Online learning platform Udemy (NASDAQ: UDMY) reported Q2 CY2025 results beating Wall Street’s revenue expectations, with sales up 2.8% year on year to $199.9 million. The company expects next quarter’s revenue to be around $192.5 million, close to analysts’ estimates. Its non-GAAP profit of $0.16 per share was 33.8% above analysts’ consensus estimates.

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StockStory’s Take

Udemy delivered a second quarter that surpassed Wall Street’s expectations for both revenue and non-GAAP profitability, prompting a positive market reaction. CEO Hugo Sarrazin attributed this performance to momentum in the Udemy Business segment, disciplined cost management, and rising adoption of subscription products. Management emphasized the successful launch of new AI-powered learning features and the company’s first GAAP net income since its IPO. CFO Sarah Blanchard credited the achievement to a combination of operational efficiency and early progress on upmarket customer acquisition, noting that “profitability exceeded our expectations.”

Looking ahead, Udemy’s guidance is shaped by expectations of accelerating growth in AI-driven learning products, expansion of subscription offerings, and continued international focus. Management highlighted early signals of demand from enterprise customers for AI-focused packages, with Sarrazin stating, “We are repositioning Udemy to be differentiated as an AI-powered skill acceleration platform.” CFO Blanchard noted that ongoing pipeline growth and improvements in customer retention should support renewed top-line momentum, while cautioning that the company is still navigating headwinds from legacy contract renewals and broader enterprise budget scrutiny.

Key Insights from Management’s Remarks

Management attributed the quarter’s outperformance to operational efficiency, rapid expansion of AI-enabled offerings, and a deliberate focus on subscription-based revenue, while also highlighting strategic partnerships and upmarket customer wins.

• Subscription revenue growth: Udemy increased its emphasis on subscription products, resulting in approximately 70% of total revenue now being subscription-based. The Consumer segment saw a notable rise, with subscriptions accounting for 15% of segment revenue, and management expects further growth as new options are rolled out.

• AI-powered product expansion: The launch of AI-driven features, such as roleplay and in-course assistants, was met with strong customer demand. Over 7,000 unique AI-powered roleplays were created by instructors, and paid enrollment in GenAI courses surpassed 11 million, reflecting both instructor and learner engagement.

• Strategic partnerships: Udemy announced integrations with Indeed and UKG, expanding its reach in career marketplaces and human resources workflows. These partnerships are designed to embed Udemy’s content into broader enterprise processes and increase adoption among both job seekers and employers.

• International market traction: Targeted campaigns in Japan, Brazil, and India led to strong performance in these regions. In Japan, the appointment of a new general manager drove double-digit ARR growth and record retention, providing a blueprint for activation in other key markets.

• Operational improvements and leadership: The quarter marked the arrival of CTO Ozzie Goldschmied, who brings expertise in AI and enterprise software. The company also restructured its go-to-market teams and outsourced SMB renewals, improving pipeline quality and freeing resources to pursue larger enterprise opportunities.

Drivers of Future Performance

Udemy’s outlook is driven by the ongoing expansion of AI-enabled learning, new monetization strategies, and efforts to strengthen long-term customer retention and profitability.

• AI-driven product momentum: Management believes that demand for AI learning solutions will continue to accelerate, with AI-focused packages now representing a significant share of the sales pipeline. This is expected to enhance both customer value and stickiness, supporting future revenue growth and higher average deal sizes.

• Diversifying revenue streams: Udemy is piloting programmatic advertising on its free courses and developing new subscription models, aiming to monetize its large audience beyond traditional course sales. The company anticipates these initiatives will contribute additional high-margin revenue and improve customer lifetime value.

• Customer retention and upmarket shift: The company is focusing on renewing and expanding contracts with larger enterprise clients, supported by a new Chief Customer Experience Officer and enhanced AI tools for the renewal process. Management expects net dollar retention rates to stabilize by year-end and improve in the following quarters, though lingering headwinds from legacy COVID-era contracts and macroeconomic uncertainty could temper the pace of improvement.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory analyst team will closely watch (1) the pace of adoption and monetization for Udemy’s AI-powered products and roleplay tools; (2) stabilization and potential recovery in net revenue retention rates as legacy contracts roll off; and (3) the impact of new monetization channels, such as advertising and expanded subscription models, on both revenue growth and customer engagement. Execution in international markets and the effectiveness of strategic partnerships will also serve as key indicators of progress.

Udemy currently trades at $6.94, in line with $6.99 just before the earnings. In the wake of this quarter, is it a buy or sell? Find out in our full research report (it’s free).

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