Flight Instructor reported a NMAC event during landing pattern training.The Instructor initiated an evasive maneuver while the departing opposite direction flight of two aircraft crossed directly above.

Narrative

I was flying with a student on their third flight in a C172. This was the student's first pattern entry under verbal guidance. We flew over the airfield and descended to enter a right 45 entry to Runway XX. The student configured the aircraft to 1;000 feet but started slowly losing altitude without realizing it. About this time a flight of 2 SU26 reported departing [RWY] XX. As we made our left turn to enter the 45; I called out that altitude was slipping even further and the student needed to start a climb. The SU26 flight called out that they had us in sight. As we continued forward; the SU26 called out that they had us in sight. Shortly after I saw the two SU26 in close formation at 12 o'clock opposite direction and only slightly above while we were now established in our climb. I pushed the yoke forward enough to cause some loose objects to rise in the cockpit. The SU26 had turned crosswind directly headed towards us. I infer they had a plan to pass above; but it was entirely too narrow for my comfort.The attention to my student's correction efforts and confidence given by departing traffic calling us in sight led to my focus being away from the departing traffic. I was not familiar enough with the SU26 to anticipate the climb rate and surprised by their decision to turn and remove all lateral separation.