Upwork (UPWK) Q2 FY26 earnings call: guidance and Q&A

Seeking more insight into the duration and nature of the challenging operating environment, particularly SEO impacts, and how the new MCP server will affect the business.

Hayden Brown explained that the transition is an evolution, not a short-term fix, with AI automation and SEO changes accelerating. She highlighted green shoots like growing AI-relevant work ($330M run rate), increased GSV per client (8 consecutive quarters), and new acquisition channels like MCP. SEO challenges are industry-wide, dampening new client acquisition, but paid acquisition is performing well, leading to increased marketing spend. The MCP server is a response to AI agents already trying to hire on Upwork, enabling seamless integration with AI tools for both clients and freelancers, leveraging Upwork's scale and talent breadth.

“The trend we saw this quarter is really a continuation of last quarter, but with an acceleration in the AI automation of very low complexity work and further deterioration on Google SEO, especially notable in the non-brand channel.”

asked by Ronald Josey · answered by Hayden Brown

Asked about the expected duration of the current transition (6-12 months vs. longer) and how the current active client base will evolve towards higher-quality, AI-driven work versus rebuilding the client base.

Hayden stated that predicting the exact timing of the transition is difficult, but Upwork is emerging structurally as a beneficiary due to its unique ability to serve the evolving market. She pointed to growing enterprise, Business Plus, and AI tailwinds as indicators of future success. Regarding the client base, she clarified it's an expansion, not a replacement, as existing SMB and larger clients are shifting workloads to be more AI-oriented, leveraging Upwork for AI strategy and consulting.

“I think these things are incredibly hard to predict and, you know, it would be probably disingenuous for me to say that I know exactly how long this is going to take. But the important thing is it really is an evolution and it's a situation where on the other side of these changes, Upwork is actually emerging structurally as a beneficiary.”

asked by Eric Sheridan · answered by Hayden Brown

Noted a slowdown in AI category growth (50% -> 40% -> 22% YoY) and asked for deeper insights. Also inquired about the higher-than-expected sequential marketplace take rate and its drivers for the rest of the year.

Hayden explained that the AI category growth slowdown is an "undercount" because AI usage is now permeating all types of work, and clients often don't explicitly state AI needs in job posts. A survey showed nearly half of talent's recent projects were AI-related, while only 16% of job posts explicitly mentioned AI. For take rate, strong ad monetization efforts, dynamic pricing on freelancer fees, and other levers contributed to the over-performance, with expectations for continued step-up in the back half of the year.

“I want to emphasize this is really an undercount of AI work on Upwork because what we're seeing is customer behavior is changing. Customers who previously felt they needed to specify, hey, this is an AI job or I really need help with this AI project, now they just assume that that is expected and they don't even talk about it in their job posts.”

asked by Bernard McTernan · answered by Hayden Brown

Asked for more details on customer migrations and pipeline building for the Lifted platform, and whether the SEO changes are stabilizing or continuing to worsen.

Hayden confirmed Lifted is on track for 25% GSV growth in FY26, with customer migrations starting in June and positive feedback. The pipeline is healthy, leading to wins like a multi-million dollar RFP. She stated that SEO impacts accelerated in Q2 and are expected to "continue to get worse through Q3 and Q4," with no stabilization yet.

“Our outlook is that they will continue to get worse through Q3 and Q4. So that's what's baked into our current guide. We haven't seen them stabilized yet, but certainly to the extent they do, that would be better than our current outlook, which is for further deceleration.”

asked by John Byun · answered by Hayden Brown

Inquired about the potential impact of enterprises reducing full-time employees due to AI on freelancer work within that segment, and about different successful channels for the increased customer acquisition investment in H2.

Hayden explained that Lifted's expansion into the broader $650 billion enterprise market, beyond just freelancer budgets, insulates Upwork from AI-related risks in any one part of a client's business. It allows Upwork to serve various work types and bring AI talent to clients. For go-to-market, successful paid channels include international SEM, Meta, Reddit, podcasts, and connected TV, where testing in Q2 showed good ROI, justifying the increased marketing spend.

“This just gives us more opportunity to both bring AI talent to bear across those things and help them lean into those strategies as well as insulates us, from any one part of their business where they might be automating at a faster rate.”

asked by Matthew Condon · answered by Hayden Brown