Core Insights - Udemy has announced the phased rollout of a new AI-powered microlearning experience aimed at transforming skill development on its platform, catering to the evolving needs of learners and instructors [1][4]. Group 1: AI-Powered Microlearning Experience - The new microlearning approach will convert long-form video courses into adaptive, engaging, and interactive experiences optimized for both mobile and desktop learning [2][3]. - Instructors will utilize a "human-in-the-loop" method to review and validate microlearning content, ensuring quality before it reaches learners [3][4]. - The rollout of these instructor-validated microlearning experiences is scheduled to occur throughout 2026, accessible via Udemy.com, the mobile app, and enterprise learning environments [3][4]. Group 2: Instructor Engagement and Role - Instructors are viewed as central to the skill development process, acting as creative directors who curate and validate learning experiences [4][7]. - The AI-powered microlearning model emphasizes the importance of human insights and lived experiences in teaching, reinforcing Udemy's commitment to its instructor community [4][7]. - Opportunities for both existing and new instructors specializing in short-form, interactive learning experiences will be expanded [7]. Group 3: Market Position and Clientele - Udemy serves thousands of companies, including notable clients such as Ericsson, Samsung SDS America, and Volkswagen, providing enterprise solutions to build agile teams [8]. - The platform combines on-demand, multi-language content with real-time innovation to deliver personalized learning experiences [6].

Core Insights - Udemy has introduced new instructor-focused offerings to enhance the role of human expertise in the AI-driven learning landscape [1][2] - The global demand for upskilling is increasing, with nearly 60% of professionals requiring reskilling due to rapid changes driven by AI [1] Group 1: New Offerings - Instructor Subscriptions will allow instructors to offer live sessions, short-form content, and community features, aimed at generating recurring revenue and enhancing learner engagement [3] - AI-Powered Micro-Learning tools will enable instructors to convert long-form courses into interactive micro-learning experiences, catering to learners' needs in real-time [3] - A $2.5 million Content Innovation Fund will support instructors in developing next-generation learning formats, including subscription models and AI-driven content [4] Group 2: Market Trends - Learner expectations are shifting towards modular, continuous, and skills-focused learning experiences, prompting Udemy to adapt its offerings [5] - The innovations are designed to create new revenue streams for instructors beyond traditional course formats, thereby strengthening Udemy's subscription ecosystem [5] Group 3: Company Overview - Udemy is positioned as an AI-powered skills acceleration platform, helping organizations and individuals develop essential skills for a rapidly evolving workplace [7] - The company serves thousands of enterprises globally, including notable clients like Ericsson, Samsung, and The World Bank, emphasizing its role in workforce development [7]

Core Insights - Udemy and Mila have announced a partnership aimed at accelerating responsible AI skill development for the global workforce [1][2] - The collaboration will focus on creating scalable AI learning programs that emphasize ethical and responsible AI application [1][3] Partnership Details - Starting in January, new responsible AI learning programs will be launched, combining Udemy's global reach with Mila's expertise in responsible AI research [2] - The programs will blend technical skills with strategic and ethical decision-making, catering to organizations at various stages of their AI journey [2][3] Organizational Impact - The partnership aims to equip organizations with practical skills and frameworks necessary for safe and strategic AI adoption [3] - Professionals will gain access to courses on responsible AI, ethics, governance, and practical decision-making [6] Educational Offerings - The learning solutions will include applied training on integrating responsible practices into workflows and insights from Mila researchers on emerging trends [6] - Flexible learning formats will be available, including on-demand content and expert-led sessions for enterprise teams [6] About Udemy - Udemy is an AI-powered skills acceleration platform serving 82 million learners and over 17,000 organizations globally [1][4] - The platform provides personalized experiences to help organizations develop the necessary capabilities for a rapidly evolving workplace [4] About Mila - Mila is the world's largest academic AI research center, specializing in deep learning and dedicated to advancing AI for the benefit of all [5] - Founded by Yoshua Bengio, Mila is supported by the Canadian government and recognized for its influential research and leadership in responsible AI [5]

