Executive Summary

Record quarter: revenue $201.7M (+4% YoY), GAAP net income $29.3M (15% margin), and adjusted EBITDA $59.6M (30% margin); management raised FY25 revenue and adjusted EBITDA guidance .
Results materially beat S&P Global consensus: revenue +$8.4M (+4.3%) and non-GAAP EPS +$0.07 (+25.9%) versus estimates; beat was driven by AI-enabled product improvements, Business Plus momentum, and higher marketplace take rate * * *.
Guidance: Q4 revenue $193–$198M, adjusted EBITDA $49–$52M, non-GAAP EPS $0.31–$0.33; FY25 revenue $782–$787M and adjusted EBITDA $222–$225M; FY non-GAAP EPS $1.35–$1.37 .
Strategic catalysts: accelerated AI-related GSV (+53% YoY), agentic sourcing for SMBs (Business Plus), and Lifted enterprise subsidiary (Bubty/Ascen) positioning for late-2026 ramp; $100M incremental repurchase authorization supports capital returns .

What Went Well and What Went Wrong

What Went Well

“We crossed the $200 million revenue milestone... adjusted EBITDA hit an all-time high... at a record 30% adjusted EBITDA margin,” underscoring strong profitability expansion and operating discipline .
AI growth inflecting: AI-related GSV +53% YoY; prompt engineering GSV +71% YoY; UMA Proposal Writer increased UMA-generated proposals by 15%—fueling engagement and conversion .
Business Plus traction: GSV +33% QoQ; active clients +36% QoQ; median time to shortlist reduced >75%, evidencing SMB adoption and value creation .

What Went Wrong

Gross margin compressed 77% vs 78% YoY; GAAP diluted EPS down to $0.21 from $0.24 in Q2 as integration costs and seasonality loom in Q4 .
Active clients fell to 794k (-7% YoY), consistent with broader top-of-funnel demand pressure; focus remains on higher-LTV customers .
Enterprise revenue grew only +3% YoY and is expected to be margin-dilutive in 2026 during Lifted integration before turning accretive in 2027 .

Financial Results

Metric	Q3 2024	Q1 2025	Q2 2025	Q3 2025
Revenue ($USD Millions)	$193.8	$192.7	$194.9	$201.7
GAAP Diluted EPS ($USD)	$0.20	$0.27	$0.24	$0.21
Non-GAAP Diluted EPS ($USD)	$0.29	$0.34	$0.35	$0.36
Gross Margin %	78%	78%	78%	77%
Adjusted EBITDA ($USD Millions)	$43.2	$56.0	$57.1	$59.6
Adjusted EBITDA Margin %	22%	29%	29%	30%
Net Income ($USD Millions)	$27.8	$37.7	$32.7	$29.3
Net Income Margin %	14%	20%	17%	15%

Segment breakdown

Segment	Q1 2025	Q2 2025	Q3 2025
Marketplace revenue ($USD Millions)	$166.3	$170.7	$174.6
Enterprise revenue ($USD Millions)	$26.4	$24.3	$27.2

KPIs

KPI	Q1 2025	Q2 2025	Q3 2025
GSV ($USD Millions)	$987.7	$1,002.7	$1,017.7
Active clients (000s)	812	796	794
GSV per active client ($USD)	$4,912	$5,002	$5,036
Cash from Operations ($USD Millions)	$37.0	$72.5	$75.1
Free Cash Flow ($USD Millions)	$30.8	$65.6	$69.4

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue	Q4 2025	N/A	$193–$198M	Init. issued
Adjusted EBITDA	Q4 2025	N/A	$49–$52M	Init. issued
Non-GAAP diluted EPS	Q4 2025	N/A	$0.31–$0.33	Init. issued
Diluted weighted-average shares	Q4 2025	N/A	138–140M	Init. issued
Revenue	FY 2025	$765–$775M (Q2 guide)	$782–$787M	Raised
Adjusted EBITDA	FY 2025	$206–$214M (Q2 guide)	$222–$225M	Raised
Non-GAAP diluted EPS	FY 2025	$1.14–$1.18 (Q2 guide)	$1.35–$1.37	Raised
Diluted weighted-average shares	FY 2025	140–142M (Q2 guide)	140–142M	Maintained
Stock-based compensation	FY 2025	$60–$65M (Q2 guide)	≈$65M	Maintained high end

