Upwork’s fourth quarter results were met with a significant negative market reaction, as investors focused on challenges highlighted by management. CEO Hayden Brown attributed the quarter’s performance to ongoing investments in AI-powered marketplace features, the rapid growth of the Business Plus offering for small and midsize businesses, and early wins in the enterprise segment. CFO Erica Gessert noted that while the company achieved record adjusted EBITDA margins and improvements in client retention, softness persisted in lower-value contract categories, and automation continued to pressure segments like writing and translation.
Is now the time to buy UPWK? Find out in our full research report (it’s free for active Edge members).
Upwork (UPWK) Q4 CY2025 Highlights:
- Revenue: $198.4 million vs analyst estimates of $197.6 million (3.6% year-on-year growth, in line)
- Adjusted EPS: $0.36 vs analyst estimates of $0.31 (15.5% beat)
- Adjusted EBITDA: $52.86 million vs analyst estimates of $51.63 million (26.6% margin, 2.4% beat)
- Revenue Guidance for Q1 CY2026 is $194.5 million at the midpoint, below analyst estimates of $200.7 million
- Adjusted EPS guidance for the upcoming financial year 2026 is $1.46 at the midpoint, in line with analyst estimates
- EBITDA guidance for the upcoming financial year 2026 is $245 million at the midpoint, in line with analyst expectations
- Operating Margin: 14.3%, up from 7.1% in the same quarter last year
- Active Clients: 785,000, down 47,000 year on year
- Market Capitalization: $1.72 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Upwork’s Q4 Earnings Call
- Eric Sheridan (Goldman Sachs) asked how investments in AI, Business Plus, and Lyfted would scale through 2026. CFO Erica Gessert explained that growth levers are expected to ramp, with acceleration in both marketplace and enterprise segments as the year progresses.
- Ron Josey (Citi) questioned the impact of AI-powered search and recommendation on user experience. CEO Hayden Brown described early positive results from features like Ooma Recruiter and noted ongoing investments to further streamline hiring and project management.
- John Young (Jefferies) probed the rationale behind Q1 guidance being weaker than expected. Gessert attributed this to the timing of enterprise integration, ramp-up of larger clients, and the lag in spend from new client acquisition.
- Maria Ripps (Canaccord) inquired about active client trends and the sufficiency of AI talent on the platform. Gessert cited declining churn and improving acquisition yields, while Brown stated no major talent bottleneck exists, supported by a partnership with OpenAI to certify more freelancers.
- Brad Erickson (RBC Capital Markets) asked what marketplace segments were still experiencing headwinds despite AI growth. Brown and Gessert pointed to continued declines in writing and translation, as well as a drop in small, transactional projects.
Catalysts in Upcoming Quarters
In the coming quarters, our analysts will watch (1) the pace and breadth of enterprise client onboarding to the Lyfted platform, (2) continued growth and monetization in AI-related categories, and (3) further penetration and retention improvements in Business Plus among SMBs. Progress on the rollout of the variable freelancer fee and execution of cost optimization initiatives will also be important markers for Upwork’s ability to deliver on its growth and margin targets.
Upwork currently trades at $13.22, down from $18.79 just before the earnings. At this price, is it a buy or sell? The answer lies in our full research report (it’s free).
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