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UPWORK, INC (UPWK)·Q2 2025 Earnings Summary

Executive Summary

  • Record Q2: Revenue $194.9M (+1% y/y), non-GAAP diluted EPS $0.35, adjusted EBITDA $57.1M (29.3% margin). Both revenue and EPS beat S&P Global consensus by ~4% and ~27%, respectively (rev est. $187.6M*, EPS est. $0.275*) .
  • Guidance raised: FY25 revenue to $765–$775M and adjusted EBITDA to $206–$214M; non-GAAP EPS maintained at $1.14–$1.18 .
  • Strategic moves: Announced acquisition of Bubty and definitive agreement to acquire Ascen within new enterprise subsidiary, expanding into full-stack contingent workforce solutions with a $650B TAM; near-term H2’25 adj. EBITDA dilution (~$10M) but expected top-line benefit and meaningful EBITDA accretion from 2027 .
  • KPIs mixed: GSV per active client reached $5,002 (+5% y/y) and hours per contract hit an all-time high, but active clients declined to 796k (-8% y/y) .
  • Potential stock catalysts: Broad-based beat, FY guidance raise, accelerating AI and monetization trends, and enterprise M&A strategy to capture larger wallet share .

What Went Well and What Went Wrong

What Went Well

  • Strong execution and beats: Revenue $194.9M vs guidance ($184–$189M in Q1 guide) and non-GAAP EPS $0.35; adjusted EBITDA $57.1M with a record 29.3% margin. “We are raising our full-year guidance for both revenue and adjusted EBITDA” (CFO) .
  • AI and monetization flywheel: Ads & monetization revenue +17% y/y; Connects +19% y/y; Freelancer Plus +13% y/y; Uma-powered features lifted average spend/contract by 4% and boosted proposal submissions by 58% .
  • Business Plus traction: Active Business Plus clients +45% q/q; GSV +190% q/q; 35% of clients new to Upwork—evidence of stronger SMB up-market adoption .

Quotes:

  • CEO: “Upwork delivered an exceptional second quarter, significantly outperforming across all key financial metrics.”
  • CFO: “Adjusted EBITDA margin hit a new record high of 29.3%... we are raising our full year 2025 revenue and adjusted EBITDA guidance.”
  • CEO: “We’re harnessing these strategic levers to continue to lead the industry in this human and AI-powered era of work.”

What Went Wrong

  • Active clients down and enterprise softness: Active clients fell to 796k (-8% y/y), reflecting slower top-of-funnel acquisition; enterprise revenue $24.3M (-8% y/y) and down sequentially due to budget cuts/layoffs at larger customers and a pause in traditional enterprise sales efforts .
  • Macro headwinds persist: Management sees an unpredictable macro with no notable improvement vs prior quarter, still weighing on acquisition and active clients .
  • Near-term dilution from M&A: Expected ~$10M adjusted EBITDA dilution in H2’25 from acquisitions and integration costs; Q3 margin guide implies step-down to 25–26% as investments ramp .

Financial Results

Performance vs. Prior Periods

MetricQ2 2024Q1 2025Q2 2025
Revenue ($M)$193.129 $192.706 $194.939
GAAP Diluted EPS ($)$0.17 $0.27 $0.24
Non-GAAP Diluted EPS ($)$0.26 $0.34 $0.35
Gross Margin (%)77% 78% 78%
Adjusted EBITDA ($M)$40.835 $56.011 $57.061
Adjusted EBITDA Margin (%)21% 29% 29%
Net Income Margin (%)12% 20% 17%

Q2 2025 Actuals vs. S&P Global Consensus

MetricQ2 2025 ActualQ2 2025 Consensus*Surprise
Revenue ($M)$194.939 $187.559*+$7.380M (~+3.9%)*
Primary EPS ($)$0.35 $0.275*+$0.075 (~+27%)*

Values with * are retrieved from S&P Global.

