Executive Summary

Q1 2025 delivered a clean beat: revenue $192.7M exceeded guidance and Wall Street consensus, non-GAAP diluted EPS $0.34 beat consensus, and adjusted EBITDA reached a record $56.0M with a 29% margin, driven by disciplined OpEx and stronger marketplace performance . Revenue and EPS beats versus S&P Global consensus: $192.7M vs $188.5M*, $0.34 vs $0.272*.
Management reiterated FY2025 revenue ($740–$760M) and raised full-year adjusted EBITDA to $190–$200M; non-GAAP EPS guided to $1.14–$1.18 in the release (CFO on the call said $1.05–$1.10, a discrepancy noted below) .
Key drivers: ads & monetization revenue +23% YoY, rising take rate to 18.3%, AI-native product enhancements (Uma) improving conversion, hiring rates, and spend dynamics; Business Plus ramp with active clients up over 100% QoQ .
Near-term catalyst: raised EBITDA guidance, accelerating AI roadmap, and Business Plus momentum; watch Q2 reinvestment cadence (margins to step down sequentially) and top-of-funnel macro headwinds flagged by management .

What Went Well and What Went Wrong

What Went Well
- Record profitability: adjusted EBITDA $56.0M (29% margin), GAAP net income $37.7M (20% profit margin) on cost discipline and revenue outperformance .
- AI product momentum: Uma engagement +52% QoQ; proposal writer engagement +58%; homepage engagement +340%; AI-related GSV +25% YoY; prompt engineering +52% YoY . “We are incredibly excited by the early impact of our strategic product investments in AI,” — CEO Hayden Brown .
- Business Plus ramp: active clients +100% QoQ and 37% new to Upwork, improving conversion and spend for larger clients . “Business Plus…is performing well. Active clients…more than doubled quarter-over-quarter,” — CEO Hayden Brown .
What Went Wrong
- Active clients down YoY to 812k (from 872k) reflecting top-of-funnel demand pressure despite improving spend per client .
- Macro caution persists: management cited slight headwinds impacting top-of-funnel activity; Q2 margin guide steps down as the company reinvests in enterprise and AI .
- Segment mix: Enterprise revenue was relatively flat YoY at $26.4M as resources shifted toward Business Plus and strategic retained accounts; managed services up only 3% YoY to $15.3M .

Financial Results

Sequential performance

Metric	Q3 2024	Q4 2024	Q1 2025
Revenue ($USD Millions)	$193.8	$191.5	$192.7
GAAP Diluted EPS ($)	$0.20	$1.03	$0.27
GAAP Net Income ($USD Millions)	$27.8	$147.2	$37.7
Adjusted EBITDA ($USD Millions)	$43.2	$50.2	$56.0
Adjusted EBITDA Margin (%)	22%	26%	29%
Gross Margin (%)	78%	78%	78%
Marketplace Revenue ($USD Millions)	$167.3	$163.7	$166.3
Enterprise Revenue ($USD Millions)	$26.4	$27.8	$26.4

Year-over-year comparison

Metric	Q1 2024	Q1 2025
Revenue ($USD Millions)	$190.9	$192.7
GAAP Diluted EPS ($)	$0.13	$0.27
GAAP Net Income ($USD Millions)	$18.4	$37.7
Adjusted EBITDA ($USD Millions)	$33.3	$56.0
Gross Margin (%)	77%	78%
Active Clients (‘000, As of March 31)	872	812
GSV ($USD Millions, Q1)	$1,008.8	$987.7

Estimates comparison (Q1 2025)

Metric	Actual Q1 2025	Consensus (S&P Global) Q1 2025
Revenue ($USD Millions)	$192.706	$188.489*
Non-GAAP Diluted EPS ($)	$0.34	$0.272*
Adjusted EBITDA ($USD Millions)	$56.011	$48.328*

Values retrieved from S&P Global.*

Segment breakdown

Segment Revenue ($USD Millions)	Q1 2024	Q4 2024	Q1 2025
Marketplace	$164.3	$163.7	$166.3
Enterprise	$26.6	$27.8	$26.4

KPIs and monetization

KPI / Monetization	Q4 2024	Q1 2025
Active Clients (‘000)	832	812
GSV per Active Client ($)	4,815	4,912
Marketplace Take Rate (%)	—	18.3
Ads & Monetization Revenue YoY (%)	—	+23%
Connects Revenue YoY (%)	—	+25%
Freelancer Plus Subscription Revenue YoY (%)	—	+20%

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue ($USD Millions)	FY 2025	$740–$760	$740–$760	Maintained
Adjusted EBITDA ($USD Millions)	FY 2025	$180–$190	$190–$200	Raised
Non-GAAP Diluted EPS ($)	FY 2025	$1.05–$1.10	$1.14–$1.18	Raised (press release); CFO said $1.05–$1.10 (call)
Stock-Based Compensation ($USD Millions)	FY 2025	~~15/quarter (~~$60/year)	$60–$65	Raised upper bound
Revenue ($USD Millions)	Q2 2025	—	$184–$189	New
Adjusted EBITDA ($USD Millions)	Q2 2025	—	$45–$49	New
Non-GAAP Diluted EPS ($)	Q2 2025	—	$0.26–$0.28	New
Diluted Weighted-Average Shares (Millions)	Q2 2025	—	139–141	New

Note: Discrepancy between press release/8-K and call for FY2025 non-GAAP EPS guidance ($1.14–$1.18 vs $1.05–$1.10). Management should clarify in follow-ups .

