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Udemy, Inc. (UDMY)·Q2 2025 Earnings Summary

Executive Summary

  • Udemy delivered an inflection quarter: GAAP profitability with net income of $6.3M and 3% margin; non-GAAP diluted EPS was $0.16, and adjusted EBITDA rose to $28.4M (14% margin), driven by subscriptions and cost discipline .
  • Top-line and EPS beat Street: revenue $199.9M vs consensus $197.1M*, and non-GAAP EPS $0.16 vs $0.12*, while consumer revenue decline (-4% YoY) included a one-time $2.5M “breakage” benefit .
  • Guidance: introduced Q3 revenue of $190–$195M and adjusted EBITDA $18–$20M, and raised FY25 adjusted EBITDA to $84–$89M (from $77–$87M) with FY25 revenue $784–$794M .
  • Strategic catalysts: AI packages (Readiness/Growth), MCP server to embed learning in AI workflows, new partnerships (Indeed, UKG), and 200k+ consumer subscribers, positioning an AI-powered platform narrative that management says is resonating with enterprise budgets beyond L&D .
  • Balance sheet and flexibility: $393.1M in cash/marketable securities and a new, undrawn $200M revolver, supporting investment optionality into AI-led growth .

Estimates marked with * retrieved from S&P Global.

What Went Well and What Went Wrong

What Went Well

  • Subscriptions and margin mix: gross margin expanded 300 bps YoY to 67%; adjusted EBITDA margin expanded 1,100 bps YoY to 14% on higher subscription mix and revenue share changes earlier in the year .
  • Udemy Business resilience: UB revenue grew 7% YoY to $129.3M; ARR reached $520.0M (+6% YoY); large customer NDRR held at 99% .
  • AI-led product cadence and partnerships: launched AI Readiness/Growth packages, AI Role Play, MCP server beta; partnered with Indeed and UKG to expand reach and embed learning into workflows, supporting pipeline and win rate improvements .

What Went Wrong

  • Net dollar retention softness: UB NDRR at 95% (large customers 99%), pressured by renewals of COVID-era multi-year contracts with weaker implementation foundations; management expects NDRR to bottom in Q3 and improve into FY26 .
  • Consumer segment contraction: consumer revenue fell 4% YoY to $70.6M, with FX headwinds (-2 ppt) and an ongoing shift toward subscription models; revenue included a one-time $2.5M breakage benefit unlikely to recur at similar scale .
  • UB customer count down sequentially: total enterprise customers declined to 17,107 from 17,216 as focus shifted upmarket and SMB churn occurred; SMB renewals outsourced to a third-party firm to improve retention .

Financial Results

MetricQ2 2024Q1 2025Q2 2025
Revenue ($USD Millions)$194.36 $200.30 $199.88
Gross Margin (%)62% 65% 66%
GAAP Net Income ($USD Millions)-$31.81 -$1.77 $6.27
GAAP Diluted EPS ($USD)-$0.21 -$0.01 $0.04
Non-GAAP Net Income ($USD Millions)-$6.54 $17.90 $24.21
Non-GAAP Diluted EPS ($USD)-$0.04 $0.12 $0.16
Adjusted EBITDA ($USD Millions)$5.46 $21.15 $28.40
Adjusted EBITDA Margin (%)3% 11% 14%

Segment performance:

Segment MetricQ2 2024Q1 2025Q2 2025
Enterprise (UB) Revenue ($USD Millions)$120.6 $127.7 $129.3
Enterprise Segment Adjusted Gross Profit ($USD Millions)$87.2 $96.0 $97.5
Enterprise Segment Adjusted Gross Margin (%)72% 75% 75%
Consumer Revenue ($USD Millions)$73.8 $72.6 $70.6
Consumer Segment Adjusted Gross Profit ($USD Millions)$41.5 $40.4 $42.1
Consumer Segment Adjusted Gross Margin (%)56% 56% 60%

KPIs:

KPIQ1 2025Q2 2025
Udemy Business ARR ($USD Millions)$519.0 $520.0
UB Net Dollar Retention Rate (%)96% 95%
UB Large Customer NDRR (%)100% 99%
Total Enterprise Customers (Count)17,216 17,107
Monthly Average Buyers (Consumer) (Millions)1.41 1.24

Q2 2025 Actual vs Consensus:

MetricConsensusActual
Revenue ($USD Millions)$197.13*$199.88
Primary EPS ($USD)$0.12*$0.16

Values retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD Millions)Q3 2025—$190–$195 New
Adjusted EBITDA ($USD Millions)Q3 2025—$18–$20 New
Revenue ($USD Millions)FY 2025$772–$794 $784–$794 Raised (low end)
Adjusted EBITDA ($USD Millions)FY 2025$77–$87 $84–$89 Raised
Diluted Share Count (Millions)Q3 2025—151 New
Diluted Share Count (Millions)FY 2025153 152 Lowered

