Upwork Gains On AI And Enterprise Growth, But Analysts See Macro Challenges Limiting Upside

Upwork Inc. UPWK shares are trading higher on Thursday.

The company’s total revenue increased 4% year-over-year. Active clients totaled 832,000 at quarter’s end. Gross services volume per active client came in at $4,815, up 1% year-over-year.

Upwork expects first-quarter revenue to be in the range of $186 million to $191 million. The company anticipates first-quarter adjusted earnings of 24 cents to 26 cents per share.

Here are the analysts’ takes on the stock:

• RBC Capital Markets analyst Brad Erickson reiterated the Sector Perform rating on Upwork, raising the price forecast to $18 from $16.
• Needham analyst Bernie Mcternan maintained the Buy rating on the stock, raising the price forecast to $19 from $17.
• Piper Sandler analyst Matt Farrell reiterated the Overweight rating on the company, with a price forecast of $18.

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RBC Capital Markets: The analyst notes that while Enterprise revenue is showing positive growth with improvements in key metrics, including a 13% year-over-year increase in take rates, there is also a positive impact from AI.

However, the analyst writes that GSV is still declining, and a recovery might depend on macroeconomic factors, as other initiatives may not have an effect until 2026.

Erickson raises estimates, but remains cautious about giving a more positive rating until clearer signals of long-term growth are seen. The analyst raised the FY25 adjusted EBITDA estimate to $187.5 million from $176.5 million.

Needham: The analyst sees a slow macro environment in 2025, with lower take rate benefits and a decline in GSV and revenue year-over-year. The company plans to focus on AI, Enterprise, and Ads & monetization in this investment year, aiming for growth in 2026 and beyond.

Despite these challenges, the analyst models an 8% growth in adjusted EBITDA, driven by 250 basis points of margin expansion, which remains a strong element of the Upwork story while waiting for macro conditions to improve.

The analyst is raising FY25 revenue and adjusted EBITDA estimates by 3% and 9%, respectively, due to higher take rate assumptions, though slightly offset by lower GSV expectations.

This adjustment follows the company’s better-than-expected performance in the fourth quarter, with revenue exceeding expectations by 6% and adjusted EBITDA by 25%.

Piper Sandler: The analyst notes that Upwork is concentrating on controllable factors, investing in AI, enterprise, and ads/monetization for growth.

Farrell remains impressed with the company’s ability to expand EBITDA margins, aiming for 35% over the next five years. Overall, per the analyst, estimates are likely to rise, assuming no significant changes in the macro environment.

Price Action: UPWK shares are trading higher by 7.08% to $16.63 at last check Thursday.

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