IDP Education’s AI and cost cuts keep FY27 earnings target alive

FY27 earnings guidance holds despite weaker volumes

IDP Education Limited (ASX:IEL) is heading into FY27 with its earnings target intact, but not because the international education market has improved. The company reaffirmed an Adjusted EBIT range of A$95 million to A$115 million at its annual general meeting, based on planning assumptions that market volumes will fall by 20% to 30% compared with FY26.

Management expects revenue to outperform volumes through profitable growth and further yield improvements. Student Placement and English Language Testing yields are each expected to increase by mid-single-digit percentages, while the transformation program is targeted to deliver another A$15 million net reduction in the cost base.

Cost discipline limits the damage from volume declines

FY26 showed why that offset matters. Student Placement volumes fell 27% and IELTS volumes dropped 8%, yet revenue declined 11% to A$795 million. Student Placement yield rose 11% and IELTS yield increased 7%, helping Adjusted EBIT land at A$122.9 million, within the guidance range provided at the start of the year.

IDP also delivered A$32 million of net cost reductions, exceeding its A$25 million target. Strong cash generation and working-capital discipline reduced the net leverage ratio from 1.4 times to 1.0 times at year-end. The improvement provided room for capital returns, including a buyback of up to A$50 million, of which approximately A$11 million had been executed by the AGM.

The result is consistent with the FY26 results announcement, which reported the same 27% Student Placement volume decline and A$32 million transformation saving. The more difficult question now is whether the next round of cost reductions can protect earnings if the volume assumptions prove accurate.

AI and China expansion form the growth case

IDP is presenting technology and data as more than back-office efficiency tools. Its AI Assistant is live in 10 countries, captures more than half of unique student profiles and is delivering 7% more applications than other channels, according to the company. FastLane is being used to improve course and institution matching, while the IDP Student Community has more than 50,000 registered students.

The company also expanded Student Placement into Malaysia and launched IELTS at 13 Chinese test centres during FY26, later increasing that presence to 25 centres. Management says the transformation is intended to combine its counsellor network, university relationships, data and digital channels to improve conversion, productivity and matching outcomes. Those claims remain operational measures rather than a guarantee of future earnings, particularly while policy settings continue to constrain student mobility.

Board rejects acquisition approach and advances renewal

Chair Tracey Horton told shareholders the board had rejected an unsolicited indicative proposal from a global investment firm, describing it as opportunistic and fundamentally undervaluing IDP. The board said the proposal did not recognise the business’s future earnings potential or the possible benefits of its transformation program. The disclosure follows the second Blackstone proposal, which had lifted the offer to A$2.50 per share before being rejected.

The AGM also marked a significant refresh of the board. Ariane Barker and Andrew Barkla retired after the meeting, Anne Brennan was put forward for election as an independent non-executive director, and Tracey Ah Hee is due to join in November. Proxy results showed 95.09% of available votes in favour of Brennan’s election. The remuneration report received 61.10% support, while the proposed grant of long-term incentive performance rights to chief executive Tennealle O’Shannessy received 91.58% support. A separate proposed grant of total performance incentive rights was withdrawn and was not put to shareholders.