Year-Old Startup

Wiley is simultaneously the oldest and newest company in scientific publishing. Its 218-year history provides the content foundation and customer relationships that competitors cannot replicate, while its AI licensing strategy positions it at the forefront of the machine learning revolution. The Research segment's 33.5% EBITDA margins and 99% retention offer a durable base, the cost transformation is delivering 250 basis points of margin expansion, and the AI Gateway opens a corporate R&D market eight times larger than Wiley's current addressable market.

The investment thesis hinges on three variables: AI licensing scalability, Learning segment stabilization, and successful penetration of corporate R&D. The valuation at 8.2x EV/EBITDA and 12.7x FCF provides a margin of safety while these initiatives mature, and the 4.6% dividend yield pays investors to wait. If Wiley can execute on its "CapEx light and open platform" strategy, the market will eventually price it as an AI infrastructure company rather than a legacy publisher. The 32 consecutive years of dividend increases suggest management's ability to navigate transitions, making this 218-year-old company look like a compelling turnaround story disguised as a safe-haven investment.