Here’s how ed-tech company 2U spiraled from $5 billion to ‘going concern’
Chip Paucek, co-founder and former CEO of 2U, appears at the company’s headquarters in Lanham, Maryland on Nov. 17, 2021. The company’s chief financial officer, Paul Lalljie, replaced Paucek as CEO in November 2023.
Marvin Joseph | The Washington Post | Getty Images
When 2U went public a decade ago, the company was out to prove it could make a splash in the notoriously difficult $550 billion U.S. higher education market.
For a while, it was on to something. The stock price ballooned from $13 at 2U’s 2014 IPO to a high of $98.58 four years later as demand increased for the company’s online education offerings. At its peak, 2U had a market cap of more than $5 billion and growth rates comparable to high-flying cloud software companies. Revenue climbed 44% in 2018.
Now, the company is hanging on for dear life.
2U’s stock price has been trading below $1 for much of 2024 following a problematic forecast in November and indications that some universities were terminating their contracts. This week, 2U issued weak guidance for the year and warned investors of “substantial doubt about its ability to continue as a going concern” without additional capital or reduced debt.
2U shares plummeted 59% after the announcement. They fell an additional 10% on Wednesday to close at 34 cents, valuing 2U at $27.5 million.
Analysts at Needham lowered their rating to hold from buy after this week’s report, and said the outlook made them more skeptical about 2U’s ability to refinance its debt, which stood at more than $900 million at the end of 2023. Cash and equivalents dwindled to $73.4 million from $182.6 million at the end of 2022.
In a statement to CNBC, a 2U spokesperson said the company won’t “speculate on potential outcomes.”
“2U expects to continue to engage constructively with our lenders and other financial stakeholders as we continue to evaluate options to strengthen our balance sheet and adapt our business to the present landscape,” the spokesperson said. “We have sufficient time and liquidity, and we believe we will reach a resolution that will benefit our stakeholders.”
The company started in 2008, initially under the name 2Tor, and built a business around the idea of helping universities pick up more students by holding classes online. For years, an outsized amount of 2U’s business came from a few colleges.
In 2017, 2U generated more than half its revenue from the University of Southern California (which ran the company’s oldest program), Simmons College in Boston and the University of North Carolina. 2U was eventually able to diversify and by 2021 no university client accounted for more than 10% of revenue.
The biggest problem, however, was that 2U’s model never proved profitable. 2U has lost money every year as a public company, with its total deficit over the past three years surpassing $830 million. A big chunk of 2U’s revenue has gone to pay for sales and marketing, and the company had “to expend substantial financial and other resources on technology and production efforts to support a growing number of offerings,” as stated in its 2021 annual report.
Bulking up
Rather than preserve capital, 2U went big on M&A.
In 2019 it paid more than $600 million to buy Trilogy Education, giving 2U more university partners. Then, in 2021, the company announced plans to buy online learning platform edX for about $800 million in cash. That acquisition would give 2U more than 230 education partners, including 19 of the top 20 universities across the globe, the companies said in a joint release when the deal closed.
The plan didn’t work. 2U took on debt for the edX acquisition, resulting in “interest payments that exceeded the revenue edX would generate,” analysts at Cantor Fitzgerald wrote in a report late last year.
By early 2022, sales growth had slipped into the mid single digits, and by the middle of that year, they were on the decline. Year-over-year revenue dropped for five straight quarters. Multiple rounds of layoffs ensued.
The third quarter of 2023 brought with it a catastrophic development.
2U told investors in its earnings report in November that USC, its flagship customer, was paying $40 million to the company to end their relationship. 2U cut its forecast for the full year. The stock plummeted 57% in one day.
“We thank USC for the role they’ve had in helping us build our company,” then-CEO Chip Paucek said on the earnings call. However, he added that “with the results from the standpoint of new pipeline, the health of the existing portfolio is very strong.”
Days later, Paucek stepped down. He was succeeded by then-CFO Paul Lalljie.
Paucek, who didn’t respond to a request for comment, is now co-CEO of Pro Athlete Community, a company he helped start in 2022 to help educate professional athletes in business. His former company is now in crisis mode, with its share price in the tank.
