2U: Same Decaying Story As Ever


  • Shares of 2U rallied 10% after the company posted better-than-expected Q1 results.
  • Investors primarily cheered the company’s positive adjusted EBITDA and its raised EBITDA expectations for the full year FY22.
  • However, growth continued to disappoint, with organic growth sinking to the single digits in Q1.
  • 2U continues to propound a structurally low-margin business model that is difficult to scale.
  • The deep leverage on its balance sheet, undertaken to execute acquisitions like edX, also can’t be ignored.

Black woman having a virtual meeting with her financial consultant

Alistair Berg/DigitalVision via Getty Images

While I think few of the sharp corrections we’ve seen year to date in the tech sector have been justified, 2U’s (NASDAQ:TWOU) fall from grace has been more than appropriate given the company’s’ recent fundamental

2U stock
Data by YCharts

2U FY22 outlook

2U FY22 outlook (2U Q1 earnings deck)

2U Q1 revenue

2U Q1 revenue (2U Q1 earnings deck)


2U FCEs (2U Q1 earnings deck)

2U adjusted EBITDA by segment

2U adjusted EBITDA by segment (2U Q1 earnings deck)

2U balance sheet

2U balance sheet (2U Q1 earnings deck)

Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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