Core Insights - Udemy has formed a strategic partnership with Emtrain to enhance compliance and workplace culture training for enterprise customers, addressing rising regulatory pressures and improving workforce performance [1][3][4] Company Overview - Udemy is an AI-powered skills acceleration platform that provides on-demand learning solutions to organizations globally, helping them build necessary capabilities for a rapidly evolving workplace [5][6] - Emtrain specializes in compliance training and risk intelligence solutions, focusing on managing employee behavior and preventing issues through scenario-based courses [7] Partnership Details - The collaboration will allow organizations to develop critical skills in areas such as data privacy, anti-harassment, and AI governance through Emtrain's content on Udemy's platform [2][3] - This partnership aims to create a comprehensive workforce enablement solution, making it easier for employees to develop vital skills seamlessly in their work environment [1][3] Market Context - The global corporate compliance training market is valued in the multibillion-dollar range, with increasing demand due to rising regulatory complexity and evolving data privacy and cybersecurity requirements [3] - Compliance training has been shown to reduce unhealthy behaviors by 25% and improve adherence to cybersecurity and regulatory protocols, although 7% of employees still perceive gaps in leadership structures [3] Industry Challenges - Harassment and discrimination claims have surged by 47%, indicating a growing need for effective compliance programs that enhance both employee and business skills [4] - Organizations are increasingly seeking a single partner for skills development to address these challenges and improve compliance frameworks [4]

Core Insights - Udemy, Inc. is recognized as a promising EdTech stock, with KeyBanc maintaining an Overweight rating while lowering the price target to $9 from $11 due to an accelerated shift towards subscription models [1][3]. Financial Performance - For Q3 2025, Udemy reported revenue of approximately $195.7 million, slightly exceeding expectations, with a strong emphasis on the transition to recurring subscription revenue [2][3]. - The company highlighted continued traction in its subscription businesses, which aligns with its strategic update earlier in the year [3]. Market Position and Strategy - Udemy operates a global learning marketplace and an enterprise offering, Udemy Business, providing curated course libraries and hands-on learning tools to organizations worldwide [4]. - The commentary surrounding the Q3 results focused on the implications of the subscription mix for both near-term growth and long-term sustainability [2][3].

Core Insights - Udemy, Inc. reported revenue of $195.68 million for the quarter ended September 2025, reflecting a year-over-year increase of 0.1% and an EPS of $0.13, up from $0.07 a year ago [1] - The revenue exceeded the Zacks Consensus Estimate of $193.15 million by 1.31%, and the EPS surpassed the consensus estimate of $0.10 by 30% [1] Financial Performance Metrics - The Enterprise Segment's Annual Recurring Revenue was $527.2 million, slightly below the average estimate of $529.52 million from two analysts [4] - The Consumer Segment had a monthly average of 1.2 million buyers, which was lower than the estimated 1.27 million [4] - Total customers in the Enterprise Segment reached 17,111, compared to the average estimate of 17,241 [4] - Revenue from the Enterprise Segment was $132.8 million, exceeding the estimated $129.78 million, representing a year-over-year increase of 5.3% [4] - Revenue from the Consumer Segment was $62.88 million, slightly below the estimated $63.15 million, showing a year-over-year decline of 9.3% [4] Stock Performance - Udemy's shares have returned -2.3% over the past month, while the Zacks S&P 500 composite increased by 3.8% [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating potential performance in line with the broader market in the near term [3]

Core Insights - Udemy, Inc. reported quarterly earnings of $0.13 per share, exceeding the Zacks Consensus Estimate of $0.10 per share, and showing an increase from $0.07 per share a year ago, resulting in an earnings surprise of +30.00% [1] - The company achieved revenues of $195.68 million for the quarter ended September 2025, surpassing the Zacks Consensus Estimate by 1.31% and slightly up from $195.42 million year-over-year [2] - Udemy has consistently surpassed consensus EPS and revenue estimates over the last four quarters [2] Earnings Outlook - The future performance of Udemy's stock will largely depend on management's commentary during the earnings call and the sustainability of its immediate price movement based on the recently released numbers [3][4] - The current consensus EPS estimate for the upcoming quarter is $0.10 on revenues of $196.65 million, and for the current fiscal year, it is $0.47 on revenues of $789.99 million [7] Industry Context - The Internet - Software industry, to which Udemy belongs, is currently ranked in the top 30% of over 250 Zacks industries, indicating a favorable outlook compared to the bottom 50% [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5]

