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    UPWK
    Earnings call· Jun 2026(Q2 FY26)

    UPWORK Q2 FY26 earnings call UPWK

    Aug 10, 2026 Source

    Executive summary

    Upwork Q2 FY26 — AI-driven transition and strategic execution

    Upwork navigated a challenging Q2 FY26, delivering revenue and adjusted EBITDA at or above guidance, driven by disciplined cost management. The company is actively adapting to an accelerating AI-driven transition in the labor market, which is impacting lower-value work and new client acquisition via SEO. Strategically, Upwork is focusing on higher-value SMB and enterprise clients, expanding AI-related work, and innovating with its MCP server to integrate with AI tools, positioning itself for long-term growth despite near-term headwinds.

    Highlights

    6

    • Revenue of $191.7 million at the high end of guidance.

    • Adjusted EBITDA of $64.1 million, exceeding the high end of guidance.

    • Business Plus GSV grew 174% year over year.

    • GSV per active client reached a record $5,230, up 5% YoY, marking the eighth consecutive quarter of sequential growth.

    • GSV from AI-related jobs grew 22% YoY, reaching an approximate annualized run rate of $330 million.

    • Cost per new contract start improved 22% quarter-on-quarter.

    Concerns

    4

    • Near-term AI and macro headwinds persisted, with an acceleration in AI-related automation.

    • Google's changes to search dampened new customer acquisition, with accelerated negative impact in Q2.

    • Full-year 2026 revenue guidance adjusted down to $730 million to $750 million.

    • Active client count pressured by AI automation, search trends, and subdued labor market.

    Guidance & targets

    11
    CategoryTargetConfidence
    Full Year 2026 Revenue
    $730 million to $750 million
    high materiality
    High
    Full Year 2026 Adjusted EBITDA
    $225 million to $235 million
    high materiality
    High
    Full Year 2026 Adjusted EBITDA Margin
    31%
    high materiality
    High
    Full Year 2026 Non-GAAP Diluted EPS
    $1.38 and $1.43
    high materiality
    High
    Full Year 2026 Stock-based compensation
    $60 million to $65 million
    medium materiality
    High
    Q3 FY26 Revenue
    $176 million to $184 million
    high materiality
    High
    Q3 FY26 Adjusted EBITDA
    $50 million to $54 million
    high materiality
    High
    Q3 FY26 Adjusted EBITDA Margin
    29%
    high materiality
    High
    Q3 FY26 Non-GAAP Diluted EPS
    $0.31 and $0.33
    high materiality
    High
    Lifted GSV growth
    approximately 25% year-over-year
    medium materiality
    High
    Marketing spend increase
    $5 million to $10 million
    medium materiality
    High

    Segment performance

    5
    SegmentRevenueYoYQoQMargin
    SMB - Business Plus
    Business Plus continues to pace ahead of plan, with GSV growing 174% year over year as larger customers utilize Upwork for complex recurring needs.
    GSV: 174% year over year growth
    		—174%——
    SMB - AI Strategy & Consulting Category
    This is reflected in the 51% year-over-year growth we saw in our AI strategy and consulting category in Q2.
    Year-over-year growth: 51%
    		—51%——
    Enterprise
    Our focus on an expanded ability to support and grow larger customers that fit our ideal customer profile contributed to 7% year-over-year growth in GSV per enterprise account, the highest level it's been in more than three years.
    GSV per enterprise account: 7% year over year growth
    		—7%——
    Employer of Record (EOR) Solutions
    We also saw 29% year-over-year growth in GSV from employer of record, or EOR, solutions, which are made possible due to [ Lyft's acquisition of Ascend ].
    GSV: 29% year over year growth
    		—29%——
    AI-related jobs
    This is evident in the 22% growth in GSV from AI-related jobs in Q2, as defined by jobs stating an explicit AI need. These were up 5% quarter over quarter to reach an approximate annualized $330 million run rate.
    GSV: 22% year over year growthAnnualized run rate: $330 million
    		—22%5%—

    Operational metrics

    19
    Total Revenue
    $191.7 millionat the high end of guidance range
    Q2 FY26

    Total revenue for the second quarter was $191.7 million, representing the high end of our guidance range

    Adjusted EBITDA
    $64.1 millionexceeding the high end of our guidance range
    Q2 FY26

    adjusted EBITDA of $64.1 million, exceeding the high end of our guidance range.