Segment Revenue

Segment ($M)Q2 2024Q1 2025Q2 2025
Marketplace$166.786 $166.293 $170.660
Enterprise$26.343 $26.413 $24.279
Total Revenue$193.129 $192.706 $194.939

KPIs and Cash Generation

KPIQ2 2024Q1 2025Q2 2025
GSV ($000s)1,008,267 987,712 1,002,650
Active Clients (000s)868 812 796
GSV per Active Client ($)—4,912 5,002
Cash from Operations ($000s)39,203 36,965 72,514
Free Cash Flow ($000s)35,456 30,790 65,626

Note: “—” indicates not disclosed for that period.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueQ3 2025n/a$190M–$195M New
Adjusted EBITDAQ3 2025n/a$47M–$51M New
Non-GAAP Diluted EPSQ3 2025n/a$0.26–$0.28 New
Diluted SharesQ3 2025n/a140M–141M New
RevenueFY 2025$740M–$760M $765M–$775M Raised
Adjusted EBITDAFY 2025$190M–$200M $206M–$214M Raised
Non-GAAP Diluted EPSFY 2025$1.14–$1.18 $1.14–$1.18 Maintained
Diluted SharesFY 2025138M–142M 140M–142M Maintained
Stock-based CompensationFY 2025$60M–$65M $60M–$65M Maintained

Additional color: CFO expects ~$10M adjusted EBITDA dilution in H2’25 from acquisitions and integration costs, incorporated into the raised guidance .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2: Q4’24; Q-1: Q1’25)Current Period (Q2’25)Trend
AI/technology initiativesQ4’24: UMA enhancements and Objective AI acquisition; core search at all-time highs . Q1’25: Uma engagement +52% q/q; proposal writer +58%; several Q2 launches planned .Uma evolves into an AI “work agent” with instant interviews, video meetings, context-aware search; adoption +24% q/q; 4% lift in spend/contract; 58% more freelancers using Uma to bid .Accelerating
AI category demandQ4’24: AI-related GSV +60% y/y (FY) . Q1’25: AI-related GSV +25% y/y .AI-related GSV +30% y/y; prompt engineering +51% y/y; AI clients spend >3x average .Strong, accelerating
Ads & monetizationQ4’24: +51% y/y (FY) . Q1’25: +23% y/y .+17% y/y; Connects +19% y/y; Freelancer Plus +13% y/y .Growing, moderating y/y comps
Business Plus (SMB up-market)Q1’25: Active clients >100% q/q; 37% new clients .Clients +45% q/q; GSV +190% q/q; 35% new clients .Accelerating adoption
Enterprise strategyQ4’24: Enterprise revenue +4% y/y; Managed Services +12% y/y . Q1’25: preparing enhancements; sales pause not in press release.Bubty acquired; Ascen definitive agreement signed; forms full-stack enterprise offering; near-term rev modest; return to growth expected 2026; EBITDA accretive 2027 .LT positive, NT investment
MacroQ4’24: “Challenging macro environment” . Q1’25: similar tone .Unpredictable; no notable change vs Q1; company offsets via product/AI and monetization .Stable headwind
Take rate/pricingPrior: limited disclosure.Take rate 18.5% in Q2 (vs ~18% FY’24) from pricing experiments and monetization; expect stability near-term .Stable-to-slightly up

Management Commentary

  • CEO prepared remarks: “Upwork delivered another record quarter on both the top and bottom lines… outperformance driven by AI enhancement of the platform, accelerated client hiring in AI related work, ads and monetization strategies and our thriving Business Plus offering.”
  • CFO prepared remarks: “Adjusted EBITDA margin hit a new record high of 29.3%… we are raising our full year 2025 revenue and adjusted EBITDA guidance… firmly on track to achieve our 35% adjusted EBITDA margin target.”
  • On M&A strategy: “This combination… completes our enterprise offering… contract agnostic and global… a powerful combination… expect meaningful GSV and revenue growth starting in late 2026.”
  • On near-term dilution: “Combination of additional OpEx… will have a dilutive impact of approximately $10 million on adjusted EBITDA in the back half of 2025, all of which is contemplated in our raised guidance.”