Revenue Performance - Revenue for the three months ended September 30, 2025, was $195.7 million, a slight increase of $0.3 million compared to $195.4 million in the same period last year, representing a flat year-over-year growth [191]. - For the nine months ended September 30, 2025, total revenue was $595.9 million, an increase of $9.2 million or 2% compared to $586.6 million in the prior year [196]. - Enterprise segment revenue for the three months ended September 30, 2025, was $132.8 million, accounting for 68% of total revenue, up 5% from $126.1 million in the prior year [192]. - Consumer segment revenue for the three months ended September 30, 2025, was $62.9 million, a decrease of 9% from $69.3 million in the same period last year [194]. - The Enterprise segment revenue for the nine months ended September 30, 2025, was $389.8 million, representing a 7% increase from $364.3 million in the same period last year [197]. - The Consumer segment revenue for the nine months ended September 30, 2025, was $206.0 million, a decrease of 7% from $222.3 million in the prior year [198]. Cost and Expenses - Cost of revenue for Q3 2025 was $66.8 million, an 8% decrease from $72.4 million in Q3 2024, driven by a $6.2 million decrease in content costs [200]. - Total operating expenses for Q3 2025 were $129.0 million, a 15% decrease from $152.5 million in Q3 2024 [209]. - Research and development expenses for the three months ended September 30, 2025, were $25.6 million, down from $33.0 million in the same period last year [186]. - General and administrative expenses for the three months ended September 30, 2025, were $21.9 million, slightly down from $22.3 million in the prior year [186]. - Sales and marketing expenses for Q3 2025 were $81.5 million, a 5% decrease from $86.0 million in Q3 2024 [211]. - The company expects general and administrative expenses as a percentage of revenue to decrease over the long term due to greater operational scale and efficiency [179]. Profitability - The company reported a net income of $1.6 million for the three months ended September 30, 2025, compared to a net loss of $25.3 million in the same period last year [186]. - Adjusted EBITDA for Q3 2025 was $24.3 million, compared to $11.6 million in Q3 2024, reflecting a margin of 12% [249]. - Net income for Q3 2025 was $1.6 million, a significant improvement from a loss of $25.3 million in Q3 2024 [249]. - The company recognized a significant increase in net income driven by a shift towards Enterprise segment revenue and reduced operational costs [250]. Subscriber and Customer Metrics - Udemy's consumer marketplace has attracted over 80 million learners across 180 countries, with over 250,000 courses available [149]. - The number of paid Consumer subscribers increased to 294,156 in Q3 2025, representing an 88% growth compared to the previous year [236]. - Monthly average buyers decreased by 9% year-over-year to 1,200 in Q3 2025, and by 5% to 1,284 for the nine months ended September 30, 2025 [238]. - Udemy Business (UB) customers increased to 17,111 as of September 30, 2025, representing a 2% growth from 16,848 in 2024 [227]. - Udemy Business Annual Recurring Revenue (ARR) reached $527.2 million for the nine months ended September 30, 2025, a 4% increase from $504.6 million in the prior year [229]. - Udemy Business net dollar retention rate decreased to 93% in Q3 2025 from 99% in Q3 2024, while the large customer net dollar retention rate fell to 97% from 104% [233]. Strategic Initiatives - The company plans to repurchase up to $50 million in shares as part of its share repurchase program approved in September 2025 [153]. - Udemy's dual-revenue model includes subscription-based plans and single-course purchases, allowing for both recurring revenue and individual transaction value [150]. - The company is focusing on expanding its international footprint, particularly in regions with large underserved adult and corporate learning populations [164]. - AI investments are enhancing Udemy's platform capabilities, enabling personalized and measurable skill development experiences [151]. - The company plans to continue investing in the growth and development of its platform, with potential future capital raises if available funds are insufficient [260]. Cash Flow and Financial Position - For the three months ended September 30, 2025, free cash flow was $12.1 million, a significant increase from a negative $10.2 million in the same period of the prior year [254]. - For the nine months ended September 30, 2025, net cash provided by operating activities was $72.1 million, up from $43.5 million in the same period of 2024, reflecting an increase of $28.7 million [266][268]. - As of September 30, 2025, the company had cash, cash equivalents, and restricted cash totaling $237.0 million, along with marketable securities of $135.3 million [256]. - The company entered into a revolving credit facility in May 2025, providing $200.0 million in available capacity, which was undrawn as of September 30, 2025 [257]. - For the nine months ended September 30, 2025, net cash used in financing activities was $42.9 million, primarily due to $29.2 million in common stock repurchases [272]. - The accumulated deficit as of September 30, 2025, was $798.9 million, indicating significant historical operating losses [262]. - Cash provided by investing activities for the nine months ended September 30, 2025, was $15.8 million, driven by $169.1 million from the maturity of marketable securities [270]. Instructor Revenue Share Changes - The company is reducing the instructor revenue share for subscription offerings to 15% by 2026, with adjustments to 20% and 17.5% effective in 2024 and 2025 respectively [172]. - The reduction in instructor revenue share from 20% to 17.5% contributed to improved margins in both Enterprise and Consumer segments [241][242].