    Adjusted EBITDA Margin
    33.4%
    Q2 FY26

    delivering an adjusted EBITDA margin of 33.4%.

    Non-GAAP Gross Margin
    77%remaining near record levels
    Q2 FY26

    Non-GAAP gross margin for the second quarter was 77%, remaining near record levels as we manage infrastructure and support costs efficiently.

    Gross Services Volume (GSV)
    $966 million
    Q2 FY26

    GSV was $966 million, reflecting the continued burn-off of lower-value, highly automatable work, the evolving impact of AI on new client acquisition, and a subdued labor market.

    GSV per active client
    $5,230up 5% year over year
    Q2 FY26

    GSV per active client reached another record at $5,230, up 5% year over year, marking our eighth consecutive quarter of sequential growth in this metric.

    GSV per new client
    grew year-over-yearfor another consecutive quarter
    Q2 FY26

    GSV per new client grew year-over-year for another consecutive quarter, confirming that we are attracting clients with larger initial budgets and longer project horizons.

    Revenue from ads and monetization levers
    15%up 15% year over year
    Q2 FY26

    Revenue from these levers was up 15% year over year, and Connects and talent subscriptions now represent 15% of total revenue.

    Connects and talent subscriptions as % of total revenue
    15%
    Q2 FY26

    Connects and talent subscriptions now represent 15% of total revenue.

    Take Rate
    19.8%
    Q2 FY26

    This drove a strong take rate of 19.8% with highly accretive, high-margin revenue streams that also improve high-quality matching.

    Active client count
    763,000
    Q2 FY26

    Q2 active client count was 763,000. Active client count continues to be pressured by AI automation and search trends, labor market conditions, and our strategy to focus on client value over volume.

    Average spend per contract
    reached an all-time highsixth consecutive quarter of positive year-over-year growth
    Q2 FY26

    Our average spend per contract reached an all-time high over any 12-month period in company history, presenting the sixth consecutive quarter of positive year-over-year growth.

    Realized OpEx savings
    $40 million
    FY26

    expected to generate approximately $40 million in realized savings in fiscal year 2026

    Revolving Credit Facility
    $150 million
    Q2 FY26

    During the quarter, we closed a new $150 million revolving credit facility with a $50 million accordion.

    Shares repurchased
    164,000
    Q2 FY26

    We repurchased approximately 164,000 shares in Q2 while we closed the revolving credit facility.

    Shares repurchased
    8.3 million
    YTD FY26

    Year-to-date, we have repurchased approximately 8.3 million shares.

    Cost per new contract start
    22%improved 22% quarter-on-quarter
    Q2 FY26

    Cost per new contract start improved 22% quarter-on-quarter, and this performance gives us confidence in increasing our paid acquisition investments for the balance of the year.

    Share of AI-based mentions and referrals
    18%18 percentage points higher than our closest peer
    Q2 FY26

    third-party measures show that our share of AI-based mentions and referrals is 18%, percentage points higher than our closest peer.

    Average length of hourly work contracts
    100 hoursrecord
    Q2 FY26

    we are actually seeing increases in things like the length of hourly work contracts, which hit a record of 100 hours on average this quarter.

    Product announcements

    1
    ProductTypeDetails
    Upwork MCP serverlaunch

    Deals & partnerships

    1
    AscendAcquisition to bring Employer of Record (EOR) infrastructure in-house for U.S. and Canada.

    Moving our employment infrastructure in the U.S. and Canada from third-party partners to Ascend's wholly-owned entities is garnering the improvement to our value proposition we anticipated.

