Why Did McGraw Hill Stock Explode Higher Today?

Educational and professional publisher McGraw Hill (MH +23.92%) stock jumped 19% through 11:10 a.m. ET Wednesday after beating on earnings this morning.

Heading into the quarter, analysts only expected McGraw Hill to earn about $0.35 per share for its fiscal Q2 2026. Instead, the publisher reported a profit (adjusted for one-time items) of $1.40 per share — and then raised guidance for the year.

McGraw Hill’s Q2 earnings

Not all the news was good. McGraw Hill reported a 2.8% revenue decline to $669.2 million, and generally accepted accounting principles (GAAP) profits declined 21% to just $105.3 million.

On the plus side, “re-occurring revenue” grew 6.5% to $422.4 million, and high margin digital revenue surged 7.6%. McGraw Hill said it gained “notable” market share in the quarter and expanded its use of “AI-powered tools,” helping to grow gross profit margin 150 basis points to a healthy 79.2%.

Today’s Change

(23.92%) $2.72

Current Price

$14.09

Key Data Points

Market Cap

$3B

Day’s Range

$12.60 – $14.13

52wk Range

$10.70 – $17.25

Volume

2M

Avg Vol

682K

Gross Margin

65.08%

Dividend Yield

N/A

Is McGraw Hill stock a buy?

What worries me most about McGraw Hill stock, though — even more than the sales and profits declines — is the steep falloff in free cash flow. Through H1 this year, McGraw Hill generated only $168.3 million in operating cash flow, barely 40% of the $412.5 million it generated in fiscal H1 2025.

Worse, capital expenditures rose as cash flow fell, such that H1 FCF was only $119.2 million, a 68% decline.

Granted, this still keeps McGraw Hill on track to generate nearly $240 million in FCF this year, and on a $2.2 billion market cap, that sounds attractive. Factor in $3 billion in net debt, however, and McGraw Hill’s enterprise value-to-free cash flow ratio rises to nearly 22x.

With earnings falling and free cash flow falling even faster, I fail to see how that would make McGraw Hill stock a buy.