Thinkific Cut a Third of Its Staff. The Stock Jumped 72%. The Customers It's Walking Away From Are the Small Ones.

The cheapest way to make a struggling software company look healthy is to stop spending money on the customers who aren't growing fast enough. That is, more or less, what Thinkific just did — and the market gave it a standing ovation.

On September 23, the Vancouver-based company announced a "strategic realignment" of its workforce and operating model designed to accelerate growth in Thinkific Plus, its offering for mid-market and enterprise organizations, and eliminated positions affecting 96 employees. That was roughly 30% of the workforce, spread across the global team, CEO Greg Smith told BetaKit.

The part that should make every solo course creator sit up is what Smith said next. He told BetaKit that Thinkific is stepping away from "very small businesses," and that it will still serve its 35,000 small and medium-sized business customers. The layoffs, he said, were concentrated in areas built to support a broader, lower-growth market that Thinkific is stepping back from.

Shares soared 72% the next day.

The numbers behind the pop

Thinkific expects the reorganization, when complete, to produce approximately $19 million in annualized cost savings. It expects about US$5-million in related restructuring charges in the third quarter. Most of the expense reductions land in Q4 2026, with some non-headcount savings arriving in Q1 2027.

Then the guidance. Thinkific said it expects Q3 revenue at the high end of its guided range of $18.6 million to $18.9 million, and raised Q3 adjusted EBITDA guidance to 7%–10% of revenue, up from 2%–5%. Longer term, it is targeting a free cash flow margin of 25% or more of revenue in fiscal 2027.

For context on how small this company is relative to its 2021 reputation: at June 30, 2026, Thinkific reported roughly US$51 million in cash and no debt, with Q2 revenue of US$18.6 million and annual recurring revenue of US$61.7 million. It IPO'd on the TSX during the 2021 boom at $13 a share; the average analyst target is now around $2.20.

The stock has held most of its gain. THNC closed at C$1.20 the day before the announcement and was at C$2.10 by the time BetaKit went to press. As of this week it was trading near C$2.07, up 9.73% over the past week.

What the analysts actually liked

Not the product strategy. The cash.

BMO's Thanos Moschopoulos wrote that he expected the stock "to react very favourably" to the news given the EBITDA and cash flow implications. ATB Cormark upgraded the stock to Outperform and lifted its target to C$3.25.

That is the tell. A 72% move on a day with no new product, no new customer, no new revenue — only a smaller payroll and a bigger margin promise. Even the bullish coverage flagged that revenue growth has slowed and profitability remains patchy.

Smith's framing

The company line is that everyone wins. "The changes announced today will allow us to continue to provide excellent support for our customers, while investing in innovative product enhancements, and new AI-first products that will fuel our next stage of growth," Smith said in the release. "I am encouraged by what we are seeing in our strategic move upmarket, and believe it is time to lean fully into that success... By aligning our efforts towards Plus, we will be in a position to re-accelerate growth and operate the remainder of the company with greater discipline and higher margins."

To BetaKit, he was blunter about why. "Our legacy … business isn't showing the same growth trajectory, and it doesn't make sense to continue investing at the same level there," Smith said. "This wasn't about AI or purely about cost. The financial benefit is real and healthy for the business, but it's an outcome of the strategy, not the reason for it." He added that the cut "was a meaningful decision we didn't take lightly."

Smith said the cuts hit most departments, with less impact on customer-serving teams. His argument is that meeting the bigger demands of larger customers produces product improvements all customers inherit.

That argument has a long history in software, and it works right up until the roadmap starts filling with SSO, seat management, compliance reporting and procurement features — the things a 3,000-seat corporate training buyer pays for, and a creator with one course and 400 students never touches.

What this means if you're the small one

Thinkific's entry tier is Basic. It runs $54/month, or $40/month billed annually; Start is $109/month ($82 annually) and Grow is $219/month ($164 annually) — figures read off thinkific.com/pricing in August 2026, when there was no free plan, only a 30-day trial. Pricing trackers also note the direction of travel this year: Thinkific added the cheaper Basic tier below Start while raising Start from $99 to $109 monthly and Grow from $199 to $219, with Basic arriving at $54 monthly.

So the self-serve business got a lower-priced front door and higher prices above it, and now a cost base cut by a third. Read as a portfolio decision, that's a cash cow being milked, not a growth engine being fed.

The enterprise signals keep stacking too. Two weeks before the layoffs, Thinkific announced a partnership with Articulate — Articulate's first native third-party LMS integration. The company now describes itself around external training for mid-market and enterprise clients, citing brands including GoDaddy and Nasdaq among its 35,000-plus customers.

Nobody has announced a price increase for creators. Nobody has announced a feature being removed. Smith explicitly said the 35,000 SMB customers still get served. Those are the facts, and they are worth holding onto before anyone panics and migrates.

But the things worth watching are now obvious. Support response times. Whether self-serve features ship at the same pace as Plus features. Whether the Basic tier quietly gets squeezed. Q3 earnings are scheduled for November 11.

The first number to look at isn't revenue. It's what happens to the customer count under 35,000.