Hybrid learning models that combine physical centres with digital delivery are set to become the dominant operating format for the edtech sector in 2026, as companies recalibrate around profitability, predictable cash flows and student outcomes rather than scale at any cost. After three years of funding constraints and forced consolidation, the industry’s next phase is likely to be shaped less by venture capital cycles and more by operating discipline.
The immediate backdrop remains challenging. Funding in the edtech sector has fallen sharply from its 2021 peak, while merger activity, though picking up, has largely been distress-led and at compressed valuations. These conditions are expected to persist into 2026, keeping pressure on pure-play online platforms that lack pricing power or repeat engagement. Analysts say the result will be a narrower field dominated by players that can monetise offline infrastructure alongside digital content.
Validating the Hybrid Shift
Public market signals are reinforcing this shift. The listing of Physics Wallah has reset investor expectations for the sector. While valuations have moderated after listing, sustained trading above issue price has underlined appetite for edtech businesses that demonstrate revenue diversification and a credible path to profits. The company’s near-even split between online and offline revenues is now widely seen as a template that others will try to replicate in 2026, particularly in test preparation and vocational learning where physical presence improves outcomes and retention.
Operationally, hybrid models are expected to expand deeper into tier-2 and tier-3 cities over the next year, as student acquisition costs online remain elevated and price sensitivity increases. Physical centres, though capital intensive, are increasingly viewed as defensible distribution rather than a drag on margins, especially when combined with centrally produced digital content and analytics-led teaching tools.
Survival of the Disciplined
This logic is also shaping strategy at scaled players such as upGrad, which has signalled that offline expansion and selective acquisitions will be central to its next phase of growth. Industry watchers expect consolidation around a few national hybrid platforms in higher education and test prep by end-2026, as weaker digital-first firms either sell assets or exit.
At the same time, traditional classroom giants are unlikely to cede ground. Large coaching networks such as Allen Career Institute, Sri Chaitanya and Narayana Group are expected to accelerate investments in technology layers that personalise learning, track performance and standardise delivery across centres. In 2026, competition is likely to centre less on who has the best app and more on who can integrate data, faculty and physical scale most effectively.
By contrast, the outlook for heavily leveraged or structurally unprofitable players remains weak. Ongoing insolvency proceedings at Byju’s and deep valuation resets at platforms such as Unacademy have become reference points for how aggressively markets are repricing risk in the sector. Analysts expect 2026 to see more such clean-ups, with asset sales rather than capital raises becoming the preferred route to survival.