Earnings Call Themes & Trends

Topic	Q3 2024 (Prev-2)	Q4 2024 (Prev-1)	Q1 2025 (Current)	Trend
AI/technology initiatives	Uma enhancements; Objective AI acquisition announced; AI-related GSV +36% YoY	Launches and integration continued; highest-ever margins; FY25 guide set	Uma engagement +52% QoQ; proposal writer +58%; homepage +340%; AI GSV +25% YoY; prompt engineering +52% YoY	Strengthening; accelerating product impact
Enterprise strategy	Modified offering; 42 new clients; managed services +5% YoY	Enterprise revenue +4% YoY for FY24; set FY25 guide	Transitional phase; focus on strategic retained accounts; managed services +3% YoY; Business Plus ramp to unlock larger client spend	Pivoting to Business Plus; steady enterprise
Ads & monetization	Revenues +35% YoY; Freelancer Plus +48% YoY	Ads & monetization +51% YoY in FY24	Ads & monetization +23% YoY; Connects +25% YoY; take rate 18.3%	Sustained growth; take rate up
Macro/tariffs/public sector	Macro challenges but resilient; repurchase program authorization	Macro still challenging; strong profitability	Slight top-of-funnel headwinds; no direct tariff exposure; public sector impacts minimal	Mixed macro; platform resilience
Performance marketing / LTV	—	—	Rebalanced spend for higher-LTV clients; activations improved QoQ for first time in over a year	Improving mix/quality
Capital allocation	$100M buyback authorization	Buybacks continued; FY25 profitability focus	~$67M buyback remaining; aim to offset SBC dilution	Ongoing repurchases

Management Commentary

“Revenue of $192.7 million exceeded the high end of our guidance range…record high adjusted EBITDA of $56 million and adjusted EBITDA margin of 29%” — CEO Hayden Brown .
“Gross margin reached 78.3%, and our adjusted EBITDA margin was our highest ever at 29%…firmly on track to achieve our 5-year 35% adjusted EBITDA margin target” — CFO Erica Gessert .
“Upwork Business Plus…active clients more than doubled quarter-over-quarter…approximately 40%…being new customers” — CEO Hayden Brown .
“Marketplace take rate was 18.3% in Q1 2025…driven by continued growth in our ads and monetization business. We expect relatively stable take rates throughout 2025” — CFO Erica Gessert .
“We are reiterating our revenue guidance…increasing our full year adjusted EBITDA guidance to…$190 million to $200 million” — CFO Erica Gessert .

Q&A Highlights

Macro and guidance inputs: Slight top-of-funnel weakness offset by stronger customer spend; both dynamics embedded in guidance . No direct tariff exposure; public sector impacts minimal .
AI monetization and platform effects: AI talent drives higher rates and volumes; Uma features lifting proposals, hiring rates, contract volumes, time-to-hire/time-to-start .
Larger customers and marketing mix: Shift to higher-LTV channels and Business Plus unlocking larger-client spend; improved activations QoQ .
Take rate trajectory: Near-term stability to allow experimentation; meaningful expansion targeted in 2026; ads & monetization +23% YoY; Connects record quarter .
Margin cadence and reinvestment: Q1 is high watermark for margins in 2025; reinvest in enterprise and AI enablement in Q2/Q3 while maintaining long-term margin expansion path .
Capital allocation: ~$67M remaining under $100M buyback; intent to offset SBC dilution; opportunistic deployment beyond .

Estimates Context

Q1 2025 actuals vs consensus: revenue $192.706M vs $188.489M*, non-GAAP diluted EPS $0.34 vs $0.272*, adjusted EBITDA $56.011M vs $48.328M* — broad-based beat driven by stronger marketplace dynamics, ads & monetization, and cost discipline . Values retrieved from S&P Global.*
Note: Companies and analysts may define EBITDA differently (GAAP vs adjusted). Upwork reports adjusted EBITDA; consensus EBITDA definition may vary. Comparability should be confirmed against analyst models.*

Key Takeaways for Investors

Quality beat with record profitability: Revenue and EPS above consensus; adjusted EBITDA margin at 29% indicates strong cost control and improving mix (ads/monetization) .
Guidance positive and a source of upside optionality: FY2025 adjusted EBITDA raised to $190–$200M; revenue reiterated; watch for clarification on FY EPS guidance discrepancy (press release $1.14–$1.18 vs call $1.05–$1.10) .
AI as a structural tailwind: Uma engagement metrics and AI-related category growth point to durable conversion and spend improvements across the marketplace .
Larger-client strategy working: Business Plus active clients doubled QoQ; improving conversion and spend, supporting medium-term top-line reacceleration .
Near-term margin step-down is planned: Q2 adjusted EBITDA guide $45–$49M as the company reinvests in enterprise and AI; margin expansion target (35% adjusted EBITDA over five years) remains intact .
Monetization strength supports take rate: Ads & monetization +23% YoY; Connects +25% YoY; take rate at 18.3% in Q1 with stability expected in 2025 and targeted expansion in 2026 .
Capital returns continue: ~$67M remaining under buyback with intent to offset SBC dilution — potential support for per-share metrics and sentiment .

UPWORK, INC (UPWK)·Q1 2025 Earnings Summary