Any stocks trading below $1 for 30 consecutive days can lead to a delisting from the Nasdaq. While 2U could potentially institute a reverse split to bolster its share price, that would amount to a temporary fix for a much bigger problem. Cantor Fitzgerald, KeyBanc and Piper Sandler have all discontinued coverage of the stock in recent months, signaling their lack of confidence in the company’s future.
Gautam Tambay, co-founder and CEO of online learning startup Springboard, told CNBC that it’s sad to see a pioneer in the space struggle.
“There’s a big part of me that would like to see them work through these challenges and get to the other side and be able to serve the mission that they started the company to serve, which is ultimately serve their students,” Tambay said.
Far removed from its growth days, 2U is just trying to survive.
On this week’s earnings call, Lalljie said the company is “embarking on a 12-quarter journey” to reset, which involves cutting expenses and working with lenders on its debt payments.
“We need to shrink to grow,” Lalljie said, “so that we can support the balance sheet that we have, so that we can be in a position to negotiate and extend the maturities — the upcoming maturities that we have and to ensure that we have a financially resilient company going forward.”
President Donald Trump takes a question from a reporter before signing executive orders in the Oval Office at the White House on September 19, 2025 in Washington, DC.
Andrew Harnik | Getty Images
It’s been a chaotic few days for the tech sector, and industry executives and experts are still assessing how U.S. President Donald Trump’s latest immigration crackdown could shape the future of their workforces.
The Trump administration sparked widespread panic Friday after announcing employers will pay a new $100,000 fee for H-1B visas, which are temporary work visas granted to highly skilled foreign professionals. These visas have underpinned the U.S. tech workforce for decades.
Some tech executives, including Netflix co-founder Reed Hastings and OpenAI CEO Sam Altman, have lauded the changes to the H-1B program, but experts told CNBC that the Trump administration’s changes could prevent some tech companies — namely startups — from securing top foreign talent. These experts said the changes also run the risk of driving top talent toward other countries.
“The short of it is, it would be a disaster for America, for American companies, American competitiveness, American innovation,” said Exequiel Hernandez, an associate professor at the Wharton School of the University of Pennsylvania.
Tech’s reliance on the H-1B program
The current annual cap for H-1B visas is at 65,000, along with 20,000 additional visas for foreign professionals with advanced degrees.
In fiscal 2025, Amazon, Microsoft, Meta, Apple and Google are among the top 10 companies that employ the most H-1B holders. Prominent tech executives like Microsoft CEO Satya Nadella, Google CEO Sundar Pichai and Tesla CEO Elon Musk were H-1B recipients earlier in their careers.
As tech companies scrambled to respond before Trump’s proclamation went into effect at 12:01 a.m. ET on Sunday, the White House quelled some concerns on Saturday by clarifying that the fee is not annual and would only apply to new visas, not renewals for current visa holders.
More changes could be on the horizon.
The Trump administration teased a proposed rule on Tuesday that said H-1B recipients should be selected through a weighted process instead of a random one. The weighted process would take place when the number of requests for visas exceeds the limit of available spots, and it would be based on wage levels, the proposal said.
The proposed rule will officially publish in the Federal Register on Wednesday, and it’s still subject to change after the administration reviews initial public feedback.
Hastings called the Trump administration’s $100,000 fee a “great solution,” in a post on X on Sunday.
“It will mean H1-B is used just for very high value jobs, which will mean no lottery needed, and more certainty for those jobs,” he wrote.
OpenAI’s Altman expressed support for the updates during an interview with CNBC’s Jon Fortt on Monday.
“We need to get the smartest people in the country, and streamlining that process and also sort of outlining financial incentives seems good to me,” Altman said.
‘It kneecaps startups’
Historically, H-1B visas have cost employers somewhere between $2,000 to $5,000 per application, depending on the size of the company, according to the Immigration Law Group.
The new $100,000 fee is a big jump for small, cash-strapped startups.
“You’re not going to find many startups who are going to be willing to pay $100,000 per H-1B, in addition to salary for that H-1B,” said Adam Kovacevich, CEO of Chamber of Progress, a left-leaning tech industry trade association.