Q&A Highlights

  • M&A integration and revenue model: Management emphasized Bubty and Ascen create a unified, digitally native enterprise solution across IC, AOR, EOR, staff augmentation, and SOW. Revenue recognition will be as work is executed; many contracts will be gross-revenue presentation items; meaningful revenue/GSV impact expected late 2026, EBITDA accretive in 2027 .
  • Macro outlook: No material change from Q1; slower acquisition environment still weighing on active clients; confidence stems from controllable levers (AI, monetization, enterprise strategy) rather than macro improvement .
  • Take rate: About 50 bps y/y uplift driven by value-based pricing and supply/demand experiments; Connects and subscriptions contributed. Expect relative stability through 2025 while testing to drive both GSV and revenue .
  • Business Plus behavior: Faster conversion and higher spend; 35% new to Upwork; consistent adoption patterns between new and established customers; seen as a material 2026 revenue driver .
  • Capital allocation: ~$38M repurchased in Q2; intent to remain active; subsequently approved an additional $100M authorization post-quarter .

Estimates Context

  • Q2 2025 print beat: Revenue $194.9M vs $187.6M consensus*; Primary EPS $0.35 vs $0.275* .
  • FY 2025 guidance vs Street: Company guided revenue to $765–$775M vs S&P Global consensus of ~$786.7M*, and non-GAAP EPS guide $1.14–$1.18 vs S&P Primary EPS consensus of ~$1.35*—setting a more conservative bar that may prompt modest consensus recalibration to guidance ranges .
  • EBITDA definition differences: Company reported adjusted EBITDA ($57.1M), whereas S&P “EBITDA” consensus tracks a different construct (consensus ~$47.1M*, S&P “actual” ~$34.6M*), making adjusted-vs-EBITDA comparisons non-like-for-like; investors should anchor profitability comparisons to non-GAAP EPS and adjusted EBITDA when assessing the beat .

Values with * are retrieved from S&P Global.

Key Takeaways for Investors

  • Beat-and-raise quarter: Upside on revenue and non-GAAP EPS, and higher FY revenue/adj. EBITDA guidance indicate sustained momentum from AI, monetization, and Business Plus .
  • Unit economics improving: Take rate uptick and all-time-high adjusted EBITDA margin reflect successful value-based pricing and AI-enabled cost discipline; company reiterates 35% long-term margin target .
  • Mixed KPIs with quality over quantity: GSV per active client +5% y/y and hours/contract at a high suggest larger, more complex projects, even as active clients decline on macro/top-of-funnel pressures .
  • Enterprise optionality: Bubty/Ascen expand TAM and should unlock larger, higher take-rate contracts; near-term EBITDA dilution (~$10M) is an investment for multi-year accretion beginning 2027 .
  • 2H setup: Q3 guide implies margin step-down to 25–26% as M&A costs absorb, but FY guidance is higher—suggesting continued operating leverage across 2H on marketplace strength .
  • Capital returns: Ongoing buybacks and a new $100M authorization post-quarter provide downside support and signal confidence in cash generation .
  • Estimate path: Street likely raises near-term EPS/revenue for Q3/Q4 off beats, but may align FY revenue/EPS closer to company guidance midpoint to reflect conservative macro and M&A absorption .

Additional Documents and Updates

  • Q2 2025 earnings press release (8-K Exhibit 99.1): results, non-GAAP reconciliations, and guidance .
  • Q2 2025 earnings call transcript: commentary on AI, monetization, enterprise strategy, take rate, and M&A financial impact .
  • Product updates (July 23): Uma evolves into an AI work agent with instant interviews and video meeting summaries .
  • Lifted launch (Aug 19): consolidates enterprise offering for contingent workforce management .
  • Share repurchase authorization (Sept 3): additional $100M approved post-quarter .