Upwork Inc. (UPWK) delivered a standout first quarter in fiscal 2025.
Its shares surged more than 17% following an earnings report that beat expectations and signaled growing momentum in its AI-driven strategy. The freelancing platform posted record revenue of $192.7 million, surpassing the high end of its guidance range and coming in ahead of Wall Street estimates. Adjusted EBITDA reached a new high at $56 million, representing a 29% margin, and net income more than doubled from the prior year to $37.7 million.
The company’s gross margin stood at an impressive 78.3%, and free cash flow came in at $30.8 million. Cash and equivalents totaled $622 million at quarter’s end, giving Upwork ample liquidity to invest in growth and shareholder returns. The company repurchased 2.3 million shares for $33.1 million during the quarter, underlining its confidence in long-term prospects.
While overall Gross Services Volume (GSV) dipped 6.9% year-over-year to $812 million, Upwork saw GSV per active client rise for the first time in six quarters, aided by pricing power and improved platform monetization. The marketplace take rate climbed to 18.3% from 17.7% in the same period last year.
AI Takes Center Stage
Artificial intelligence is emerging as a critical growth lever for Upwork. CEO Hayden Brown highlighted that AI-related jobs now command a 40% premium on the platform, with AI-specific GSV growing 25% in the first quarter. Notably, prompt engineering alone grew 52% year-over-year. The company hosts more than 80,000 AI specialists, and its proprietary AI product “Uma” is enhancing user experience through smarter recommendations and client dashboards.
These efforts are also translating into stronger client engagement. The company’s Business Plus offering, which includes features like enterprise-vetted talent and net-30 payment terms, saw its active client base more than double quarter-over-quarter. Larger clients are contributing more spend, a trend management attributes to deliberate enterprise strategy shifts initiated last year.
Near-Term Headwinds, Long-Term Strategy
Despite the strong financials, Upwork continues to face challenges. Active client count remains under pressure due to broader macroeconomic uncertainty and what executives describe as “top-of-funnel demand softness.” Enterprise revenue remained flat year-over-year at $26.4 million as the company refocused sales efforts, while Managed Services revenue grew modestly by 3% to $15.3 million.
Upwork’s leadership acknowledged that Q1 is likely to be the high-water mark for margins in 2025 as the company reinvests in platform improvements and marketing. Still, they raised full-year adjusted EPS guidance to a midpoint of $1.16 and EBITDA guidance to $195 million, both ahead of analyst expectations.
Valuation Rebound and Market Reaction
Upwork shares, long stuck in a $12–$18 trading range, jumped to $16.05 following the report, their strongest single-day move in months. The upbeat earnings have renewed interest in the stock, which has lagged peers in the gig economy despite steady execution. Upwork’s market capitalization now stands at $1.79 billion.
The broader picture remains mixed—growth in revenue per client and platform take rate is encouraging, but overall client acquisition remains sluggish. Nevertheless, the first quarter’s performance reflects strong operational discipline and successful early returns from AI investments.
With a solid balance sheet, clear strategic priorities, and signs of pricing power, Upwork is positioning itself to not just weather macroeconomic volatility but potentially lead in the evolving landscape of AI-enabled remote work.
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