Even big tech companies could feel some pain and have to reassess who they use H-1Bs for. But their deep pockets come with advantages.
“A big firm like Microsoft or Google, even though it’s not ideal for them, they have workarounds,” said Wharton’s Hernandez. “They can offshore jobs, or they’re the ones who can make acquisitions.”
Garry Tan, the CEO of the popular startup accelerator Y Combinator, criticized the Trump administration’s new fee, writing in a LinkedIn post that “it kneecaps startups” and is a “massive gift” to overseas tech hubs.
“In the middle of an AI arms race, we’re telling builders to build elsewhere,” Tan wrote. “We need American Little Tech to win—not $100K toll booths.”
A picture shows logos of the Big Tech companies named GAFAM, for Google, Apple, Facebook, Amazon and Microsoft, on June 2, 2023.
Sebastien Bozon | AFP | Getty Images
China and other competitors loom large
U.S. tech companies big and small are fiercely competing with one another – and the rest of the world – as they race to develop the most advanced AI models and applications. Organizations like Meta have shelled out billions of dollars to recruit top AI talent in an effort to try and gain an edge.
The Trump administration’s changes to the H-1B program could complicate similar recruiting efforts.
“What this does is that it gives our competitors, other countries, places like Asia, Canada, Europe, they can then attract these employees to create new innovations,” said Steven Hubbard, a data scientist at the American Immigration Council, which is a nonprofit for immigration advocacy and research.
One big competitor in the war for talent is China. The world’s second-largest economy has long fought against the U.S. for tech dominance, and more recently the AI race.
Earlier this year, Chinese AI firm DeepSeek rattled global markets after claiming to create a large language chatbot that outperformed competitors at a fraction of the cost. The news raised questions over the significant sums that American tech companies are shelling out on AI.
Some experts worry that visa changes could deal a victory into China’s hands, sending top talent overseas. The move may also deter foreign students from attending university in the U.S. as uncertainty hangs over their post-graduation job prospects.
“Those students are going to look at this environment and stay home,” said Greg Morrisett, vice provost at Cornell Tech. “It’s giving a leg up to both China and India in terms of feeding their startup ecosystems.”
For Bradley Tusk, the CEO of Tusk Venture Partners, the changes to the H-1B program are simply “terrible.” American companies have to have access to top talent in order to compete at the highest levels, he said.
“America’s competitive advantage has always been the ability to attract the best talent from around the world,” Tusk said. “To limit our ability to recruit and compete is illogical.”
WATCH: JPMorgan CEO Jamie Dimon speaks out on H-1B visa changes
Alibaba‘s Hong Kong-listed shares surged on Wednesday to reach their highest point since 2021 after the company said it will invest more in artificial intelligence and rolled out new AI products and updates.
Shares of the company jumped over 6%, while its total gains year to date rose above 107%.
The tech giant plans to increase spending on AI models and infrastructure development, on top of the 380 billion yuan ($53 billion) over three years it announced in February, Chief Executive Officer Eddie Wu said Wednesday at Alibaba Cloud’s annual flagship technology conference.
“We are vigorously advancing a three-year, 380 billion [yuan] AI infrastructure initiative with plans to sustain and further increase our investment according to our strategic vision in anticipation of the [artificial superintelligence] era,” Wu said.
Alibaba shares surge after CEO unveils plans to boost AI spending
So-called ‘artificial superintelligence’ refers to AI that would hypothetically surpass the power and intelligence of the human brain, with the hypothetical benchmark becoming a growing focus of major AI companies.
Alibaba also officially unveiled the latest version of its Qwen large language models — the Qwen3-Max — on Wednesday, along with a series of other updates to its suite of AI product offerings.
Wu highlighted that Alibaba Cloud is strategically positioned as a “full-stack AI service provider,” delivering the computing power required for training and deploying large AI models on the cloud through its own data centers.
“The cumulative investment in global AI in the next five years will exceed $4 trillion, and this is the largest investment in computing power and research and development in history,” he added.
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