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024)Previous Mentions (Q1 2025)Current Period (Q2 2025)Trend
AI/Technology initiativesSkills Mapping adoption; strategic pivot upmarket Career Accelerators launched AI Readiness/Growth packages; AI Role Play; MCP server beta; 4,500+ GenAI courses; 100+ live coding courses; AI assistant traction Accelerating
Partnerships & channelsIngram Micro; strong enterprise logos Continued enterprise adds Indeed (consumer acquisition), UKG (enterprise integration), LATAM/APAC reseller expansion Expanding
Go-to-market & pipelineUpmarket focus; disciplined execution Exceeded revenue/EBITDA guidance Highest $100k+ pipeline since 2022; rising win rates; net new ARR expected to increase Q3/Q4 Improving
Consumer strategySegment down YoY Consumer down; early subscription emphasis Subscription revenue share up; GMV +40–50% YoY in June/July; programmatic ads pilot Stabilizing/monetizing
Regional trendsGlobal expansion; Mexico office New enterprise logos across geographies Japan ARR double-digit growth; highest gross retention in 3+ years; blueprint for other regions Improving
Regulatory/legal/macroNot highlightedNot highlightedL&D budgets mixed; pivot to budgets beyond L&D; AI-driven workforce reskilling imperative Mixed macro; AI tailwind
Financial flexibilityShare repurchase completed Cash/marketable securities $358M Cash/marketable securities $393.1M; new $200M revolver Strengthened

Management Commentary

  • CEO Hugo Sarrazin: “We delivered both GAAP profitability and made meaningful progress on our strategy… building subscription momentum, strengthening operational discipline, and accelerating product innovation” .
  • On AI platform differentiation: “We are evolving Udemy to be an essential partner with our powerful suite of AI tools embedded throughout the enterprise technology stack… ultimately, we aim to create a personalized assistant for every employee” .
  • CFO Sarah Blanchard on profitability: “Adjusted EBITDA… representing a 1,100 basis point year-over-year expansion… 14th consecutive quarter of exceeding expectations on the bottom line” .
  • On renewals: COVID-era multi-year deals pressuring NDRR; improvements expected as new AI SKUs and Customer Experience motions roll through renewals .

Q&A Highlights

  • Renewals/NDRR: COVID-era contracts lacked strong implementation and value metrics; expect NDRR to bottom in Q3, stabilize in Q4, and accelerate in Q1’26 as CX and AI plays support expansions .
  • Pipeline/win rates: Highest pipeline of $100k+ deals since 2022; win rates up on a dollar-weighted basis across new and upsell; net new ARR expected to be “up meaningfully” in Q3 and similar to Q4 last year in Q4 .
  • Consumer monetization: Programmatic ads pilot in Q3 to monetize 39M monthly visitors and strengthen subscription upsell; multiple subscription SKUs envisioned over time .
  • One-time item: $2.5M consumer breakage recognized this quarter from administrative changes; future breakage will be recognized quarterly but “not as meaningful” .
  • Upmarket focus: UB customer count decline tied to SMB churn amid upmarket shift; added ~100 large customer logos .

Estimates Context

  • Q2 beat: Revenue $199.9M vs $197.1M*; non-GAAP diluted EPS $0.16 vs $0.12* (bold beat vs EPS; marginal beat vs revenue). Company noted FX headwinds (-1 ppt) and a one-time $2.5M consumer breakage benefit to revenue .
  • FY25 context: Street FY25 revenue at ~$789.2M* sits within guidance ($784–$794M), while Street FY25 EBITDA at ~$93.3M* is above the company’s raised guidance ($84–$89M), suggesting potential upward revisions contingent on execution and macro .

Values retrieved from S&P Global.

Key Takeaways for Investors

  • Inflection to GAAP profitability and multi-quarter margin expansion underpin a credible “profitable growth” pivot; watch sustainability as growth accelerates .
  • Enterprise growth engine intact with ARR +6% YoY and improving win rates/pipeline; near-term NDRR headwinds likely transient as renewals cycle through with new AI SKUs and improved CX motion .
  • AI platform narrative (MCP, Role Play, AI packages) is resonating with budgets beyond L&D, potentially expanding TAM and deal sizes; could be a medium-term re-rating catalyst .
  • Consumer stabilization through subscriptions (200k+ paid subs; subscription GMV +40–50% YoY) and ad monetization pilot adds incremental revenue streams with better LTV/CAC dynamics .
  • FY25 guide raise on EBITDA (to $84–$89M) signals operating leverage from mix and discipline; Street EBITDA above guidance implies room for beats if pipeline converts and NDRR bottoms on schedule .
  • Liquidity and revolver ($393.1M cash/marketable + $200M facility) provide optionality to invest in AI innovation and strategic partnerships; reduces execution risk .
  • Near-term watch items: Q3 guide implies UB +~3% YoY and consumer -~9% YoY; monitor renewal quality, SMB churn, FX impacts, and conversion of AI-led pipeline to bookings/ARR .