Executive Summary

Udemy delivered Q3 2025 revenue of $195.68M, above S&P Global consensus $193.08M* and above the company’s $190–$195M guidance; non-GAAP diluted EPS was $0.13, beating the $0.094* Street consensus. Consolidated subscription revenue grew 8% YoY and reached 74% of total, reflecting the subscription-first pivot .*
Adjusted EBITDA was $24.27M (12% margin), up 110% YoY, but down sequentially vs Q2 ($28.40M; 14% margin); gross margin improved 300 bps YoY to 66% on higher-margin mix .
Udemy raised full-year adjusted EBITDA guidance to $92–$94M (prior $84–$89M), while Q4 revenue guidance of $191–$194M brackets S&P revenue consensus $193.31M* .*
Key narrative drivers: consumer subscription acceleration (paid subscribers 294K vs 250K target), enterprise ARR momentum ($527.2M), and NDRR stabilization expectations as COVID-era contract downsell headwinds abate; management emphasized AI-enabled role plays, certification and career journeys, and stronger unit economics (LTV/CAC >3x for subscriptions vs ~1x transactional) .

What Went Well and What Went Wrong

What Went Well

Subscription mix shift: consolidated subscription revenue up 8% YoY; subscription now 74% of total; consumer subscription revenue up 43% YoY with paid consumer subscribers reaching 294K, ahead of the 2025 target .
Profitability and cash generation: GAAP net income of $1.64M (vs loss of $25.27M YoY), adjusted EBITDA $24.27M (+110% YoY), and free cash flow $12.09M; gross margin expanded 300 bps YoY to 66% .
Enterprise resilience: UB ARR reached $527.2M (+4% YoY) with 17,111 customers (+2% YoY), and large-customer NDRR at 97%; pipeline strength noted in technology, manufacturing, and financial services sectors amid AI-driven upskilling demand .

Management quotes:

“Consolidated subscription revenue grew 8% year over year and now makes up 74% of total… For Q3, we beat our revenue guidance and delivered on our 15th consecutive quarter of better-than-expected adjusted EBITDA” — CEO Hugo Sarrazin .
“We… generated $7 million of net new ARR… These results exceeded our expectation and signal the underlying strength of our enterprise business” — CEO Hugo Sarrazin .

What Went Wrong

Top-line growth flat YoY and down QoQ: total revenue was essentially flat YoY ($195.68M vs $195.42M) and declined ~2% sequentially from Q2 ($199.88M), reflecting the consumer pivot away from transactional sales and deferral dynamics of annual subscriptions .
Net dollar retention pressure: UB NDRR 93% (down from 95% in Q2 and 96% in Q1), impacted by COVID-era contract downsells and prior go-to-market transitions; management expects stabilization in Q4 .
Consumer segment revenue down 9% YoY, and monthly average buyers fell to 1.20 from 1.31; deliberate reduction in transactional course sales to push annual subscription products, creating near-term headwinds .

Financial Results

Core Metrics vs Prior Periods and Estimates

Metric	Q3 2024	Q1 2025	Q2 2025	Q3 2025	Q4 2025E
Revenue ($USD Millions)	$195.42	$200.30	$199.88	$195.68	$191–$194 guidance ; $193.31* consensus
Primary EPS ($USD)	$(0.17) GAAP diluted	$0.12 non-GAAP diluted	$0.16 non-GAAP diluted	$0.13 non-GAAP diluted	$0.093* consensus
Gross Margin %	63%	65%	66%	66%	N/A
Adjusted EBITDA ($USD Millions)	$11.56	$21.15	$28.40	$24.27	$18–$20 guidance
Adjusted EBITDA Margin %	6%	11%	14%	12%	~9–10% midpoint

Notes: Primary EPS shown aligns to non-GAAP diluted EPS where provided in press releases. Q4 2025 consensus values marked with asterisks are from S&P Global.*

