Udemy, Inc. Q2 FY2025 earnings call

Key Priorities and Progress

• Subscription Products: Approximately 70% of top line is subscription-based. Surpassed 200,000 paid consumer subscribers, with subscription revenue accounting for 15% of the Consumer segment (up 2 points from Q1). On track to grow consumer subscriptions to over 250,000 by year-end and more than double that next year. Piloting programmatic advertising on free courses.
• Partnership Ecosystem: Announced partnership with Indeed to integrate content with career marketplace; partnered with UKG and BCN Global. Expanding reach and monetizing through partnerships.
• Global Market Activation: Launched targeted campaigns in high-opportunity markets like Brazil, India, Japan. In Japan, saw double-digit ARR growth and highest gross retention in over 3 years.
• AI-Powered Skill Acceleration: Positioning as leading AI-powered platform. Launched AI-powered roleplay, in-course AI assistant, and Lummi design tools for instructors. Over 4,500 Gen AI courses, paid enrollments over 11 million. New AI SKUs like AI readiness and growth packages are driving engagement.

Udemy reported Q2 revenues of $200 million, up 3% year-over-year. The Udemy Business segment, the main growth engine, generated revenue of $129 million, a 7% year-over-year increase, with an ARR of $520 million at quarter-end. The Consumer segment had revenue of $71 million, down 4% year-over-year. Udemy Business contributed 64.5% of total revenue ($129M / $200M), while the Consumer segment contributed 35.5% ($71M / $200M).

Q3 Guidance

• Expected revenue between $190 million and $195 million.

Full-Year 2025 Guidance

• Revenue expected in the range of $784 million to $794 million.
• Adjusted EBITDA raised to $84 million to $89 million.
• Net new ARR expected up in Q3 and Q4, win rates increased, self-service plan subscription product bookings grew over 35% y/y.

Risks

• Impact of COVID contracts on renewals, though progress being made with new customer experience initiatives.
• Macro uncertainties affecting L&D budgets, though focus on AI-driven demand and stickier products mitigates some risks.

Q: Josh Baer asked about Hugo's first 4 months at Udemy.

A: Hugo mentioned spending time with over 300 customers, noting AI reskilling is a global theme and customers want more than an online catalog, leading to focus on Udemy 2.0 with expanded capabilities, platform integration, and AI embedding.

Q: Ryan MacDonald asked about renewals and pipeline.

A: Sarah mentioned working through COVID contracts, with progress from new customer experience initiatives and AI SKUs, while Hugo added L&D budgets net out and Udemy is targeting new budgets.

Q: Ryan MacDonald asked about consumer ad revenue.

A: Hugo stated they are piloting programmatic advertising on free courses, with 39 million monthly visitors and potential to unlock new revenue streams.