From the Chief Financial Officer

Harvard Business School (HBS) demonstrated resilience and operational strength in fiscal year 2025. Amid economic headwinds, intensifying competitive pressures, and evolving federal policy, the School’s careful fiscal stewardship enabled it to end the year with an operating surplus. Through judicious budgeting, cost management, and targeted investments in strategic priorities—including faculty research and AI-driven innovation—HBS advanced its mission of educating leaders who make a difference in the world. The School’s ability to adapt to a shifting landscape reflects the dedication of its faculty, staff, students, and alumni, whose creativity, support, and discipline have been instrumental in sustaining excellence and ensuring the School continues to thrive.

Accelerating Impact Through Innovation

Investments in innovative programs and activities remained a centerpiece of the School’s strategic agenda.

Fiscal 2025 marked the launch of Foundry, a donor-funded initiative designed to broaden access to HBS’s entrepreneurial expertise in underserved regions through an AI-powered platform. In its first year, Foundry established its core team, partnered with the Digital Transformation group to build foundational technology, and conducted global market research with more than 5,000 survey responses and 300 interviews. The alpha platform launched with more than 500 founders across six organizations, offering structured learning, AI-driven tools, and community engagement. Foundry also set up essential operations across legal, marketing, and finance to support future growth and long-term success.

The School’s digital transformation (DTx) entered its fourth year. By investing in scalable and extensible platforms, HBS is able to develop AI-powered tools that enhance teaching, learning, research, and work—including course bots, tutor bots, and a new tool in the Career & Professional Development Group that more quickly and effectively matches students to job opportunities.

In the MBA Program, enhancements to the curriculum ensured the School prepares students for leadership in a rapidly changing world. In the Required Curriculum, Data Science and AI for Leaders (DSAIL) was introduced, a course designed to provide students with the knowledge, judgment, and practical experience required to navigate in an AI-driven era. In the Elective Curriculum, the faculty voted to advance two pilots: one supporting entrepreneurs, and one supporting students pursuing internships not only during the summer, but also during their second year in the program.

The HBS Economic Model

By funding the majority of our research internally, HBS empowers faculty to pursue the most important and interesting questions that will shape the future of business, ensuring our scholarship remains both academically rigorous and deeply relevant. Coupled with strong connections to practice, this enables the School to respond rapidly to emerging opportunities and challenges.

The intellectual capital generated from faculty research—including cases, articles, and books—is the foundation of our educational offerings. Revenue from Executive Education, Online, MBA, Harvard Business Publishing (HBP), and philanthropic support create a virtuous cycle: Research drives learning, learning drives impact, and impact enables reinvestment in our mission.

As we navigate an increasingly complex environment, our economic model remains the foundation for sustained innovation and operational excellence. Detailed financial results for fiscal 2025 are provided in the Supplemental Financial Information section.

The remainder of this letter offers a strategic overview of our fiscal 2025 financial performance and outlines our financial outlook for the coming year.

Fiscal 2025 Review

HBS concluded fiscal 2025 with an operating surplus of $58 million—an increase of $22 million, or 61 percent, over the prior year. The increase was driven primarily by one-time financial benefits, including extraordinary alumni support and one-time gains related to Publishing.

Total revenues rose by $31 million, reaching $1.13 billion. Revenue growth in fiscal 2025 was driven by stronger-than-expected alumni giving amid a dynamic federal policy landscape, an increase in the endowment distribution, and higher Executive Education revenue.

Executive Education delivered another record-setting year, generating $253 million in tuition revenue—a 3 percent increase year-over-year. With more than 12,000 participants for the third consecutive year, the program continues to expand HBS’s global reach and impact. These engagements also enrich faculty insight, strengthening the dynamism of the MBA curriculum.

HBP remained the School’s largest revenue contributor in fiscal 2025, generating $300 million, or 27 percent of total revenues. While Harvard Business Review faced pressure in circulation and advertising, growth in the international group’s blended offerings helped offset those trends. HBP also advanced several innovation initiatives—including AI pilots such as the shared AI Architect, accelerated DTx efforts, and the HBR Strategy Bot—along with contributions to the Higher Ed Course Refresh. These efforts reflect a forward-looking approach to evolving market needs.

Reflecting lower enrollment in fiscal 2025, Online revenue declined by $7 million to $63 million, as the group continued to experience margin pressure around competition and higher learner acquisition costs. The group further expanded its portfolio in fiscal 2025 with new course offerings focused on strategic innovation and organizational transformation. Consistent with those themes, the group launched its inaugural cohort in a new six-month program titled Credential of Digital Innovation and Strategy. The program helps individuals build future-ready competencies—such as digital strategy, platform thinking, and design innovation—that are essential for staying competitive in a tech-driven economy.

The School’s annual endowment distribution revenue for fiscal 2025 increased by $12 million, or 6 percent, to $232 million, accounting for 21 percent of total revenues. The change in the endowment distribution is determined by three factors: the growth in the endowment payout as determined by the University, which in fiscal 2025 was 2.5 percent; new gifts to the endowment; and cash transfers made by HBS to the endowment reserve. The endowment distribution supports the School’s operations in a manner consistent with the intentions of donors and the terms of each gift.

