Online learning platform Udemy (NASDAQ: UDMY) reported revenue ahead of Wall Street’s expectations in Q1 CY2025, with sales up 1.8% year on year to $200.3 million. The company expects next quarter’s revenue to be around $197 million, close to analysts’ estimates. Its non-GAAP profit of $0.12 per share was 21.4% above analysts’ consensus estimates.
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Udemy (UDMY) Q1 CY2025 Highlights:
- Revenue: $200.3 million vs analyst estimates of $197.4 million (1.8% year-on-year growth, 1.5% beat)
- Adjusted EPS: $0.12 vs analyst estimates of $0.10 (21.4% beat)
- Adjusted EBITDA: $21.15 million vs analyst estimates of $18.36 million (10.6% margin, 15.2% beat)
- The company dropped its revenue guidance for the full year to $783 million at the midpoint from $795 million, a 1.5% decrease
- EBITDA guidance for the full year is $82 million at the midpoint, above analyst estimates of $79.4 million
- Operating Margin: -2.2%, up from -11.5% in the same quarter last year
- Free Cash Flow Margin: 3.5%, similar to the previous quarter
- Net Revenue Retention Rate: 96%, down from 98% in the previous quarter
- Annual Recurring Revenue: $519 million at quarter end, up 8.3% year on year
- Monthly Active Buyers: 17,216, up 1,146 year on year
- Market Capitalization: $1.06 billion
StockStory’s Take
Udemy’s first quarter results highlighted management’s focus on accelerating AI-powered learning solutions and transitioning toward a subscription-first model. CEO Hugo Sarrazin, on his first earnings call with Udemy, emphasized the company’s ability to deliver measurable business outcomes for enterprises, noting recent large deals where clients consolidated their reskilling platforms with Udemy. He stressed, “AI is creating a need for new types of skills that didn’t exist before,” and outlined steps to enhance content packaging and go-to-market execution for AI-driven offerings.
Looking ahead, management revised its full-year revenue guidance downward, reflecting increased macroeconomic uncertainty and persistent consumer demand softness—particularly in North America and EMEA. CFO Sarah Blanchard explained that while Udemy continues to invest in AI and platform capabilities, a shift toward more prudent top-line expectations was warranted given mixed economic signals. She stated, “Our outlook bakes in a healthy degree of conservatism on the top line while raising our outlook on the bottom line.”
Key Insights from Management’s Remarks
Management’s commentary on the Q1 call centered on Udemy’s rapid pivot toward AI-powered learning and a greater emphasis on recurring revenue. Key themes included evolving enterprise customer needs, the company’s expanding product roadmap, and continued operational changes.
- AI-Powered Learning Initiatives: Management detailed the rollout of new AI-based features, such as GenAI Skill Packs and AI-assisted role play, designed to personalize learning experiences and reduce program creation time for enterprise customers.
- Subscription Model Expansion: A primary business shift is underway, with increased emphasis on moving both consumer and enterprise users to subscription-based offerings, aiming for more predictable and high-quality recurring revenue streams.
- Enterprise Customer Consolidation: The company cited multiple large enterprise wins where clients consolidated learning platforms with Udemy, attributing these to the breadth of content and ability to demonstrate ROI, such as improved employee retention.
- Localization and Global Growth: Management announced a full-stack localization strategy, targeting specific high-potential international markets with tailored product experiences and campaigns to drive deeper engagement and market share.
- Organizational Changes: Udemy appointed its first Chief Customer Experience Officer, tasked with driving expansion and retention among existing enterprise customers—highlighting the company’s focus on increasing penetration within its customer base.
Drivers of Future Performance
Management expects that the combination of AI-powered offerings, a push for more predictable subscription revenue, and operational discipline will be the main themes shaping Udemy’s performance for the remainder of the year. However, macroeconomic caution and consumer weakness remain notable headwinds.
- AI Integration and Monetization: The rollout of new AI capabilities is expected to deepen engagement with both enterprise and individual learners, with future monetization strategies being actively explored.
- Subscription Revenue Shift: A continued move away from one-time transactions toward subscriptions is seen as critical for improving revenue visibility and customer lifetime value, though the transition could temporarily affect growth rates.
- Geographic and Segment Headwinds: The company highlighted ongoing softness in consumer demand—especially in North America and EMEA—and potential caution in some enterprise verticals, with management remaining attentive to economic trends and regional performance.
Top Analyst Questions
- Ryan MacDonald (Needham & Company): Asked about CEO Hugo Sarrazin’s priorities for the near term, to which Sarrazin cited enhanced AI content packaging, increased focus on subscriptions, and leveraging partnerships.
- Terry Tillman (Truist Securities): Questioned the potential for immediate payback from the consumer subscription push; management responded that while growth is promising, transactional revenue could see some temporary impact as users shift models.
- Josh Baer (Morgan Stanley): Inquired about changes to subscription offerings, with Sarrazin stating that adjustments in pricing, packaging, and marketing are underway, but will be carefully tested to avoid top-line disruption.
- Yi Fu Lee (Cantor Fitzgerald): Asked about monetizing AI capabilities, and management explained plans to create targeted AI packages and explore premium offerings, with ongoing experimentation around pricing and segmentation.
- Nafeesa Gupta (Bank of America): Queried the geographic nature of consumer softness, receiving the response that price sensitivity and lower average selling prices were most pronounced in North America and EMEA.
Catalysts in Upcoming Quarters
In the quarters ahead, the StockStory team will monitor (1) the pace of enterprise adoption of Udemy’s new AI-powered features and the impact on customer expansion, (2) the effectiveness of the company’s shift toward subscription revenue, particularly in the consumer segment, and (3) management’s ability to drive deeper penetration in existing enterprise accounts through its new customer experience initiatives. The degree to which macroeconomic headwinds moderate will also be a key factor shaping future results.
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