Upwork Inc. (NASDAQ:UPWK) shares are trading lower on Tuesday after it reported second-quarter earnings after Monday’s market close, although the results failed to impress investors.
Adjusted EPS was 41 cents, beating the 34 cents consensus estimate. Revenue totaled $191.66 million, topping the $189.96 million analyst forecast but declining from $194.94 million in the year-ago quarter.
Earnings Snapshot
Gross Services Volume (GSV) decreased 4% year-over-year to $966 million, reflecting pressure from AI automation, weaker new-client additions and a soft labor market.
However, revenue from higher-margin initiatives grew 15% year-over-year, driven by Ads, Dynamic Pricing, Connects and Business Plus, lifting the take rate to 19.8%.
Active clients totaled 763,000, while GSV per active client hit a record $5,230, up 5% year over year and marking the eighth straight quarter of sequential growth.
Average spend per contract also reached a record high, extending its year-over-year growth streak to six quarters.
Business Plus GSV jumped 174% year over year, while AI strategy and consulting GSV increased 51%. GSV from explicitly AI-related jobs rose 22% year over year and 5% sequentially, reaching an annualized run rate of about $330 million.
Adjusted gross margin stood at 77% as the company continued to manage infrastructure and support costs.
Free cash flow was $35.9 million despite restructuring-related payments. Upwork also secured a new $150 million revolving credit facility, with a $50 million accordion, to support debt repayment, capital allocation, potential M&A and share buybacks.
The company repurchased about 164,000 shares in the second quarter and 8.3 million shares year to date.
Outlook
For full-year 2026, the company lowered adjusted EPS guidance to $1.38-$1.43 from $1.50-$1.55, below the $1.55 estimate. Revenue guidance was cut to $730 million-$750 million from $760 million-$790 million, versus the $776.3 million consensus.
Its restructuring plan targets $70 million in annualized cost savings, with about $40 million expected in 2026.
Upwork expects third-quarter adjusted EPS of $0.31-$0.33, below the $0.41 analyst estimate, with revenue projected at $176 million-$184 million versus the $193.7 million consensus.
Management said AI remains a near-term drag on some work categories but is also creating new demand for AI talent and human-AI teams.
UPWK Price Action: Upwork shares were down 12.36% to $8.61 at the time of publication on Tuesday, according to Benzinga Pro data.
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