Udemy’s third quarter was marked by a positive market response, as the company’s subscription-based pivot fueled recurring revenue growth and margin improvement. Management cited the 8% year-over-year increase in consolidated subscription sales as a key driver, with CEO Hugo Sarrazin emphasizing, “Subscription customers are our best customers.” Progress in enterprise upskilling initiatives and strong consumer subscriber trends offset ongoing transactional revenue declines. CFO Sarah Blanchard also noted that operational discipline and the shift to higher-margin subscription products supported the company’s improved profitability.
Is now the time to buy UDMY? Find out in our full research report (it’s free for active Edge members).
Udemy (UDMY) Q3 CY2025 Highlights:
- Revenue: $195.7 million vs analyst estimates of $193.1 million (flat year on year, 1.4% beat)
- Adjusted EPS: $0.13 vs analyst estimates of $0.09 (38.7% beat)
- Adjusted EBITDA: $24.27 million vs analyst estimates of $19.65 million (12.4% margin, 23.5% beat)
- Revenue Guidance for Q4 CY2025 is $192.5 million at the midpoint, below analyst estimates of $196.4 million
- EBITDA guidance for the full year is $93 million at the midpoint, above analyst estimates of $87.39 million
- Operating Margin: -0.1%, up from -15.1% in the same quarter last year
- Net Revenue Retention Rate: 93%, down from 95% in the previous quarter
- Annual Recurring Revenue: $527.2 million vs analyst estimates of $537.7 million (4.5% year-on-year growth, 1.9% miss)
- Monthly Active Buyers: 17,111, up 263 year on year
- Market Capitalization: $780.2 million
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 Udemy’s Q3 Earnings Call
- Ryan MacDonald (Needham): asked how Udemy is incentivizing transactional customers to shift to subscriptions and about progress with ad monetization. CEO Hugo Sarrazin detailed digital marketing changes and emphasized the Indeed partnership’s impact on subscriber conversion.
- Yi Fu Lee (Cantor Fitzgerald): inquired about the impact of uncertain learning and development budgets on enterprise demand. Sarrazin explained organizations are consolidating vendors, and Udemy’s broader catalog is increasing win rates despite budget pressures.
- Josh Baer (Morgan Stanley): questioned the lower-than-expected EBITDA outlook for 2026 and sought clarity on investment priorities. CFO Sarah Blanchard attributed the change to accelerated subscription pivot and stated that most new investment will focus on AI-powered product development.
- Jason Tilchen (Canaccord Genuity): asked about enterprise adoption of AI Role Play features and monetization plans. Sarrazin described diverse use cases and said tiered pricing models will be introduced to better capture value.
- Nafeesa Gupta (Bank of America): raised concerns about lower instructor revenue share and potential churn. Sarrazin responded that Udemy is engaging instructors with new monetization options, including live coaching and production tools.
Catalysts in Upcoming Quarters
Going forward, our analyst team will monitor (1) the pace at which subscription revenue overtakes transactional declines in the consumer segment, (2) progress in monetizing new AI-powered tools and features such as role play and assessments, and (3) further expansion in large enterprise accounts and strategic partnerships. The impact of ongoing investments in product innovation and the stabilization of net dollar retention rates will also be crucial for Udemy’s long-term trajectory.
Udemy currently trades at $5.30, down from $6.40 just before the earnings. Is the company at an inflection point that warrants a buy or sell? The answer lies in our full research report (it’s free for active Edge members).
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