    Capital programs

    1
    OpEx Reduction Programunderway$70 million annualized
    Start: May 2026

    Benefit: approximately $40 million in realized savings in fiscal year 2026

    Non-GAAP operating expenses reflected the early execution of our restructuring actions we announced in May, as the annualized $70 million of OpEx reduction we initiated is expected to generate approximately $40 million in realized savings in fiscal year 2026

    Risks & headwinds

    3
    AI-related automationnear-term

    acceleration in the pace of AI-related automation

    Mitigation: Focus on higher-value work, AI-related jobs growth, MCP server integration, strategic focus on SMB/Enterprise.

    Google SEO changesnear-term

    dampened new customer acquisition with accelerated negative impact in Q2

    Mitigation: Diversify beyond paid and organic Google Search, increased paid acquisition investments ($5M-$10M incrementally in H2), tuning acquisition for AEO and LLM-based referrals.

    Subdued labor marketnear-term

    subdued labor market

    Mitigation: Focus on client value over volume, attracting clients with larger initial budgets and longer project horizons.

    What to watch in Q3 FY26

    5

    SEO impact on new client acquisition

    Q3 FY26
    Currentaccelerated negative impact in Q2
    Targetstabilization or improvement

    Why it matters

    Continued deterioration of SEO could further pressure new client acquisition, impacting top-line growth.

    Google's changes to search have dampened new customer acquisition with accelerated negative impact in Q2. 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.

    Q&A highlights

    5

    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

    2 min read6 chapters

    Detailed Narrative

    01

    Navigating AI and Market Transition

    Upwork is experiencing an acceleration in AI-related automation and SEO challenges, particularly in the non-brand channel, which is impacting new customer acquisition and lower-complexity work. Despite these short-term headwinds, the company views this as an evolution where it is structurally positioned to benefit, focusing on higher-value work and new acquisition channels. The company is confident in its ability to navigate these changes, leveraging its growth strategy and cost management.

    02

    Strategic Focus on Value and Enterprise

    The company's strategy prioritizes quality and customer value over volume, evidenced by Business Plus GSV growing 174% YoY and GSV per active client reaching a record $5,230, marking eight consecutive quarters of sequential growth. The "Lifted" platform for enterprise clients is on track, with customer migrations initiated in June and strong demand signals, contributing to 7% YoY growth in GSV per enterprise account, the highest in over three years. This focus aims to serve larger customers with a differentiated offering.

    03

    AI-Driven Work Expansion

    While AI automation shrinks demand for some work, it creates new demand, with GSV from AI-related jobs growing 22% YoY to an approximate annualized run rate of $330 million. This figure is considered an undercount, as customer behavior is changing, and many clients now implicitly expect AI use without explicitly stating it in job posts. Upwork is uniquely positioned to connect clients with AI-skilled talent for complex problems, as seen by the 51% YoY growth in its AI strategy and consulting category.

    04

    Innovation with MCP Server

    Upwork launched the MCP server to enable agentic interactions, embedding Upwork directly into AI tools like ChatGPT and Claude. This allows humans and AI agents to hire and collaborate with Upwork talent without leaving their environments, and freelancers to manage work within their preferred AI tools. This innovation addresses the growing demand for human judgment and quality assessment in AI-driven projects, positioning Upwork as a key beneficiary of the AI shift.

    05

    Financial Discipline and Capital Allocation

    The company demonstrated strong financial discipline, with adjusted EBITDA exceeding guidance due to efficient cost management, including $70 million in annualized OpEx reductions expected to yield $40 million in realized savings in FY26. Upwork also secured a new $150 million revolving credit facility with a $50 million accordion, positioning it to repay convertible notes and support its disciplined capital allocation strategy, opportunistic M&A, and share repurchase program, having repurchased 8.3 million shares year-to-date.

    06

    Evolving Customer Acquisition

    Google's SEO changes have dampened new customer acquisition, leading Upwork to diversify beyond paid and organic Google Search. Paid search has become the largest acquisition channel, with cost per new contract start improving 22% QoQ. The company is also tuning acquisition for nascent channels like answer engine optimization (AEO) and LLM-based referrals, where it holds a significant 18% share of AI-based mentions and referrals, 18 percentage points higher than its closest peer.

    AI-generated summary of the company’s earnings call. Not investment advice.