Financial Data and Key Metrics Changes - Consolidated subscription revenue grew 8% year over year, now accounting for 74% of total revenue, an increase of 600 basis points from the previous year [4][17] - Total revenue for Q3 reached $196 million, exceeding guidance, with adjusted EBITDA margin improving to 12% from 6% year over year [16][21] - GAAP net income was approximately $2 million, a significant improvement from a loss of $25 million in Q3 2024 [21][22] Business Line Data and Key Metrics Changes - Udemy Business segment revenue increased 5% year over year, generating $7 million in net new ARR, totaling $527 million in ARR [4][17] - Consumer segment revenue reached $63 million, with subscription revenue up 43% year over year, now accounting for 19% of the segment's revenue [19][20] Market Data and Key Metrics Changes - Strong performance noted in technology, manufacturing, and financial services sectors, with a total net dollar retention rate of 93% and 97% for large customers [18][22] - The consumer segment's strategic pivot to subscription products is supported by compelling unit economics, with subscription products delivering an LTV to CAC ratio well above three times [20] Company Strategy and Development Direction - The company is focused on accelerating subscription revenue growth and transforming its business model to a subscription-first approach [4][25] - Udemy aims to be a lifelong learning solution, integrating AI to enhance learning experiences and career advancement [10][15] - The strategy includes partnerships with organizations like Pearson and Indeed to enhance certification journeys and improve conversion rates [14][31] Management's Comments on Operating Environment and Future Outlook - Management highlighted the pressure on L&D budgets due to AI transformation, emphasizing the need for effective ROI demonstration [39][40] - The company expects consolidated subscription revenue growth in 2026 to approach double digits, with a focus on building a predictable, higher-value business [24][25] Other Important Information - The company has a strong balance sheet with $372 million in cash and marketable securities, and free cash flow generation of $12 million [22] - The company is investing in product differentiation and partnerships to enhance its offerings in the AI and LLM space [55][56] Q&A Session Summary Question: Can you elaborate on the initiatives for accelerating the transition to consumer subscription? - Management discussed various digital marketing strategies to improve customer acquisition and retention, including optimizing the shopping cart and reactivating existing customers [29][30] Question: How is the net new pipeline progression for Udemy Business heading into Q4? - Management expressed confidence in the pipeline, noting improvements in expansion deals and stable gross dollar retention despite challenges from COVID-era contracts [33][34] Question: What is the current state of L&D budgets and how does it impact Udemy? - Management noted that L&D teams are under pressure to do more with less, but Udemy's comprehensive solutions are positioned to capture increased demand [39][40] Question: What are the expectations for profitability and net new ARR growth? - Management indicated confidence in achieving high single-digit net new ARR growth in Q4, supported by a robust pipeline and improved deal sizes [44][45] Question: How is Udemy addressing instructor churn due to lower revenue share? - Management emphasized commitment to the instructor community and efforts to create new revenue streams for instructors through coaching and enhanced tools [69][70] Question: Any thoughts on acquiring traffic through AI platforms? - Management acknowledged the importance of being part of the evolving AI landscape but emphasized a focus on building a distinctive consumer experience rather than rushing into partnerships [71][72]

Financial Performance - Q3 2025 revenue reached $195.7 million, exceeding expectations[13, 15] - Adjusted EBITDA for Q3 2025 was $24.3 million, representing a 12% margin[13, 15] - Free cash flow for Q3 2025 was positive $12.1 million, with year-to-date free cash flow at positive $58.2 million, or 10% of revenue[13] - Consolidated subscription revenue increased by 8% year-over-year in Q3 2025, accounting for 74% of total revenue[13, 17] - The company is projecting full year 2025 revenue between $787 million and $790 million and adjusted EBITDA between $92 million and $94 million[9, 26] Business Growth and Strategy - Udemy Business (UB) Annual Recurring Revenue (ARR) increased by 4% year-over-year[9, 15] - The platform has over 294,000 paid consumer subscribers, surpassing the 2025 target of 250,000[9, 13, 18] - Enterprise segment gross margin is at 75%[9] AI Initiatives - The platform offers over 5,000 AI-focused courses with over 14 million enrollments and 560 million+ minutes of AI training consumed[9, 18] - Nearly 13,000 Role Play simulations have been created, with over 400 enterprise customers launching custom Role Plays[9, 18]