Segment Revenue and Mix

Segment Metric	Q3 2024	Q3 2025
Enterprise Subscription Revenue ($M)	$125.52	$132.28
Enterprise Other Revenue ($M)	$0.60	$0.52
Enterprise Total Revenue ($M)	$126.12	$132.80
Consumer Subscription Revenue ($M)	$8.15	$11.66
Consumer Transactional & Other Revenue ($M)	$61.14	$51.22
Consumer Total Revenue ($M)	$69.29	$62.88
Consolidated Total Revenue ($M)	$195.42	$195.68
Segment Adjusted Gross Margin (Enterprise)	74%	75%
Segment Adjusted Gross Margin (Consumer)	54%	57%

KPIs and Cash Flow

KPI	Q1 2025	Q2 2025	Q3 2025
UB Customers (#)	17,216	17,107	17,111
UB ARR ($M)	$519.0	$520.0	$527.2
UB NDRR (%)	96%	95%	93%
Large Customer NDRR (%)	100%	99%	97%
Paid Consumer Subscribers (#)	N/A	>200,000 milestone	294,000
Monthly Average Buyers (Consumer)	1.41	1.24	1.20
Net Cash from Operating Activities ($M)	$12.21	$44.20	$15.73
Free Cash Flow ($M)	$7.10	$39.01	$12.09
Cash & Marketable Securities ($M)	$358.11	$393.10	~$371.22 (Cash $235.93 + Mkt. Sec. $135.29)

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue ($M)	Q3 2025	$190–$195	Actual $195.68	Beat high end
Adjusted EBITDA ($M)	Q3 2025	$18–$20	Actual $24.27	Beat
Revenue ($M)	Q4 2025	N/A	$191–$194	New
Adjusted EBITDA ($M)	Q4 2025	N/A	$18–$20	New
Revenue ($M)	FY 2025	$784–$794	$787–$790	Narrowed
Adjusted EBITDA ($M)	FY 2025	$84–$89	$92–$94	Raised

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1 & Q2 2025)	Current Period (Q3 2025)	Trend
Subscription-first strategy	Q1: Introduced Career Accelerators; consumer down 8% YoY; UB ARR $519M . Q2: Consumer subscriptions reached 15% of segment; milestone 200K paid subs; guidance framed to subscription mix .	Aggressively accelerating consumer subscription-first; paid subs at 294K; consolidated subs 74% of total; transactional de-emphasis near-term .	Strengthening subscription mix; near-term top-line headwind
AI initiatives (Role Play, MCP, personalization)	Q2: Launched Role Play; MCP server beta; integrated Lummi; partnerships (Indeed, UKG) .	Hundreds of customers adopting role plays; building tiered monetization; personalization engine; instructor-led coaching/cohorts .	Product expansion and monetization ramp
Enterprise demand & NDRR	Q1: NDRR 96%; large 100%; +120 net new enterprise customers . Q2: NDRR 95%; large 99%; pipeline for $100K+ deals grew .	NDRR 93% (large 97%); expect stabilization in Q4; expansion driving pipeline; net new ARR $7M, with Q4 expected high-single-digit sequential .	Transition headwinds easing; pipeline quality improving
Consumer unit economics	Q1/Q2: Building subscription; improving mix .	Subscription LTV/CAC >3x vs ~1x transactional; annual subs imply revenue deferral; targeting certification and career outcomes .	Stronger economics; pacing defers revenue timing
Profitability outlook	Q1: Adj. EBITDA $21.1M (11% margin) . Q2: Adj. EBITDA $28.4M (14% margin); raised FY EBITDA guidance .	FY EBITDA raised to $92–$94M; 2026 at least ≥$90M despite investment; deliberate EBITDA vs growth trade-off .	Balanced reinvestment; sustained profitability

Management Commentary

Strategic pivot: “Bottom line, subscription customers are our best customers. That’s why growing that piece of our business faster is our top priority” — CEO Hugo Sarrazin .
Enterprise execution: “We generated $7 million of net new ARR… and… the pipeline… remains robust” — CFO Sarah Blanchard .
NDRR dynamics: “Two headwinds… downsells from COVID-era contracts… and… go-to-market team transitions… we’re optimistic that net dollar retention will stabilize in the fourth quarter” — CFO Sarah Blanchard .
Unit economics: “Transactional business operates at about a one-time LTV to CAC… subscription… well above three times… we’re accelerating our pivot” — CFO Sarah Blanchard .
2026 framing: “We will deliver more than $90 million in adjusted EBITDA next year even with the additional investments” — CFO Sarah Blanchard .