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1 & Q2)	Current Period (Q3)	Trend
AI/UMA product initiatives	UMA adoption surged; context-aware search; proposal writer usage +58%; AI-related GSV +25–30% YoY	AI-related GSV +53% YoY; prompt engineering +71% YoY; $100M 2025 incremental GSV from AI search/recommendation stack	Accelerating
SMB (Business Plus)	Active clients +45% QoQ; GSV +190% QoQ; 35–37% net-new clients	Active clients +36% QoQ; GSV +33% QoQ; agentic sourcing reduces shortlist time >75%	Sustained strength
Enterprise/Lifted	Announced Bubty and agreement for Ascen; small 2H25 revenue benefit; accretive in 2027	Launch of Lifted; onboarding first customers by early 2026; 2026 dilutive ~200bps, accretive in 2027	Build-phase; demand strong
Take rate & monetization	Take rate up; variable freelancer fee tests began; ads/monetization +17–23% YoY	Marketplace take rate 18.9%; variable fee impact minimal in Q3; ads & monetization +19% YoY	Positive; broader rollout expected 2026
Macro backdrop	Top-of-funnel pressure; no tariff exposure; stable hourly rates; hours/contract rising	Macro stable vs Q2; normal Q4 seasonality; GSV growth driven by initiatives	Stable; company-led drivers
Capital allocation	Buybacks active; $170M repurchased past 18 months	Additional $100M repurchase authorized (Sept); $31M Q3 repurchases	Ongoing returns

Management Commentary

Hayden Brown (CEO): “We exceeded $200 million in quarterly revenue... with GAAP net income of $29.3 million... our AI-native platform, AI category growth, and tailored offerings for SMBs are delivering tangible results” .
Erica Gessert (CFO): “We have resumed GSV growth two quarters earlier than planned... adjusted EBITDA was $59.6 million... we are increasing our full-year revenue guide to $782–$787 million” .
On Lifted: “We are working at lightning speed... onboarding our first customers... by early 2026... investment in Lifted... about two percentage points of dilution next year” .
On AI as tailwind: “AI is causing the fractionalization of traditional full-time work... driving more demand into the contingent work ecosystem and Upwork specifically” .

Q&A Highlights

Enterprise integration: Early indicators strong—multi-million dollar RFPs, stronger top-of-funnel interest; expect late-2026 acceleration and EBITDA accretion in 2027 .
AI-driven marketplace: $100M incremental 2025 GSV from rebuilt search/recommendation stack; boosted profiles impactful; AI category growth offers “ton of run room” .
Business Plus features: UMA Recruiter agentic sourcing is Business Plus-only; evaluating versions for basic plan .
Margins and investment cadence: 2026 margin dilution ~200bps from Lifted but no step back overall; maintaining 35% LT adjusted EBITDA target .
Capital returns: Continued buybacks; $31M in Q3; likely ongoing purchases at current levels .

Estimates Context

Metric	Q1 2025	Q2 2025	Q3 2025
Revenue actual ($USD Millions)	$192.706	$194.939	$201.730
Revenue Consensus Mean ($USD Millions)	$188.489*	$187.559*	$193.318*
Surprise ($USD Millions, %)	$4.217, 2.2%*	$7.381, 3.9%*	$8.412, 4.3%*
EPS actual (Non-GAAP diluted, $)	$0.34	$0.35	$0.36
Primary EPS Consensus Mean ($)	$0.272*	$0.275*	$0.286*
Surprise ($, %)	$0.068, 25.0%*	$0.075, 27.1%*	$0.074, 25.9%*
Revenue - # of Estimates	11*	11*	11*
Primary EPS - # of Estimates	8*	8*	8*

Values retrieved from S&P Global.*

Implications: Three consecutive quarters of revenue and EPS beats—driven by AI-enabled product velocity and take rate strategies—suggest estimates likely need upward revisions for Q4 and FY, particularly on non-GAAP EPS given stronger FCF conversion and sustained margin discipline *.

Key Takeaways for Investors

Durable beat-and-raise pattern—strongest yet—anchored by AI product execution and SMB upmarket motion; expect continued estimate upward bias near term * *.
Watch Q4 seasonal dip but focus on margin resilience (25–26% adjusted EBITDA guide) while absorbing Lifted integration costs; 35% LT margin target reiterated .
Lifted enterprise strategy is the 2026–27 growth call option; anticipate 2026 dilution and sales-cycle lag followed by 2027 accretion .
Business Plus is a proven growth lever: faster hiring, larger contracts, and superior spend; agentic features remain a differentiator in SMB segment .
AI is a structural tailwind: higher project complexity and hours/contract; categories like prompt engineering expanding rapidly—supports multi-year GSV acceleration .
Capital returns add downside support: $100M additional repurchase capacity; strong OCF/FCF trajectory sustains buybacks .
Monitor take rate initiatives (variable fees) and ads/monetization growth (+19% YoY) as incremental drivers to revenue quality and resilience into 2026 .

UPWORK, INC (UPWK)·Q3 2025 Earnings Summary