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01/11 03:19
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call reveals strong financial performance, promising AI-driven growth, and optimistic guidance. The company is raising revenue and EBITDA guidance, indicating confidence in future performance. Despite some margin dilution due to investments, the long-term target remains robust. The continuation of stock buybacks further signals financial health. The market cap suggests moderate volatility, but overall, the sentiment is positive, predicting a 2% to 8% stock price increase over the next two weeks.
Gross Services Volume (GSV) $1.02 billion in Q3 2025, a 2% year-over-year growth. This growth was driven by both marketplace and enterprise businesses. Average GSV per active client grew 5% year-over-year, remaining over $5,000. GSV per new client grew 7% year-over-year, and GSV from AI-related work increased 53% year-over-year, driven by the expansion of AI projects and jobs on the platform.
Revenue $201.7 million in Q3 2025, exceeding $200 million for the first time in company history. This represents a record-breaking performance, attributed to targeted AI customer experience and product innovations, AI category growth, and robust adoption of Upwork Business Plus.
Adjusted EBITDA $59.6 million in Q3 2025, with an adjusted EBITDA margin of 29.6%, marking an all-time high. This reflects disciplined cost management and strong operational execution.
GAAP Net Income $29.3 million in Q3 2025, a 6% increase over Q3 2024. This growth is attributed to strong revenue performance and cost management.
Free Cash Flow $69.4 million in Q3 2025, a record high. This was supported by strong profitability and operational efficiency.
Marketplace Take Rate 18.9% in Q3 2025, up from 18.3% in Q3 2024. This increase was driven by strategies like dynamic pricing and Business Plus.
Gross Margin 77.3% in Q3 2025, reflecting disciplined cost management.
Active Clients 794,000 active clients at the end of Q3 2025. GSV per active client grew 5% year-over-year, and churn rate declined over 70 basis points quarter-over-quarter, marking the lowest Q3 churn rate in years.
AI-native platform transformation: Upwork has enhanced its AI-native platform, Uma, with new capabilities such as talent sourcing, proposal drafting, and project management. These features have improved customer experience and business impact, contributing $100 million in incremental GSV in 2025.
AI-related projects growth: The number of clients engaging in AI-related projects increased by 45% year-over-year, and GSV from AI-related work grew by 53% year-over-year in Q3 2025.
Upwork Business Plus enhancements: Upwork enhanced its SMB product, Business Plus, with premium features for talent sourcing and evaluation. Active clients on Business Plus grew 36% quarter-over-quarter.
Launch of Lifted subsidiary: Upwork launched Lifted, a new subsidiary targeting the $650 billion contingent work market. Lifted offers talent sourcing, contracting, and workforce management for enterprises, with strong initial demand and expected onboarding of first customers by early 2026.
Revenue and profitability records: Upwork achieved $201.7 million in revenue and $29.3 million in GAAP net income in Q3 2025, marking record highs. Adjusted EBITDA reached $59.6 million with a margin of 29.6%.
GSV growth resumption: Gross Services Volume (GSV) grew 2% year-over-year to $1.02 billion, driven by marketplace and enterprise businesses.
Client engagement improvements: Average GSV per active client grew 5% year-over-year, and churn rate declined by 70 basis points quarter-over-quarter, marking the lowest Q3 churn rate in years.
Focus on AI and SMBs: Upwork's strategy to focus on AI and SMBs is delivering results, with significant growth in AI-related projects and Business Plus adoption.
Enterprise expansion with Lifted: The launch of Lifted positions Upwork to capture a larger share of the contingent work market, with anticipated growth in GSV, revenue, and adjusted EBITDA by 2027.
AI adoption challenges: 95% of Gen AI pilots fail, and 63% of employers cite skills gaps as a major hurdle to business transformation, which could impact Upwork's ability to fully capitalize on AI-related opportunities.
Economic uncertainties: The labor market remains sluggish, which could affect client spending and overall growth.
Enterprise sales cycle: The sales cycle for large multimillion-dollar enterprise agreements can take up to a year or more, potentially delaying revenue realization from the Lifted platform.
Integration costs: The acquisitions of Bubty and Ascen by Lifted are expected to be margin dilutive throughout 2026 due to integration and launch costs.
Seasonal volume fluctuations: Lower seasonal volumes from managed services customers are expected to impact the marketplace take rate in Q4.
Revenue Expectations: For Q4 2025, revenue is expected to be in the range of $193 million to $198 million. Full-year 2025 revenue guidance has been increased to $782 million to $787 million, driven by the strength of the marketplace business.
Adjusted EBITDA Projections: For Q4 2025, adjusted EBITDA is projected to be between $49 million and $52 million, representing a margin of 25% to 26%. Full-year adjusted EBITDA guidance has been raised to $222 million to $225 million, with a 28% margin at the midpoint.
Long-term Margin Target: The company reiterates its long-term adjusted EBITDA margin target of 35%.
Lifted Subsidiary Impact: Lifted is expected to contribute meaningfully to GSV, revenue, and adjusted EBITDA starting in 2027. Temporary integration costs will impact margins in 2026.
AI-Driven Growth: AI-related projects and jobs on the platform are expanding, with GSV from AI-related work increasing 53% year-over-year in Q3 2025. AI category growth is expected to continue driving revenue and GSV growth.
Market Trends and SMB Strategy: Adoption of Upwork Business Plus by SMBs grew 36% quarter-over-quarter in Q3 2025. This segment is expected to continue contributing to growth as SMBs increasingly rely on Upwork for AI-related initiatives.
Enterprise Business Expansion: The Lifted subsidiary is expected to onboard its first customers by early 2026, with strong demand anticipated for its comprehensive contingent workforce solutions.
Share Buyback Program: In the quarter, we used $31 million in cash to buy back 2.1 million shares as part of our commitment to driving long-term shareholder value.
The earnings call reveals strong financial performance, promising AI-driven growth, and optimistic guidance. The company is raising revenue and EBITDA guidance, indicating confidence in future performance. Despite some margin dilution due to investments, the long-term target remains robust. The continuation of stock buybacks further signals financial health. The market cap suggests moderate volatility, but overall, the sentiment is positive, predicting a 2% to 8% stock price increase over the next two weeks.
The earnings call revealed strong financial performance, particularly in AI-related growth and increased guidance. Acquisitions are expected to significantly enhance revenue and GSV in the long term. Despite macro uncertainties, Upwork's strategic focus on AI and enterprise solutions, along with shareholder returns via buybacks, is reassuring. The market cap suggests moderate volatility, aligning with a positive sentiment for short-term stock movement.
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