Q&A Highlights

Consumer subscription acceleration: Management detailed end-to-end changes in acquisition, CTA, cart optimization, reactivation, and new partnerships (Indeed conversion ~16x Udemy average) to drive subscription conversion; ad monetization roadmap expanding to sponsorships next year .
Enterprise pipeline vs retention: Expansion within existing customers is rising; COVID-era contract downsells nearing tail end; SMB churn addressed with a BPO partner; expect NDRR stabilization in Q4 .
EBITDA and investment in 2026: Street had higher prior expectations; management is prioritizing product investments (AI/LLM differentiation, personalization, platform for acquisition/mastery/validation) while maintaining ≥$90M adjusted EBITDA next year .
Role play adoption/monetization: >10,000 role plays; bespoke use cases; moving to tiered monetization aligned to usage/value; potential standalone offers targeted at non-L&D buyers .
Instructor economics: Management emphasized new monetization avenues (coaching, cohorts) and AI-enabled production tools to offset lower revenue share in subscription/UB models and support instructor community .

Estimates Context

Q3 beats: Revenue $195.68M vs $193.08M* consensus; Primary EPS $0.13 vs $0.094*; both above expectations. Adjusted EBITDA $24.27M vs guidance $18–$20M .*
Q4 setup: Company guides revenue $191–$194M vs S&P consensus $193.31M*; EPS consensus $0.093*; no EPS guidance provided. The subscription-first pivot implies annual subscription revenue deferrals (near-term headwind) but stronger unit economics .*
FY 2025: Adjusted EBITDA guidance raised to $92–$94M (prior $84–$89); revenue range narrowed to $787–$790M .*

Values retrieved from S&P Global.*

Key Takeaways for Investors

Near-term trade-off: The subscription-first consumer strategy is depressing transactional revenue and may cap near-term top-line growth, but it is improving mix quality (74% subscriptions) and unit economics (LTV/CAC >3x) and expanding margins over time .
Enterprise stabilization: Expect NDRR stabilization in Q4 as COVID-era downsells fade and GTM transition completes; expansion deals growing within a robust pipeline, adding net new ARR ($7M in Q3; aiming high-single-digit sequential in Q4) .
Profitability intact with reinvestment: FY adjusted EBITDA raised; 2026 targeted at ≥$90M despite stepped-up product/AI investments—suggesting durable profitability even as Udemy plays offense in AI-enabled learning .
Product catalysts: AI role plays, certification journeys (Pearson partnership), career journeys, instructor-led coaching/cohorts, and personalization engine are potential monetization and retention drivers; watch for tiered usage pricing and standalone offers .
Cash and buybacks: Solid cash/marketable securities (~$371M) and continued FCF generation; 4.1M shares repurchased under a $50M program—supportive of per-share metrics .
Trading implications: Q3 beat and FY EBITDA raise are positives; Q4 revenue guide bracketing consensus plus sequential margin compression may temper immediate enthusiasm. Stock likely sensitive to signals on NDRR stabilization, subscription growth velocity, and 2026 investment cadence .
Medium-term thesis: If subscription mix continues to expand and enterprise retention stabilizes, Udemy’s AI-enabled platform differentiation and stronger economics should support sustainable growth with improving predictability and margin leverage .

Appendix: Additional Press Releases

Udemy to announce Q3 2025 results on Oct 29, 2025 .
“Ready or Not: The Emerging Gap Between Awareness and Action in AI Transformation” research highlighting AI readiness gaps (YouGov survey of ~4,900 workers), reinforcing enterprise demand for structured upskilling .

Udemy, Inc. (UDMY)·Q3 2025 Earnings Summary