Philanthropy continues to be a vital force behind Harvard Business School’s ability to deliver an outstanding educational experience, pursue bold ideas, invest in transformative initiatives, and support faculty research. The generosity of the School’s alumni and friends exceeded expectations in fiscal 2025. HBS received a combined $94 million in restricted and unrestricted current-use gifts, 31 percent more than the prior year.

The School further strengthened its MBA program through curricular innovation and student support initiatives. Revenue from MBA tuition and fees dropped by $3 million, or 2 percent, to $147 million in fiscal 2025, reflecting an anticipated decline in total enrollment. After a temporary surge caused by students returning from pandemic-related deferrals, enrollment normalized, falling 5 percent to 1,878 students compared with 1,970 the previous year.

The School is committed to continuing to make its MBA program more financially accessible to students from a wide range of backgrounds. To support this goal, it offers need-based aid to roughly half of its MBA students, including full tuition and fee coverage to the 10 percent with the highest financial need. In fiscal 2025, the average need-based fellowship awarded was more than $47,000.

Despite a salary increase of 3 percent in fiscal 2025, total operating expenses rose by less than 1 percent to $1.07 billion, driven by hiring freezes, position vacancies, and targeted reductions in certain areas. Salaries and benefits remained the largest expense category, accounting for 48 percent of total expenditures.

The School continued to invest strategically in both physical infrastructure and digital transformation initiatives, including AI-based tools.

Capital spending increased by $11 million to $48 million in fiscal 2025, primarily related to the initial phase of renovation projects in two student residence buildings, Chase and McCulloch Halls. The majority of the approximately $150 million investment for those projects will be spent in fiscal 2026.

Fiscal 2026 Outlook

As HBS begins fiscal 2026, our financial strategy remains focused on ensuring that expense growth does not outpace revenue growth. We are targeting a surplus of $82 million—a goal that reflects the ongoing economic and policy uncertainties facing higher education, including potential decreases to federal research funding, an increase to the endowment tax, and potential declines in international student enrollment.

To achieve the targeted surplus increase, with Harvard’s guidance, last spring the School launched a “three S” approach—pursuing structural, surgical, and sustainable changes in every department. Hundreds of ideas were generated and evaluated, resulting in initiatives such as repurposing underused space, streamlining telecommunications, and sharing resources across departments. In addition, the School is striving to generate revenue from new and expanded programs.

The School’s revenue environment remains subdued and concentrated in fiscal 2026, with approximately 85 percent of income derived from HBP, Executive Education, the endowment distribution, and MBA tuition and fees. Sustained alumni support and disciplined expense management will remain integral to advancing our mission and strategic objectives.

HBP will focus on building its “HBP 3.0 strategy,” focusing on customer centricity, innovation, and operational efficiency. HBP is evolving its engagement model, shifting toward interactive, expert-led, and AI-enabled experiences that deliver differentiated value in an AI-driven world. The group’s fiscal 2026 revenue is expected to grow 1 percent.

Executive Education will invest strategically to drive growth, leveraging technology, AI tools, and novel program formats to expand reach and impact. The group’s fiscal 2026 revenue is anticipated to grow 8 percent compared with the prior year, with approximately half of the increase driven by volume growth and the remainder related to pricing.

Online will complete its transition to the new Learning Experience Platform, sunsetting its legacy course platform. The group will introduce new offerings and update several existing ones to better meet evolving learner needs. Online also will continue to expand its business-to-business reach through strategic partnerships. Although Online is expecting a 2 percent decline in fiscal 2026, the group remains focused on driving long-term growth through deeper learner and partner engagement, organizational agility, and ongoing innovation in course design and delivery.

The MBA Program will continue to innovate in the curriculum and experiential learning, integrating AI into teaching and learning, and maintaining a commitment to affordability and need-based aid. A 5 percent increase in MBA tuition is budgeted for fiscal 2026.

Ongoing alumni support through both current-use and endowment giving remains a cornerstone of the School’s financial strength and strategic growth. These contributions directly enable the School to launch new initiatives and sustain excellence in its operations and programs. Importantly, they also provide critical funding for need-based fellowships, ensuring that talented students can pursue an HBS education regardless of financial constraints. For fiscal 2026, HBS has allocated $68 million to financial aid, a 3 percent increase over the prior year, reaffirming our commitment to access and opportunity.

With total revenues projected to increase modestly by 2% in fiscal 2026, expense levels are being calibrated to preserve margin and ensure financial discipline. Total expenses are expected to be slightly reduced to $1.06 billion. Salaries and benefits will continue to represent the majority of the expense budget at 47 percent, compared with 48 percent of total expenses in the prior year.

Capital investments in fiscal 2026 will focus on major renovations to Chase and McCulloch Halls and to Dillon House, as well as a series of smaller projects aimed at addressing deferred maintenance and enhancing campus accessibility. To advance efficiency and innovation across the HBS campus, Information Technology will complete major cloud migrations, modernize digital platforms, and support the use of generative AI tools to enhance teaching, learning, and administrative operations.

We start the new fiscal year with a strong financial foundation and a clear commitment to responsible stewardship. Through continued focus on efficiency, innovation, and strategic investment, the School is well positioned to navigate uncertainty, deliver on its objectives, and maintain its preeminence in business education and research.

Richard P. Melnick, MBA 1992
Chief Financial Officer
November 30, 2025