Upwork Q1 Earnings Call Highlights

Key Points

• Upwork lowered its full-year revenue outlook to $760 million-$790 million after demand weakened sharply in late February and early April, especially in lower-value marketplace contracts. At the same time, it raised its adjusted EBITDA forecast to $250 million-$260 million, showing a stronger focus on profitability.
• Management said AI is pressuring small contracts under $500 as clients use tools to replace some low-end work, but AI-related work is also growing quickly. AI work exceeded $300 million annualized and made up 8% of marketplace GSV in Q1, while only about 10% of GSV is now considered AI-at-risk.
• Upwork announced a cost-cutting plan targeting about $70 million in annualized savings, including a roughly 24% workforce reduction. The company said the restructuring should help it reach its 35% adjusted EBITDA margin target earlier than expected, while larger segments like Business Plus and Lifted continue to grow.

Upwork NASDAQ: UPWK said first-quarter 2026 results reflected a sharp shift in demand late in the period, as macroeconomic uncertainty and faster adoption of artificial intelligence weighed on lower-value work, while larger customer initiatives and AI-related projects continued to grow.

President and Chief Executive Officer Hayden Brown said the company delivered “in-line revenue” and “phenomenal bottom-line results,” including a $10 million adjusted EBITDA beat. However, management said demand slowed beginning in late February, prompting Upwork to lower and widen its full-year revenue outlook while raising its adjusted EBITDA forecast.

Brown said two trends emerged during the quarter: geopolitical instability and concerns around war slowed higher-value contracts, while AI adoption reduced client activity on low-end contracts of $500 and below. She said the overall impact of AI is “marginally a net headwind” today, but the company expects it to become a longer-term tailwind.

AI Shifts Pressure Smaller Contracts

Chief Financial Officer Erica Gessert said Upwork’s GSV and active contract trends were on plan as of the company’s Feb. 9 earnings call, but demand slowed materially from late February through early April. She said customers cited inflationary pressures from tariffs, rising energy prices and elevated interest rates as factors affecting spending.

Gessert said the pressure was most pronounced in contracts below $500, where some customers are using AI tools to supplement their needs. She said trends have since stabilized, but at lower growth rates than Upwork had expected at its investor day six months ago.

To better assess AI exposure, Gessert said Upwork developed a new analysis using an LLM classifier trained on methodologies from Anthropic, Stanford and others. The analysis estimates that tasks representing about 10% of GSV on the platform are in an AI at-risk category, down from 11% a year ago. She said the remaining 90% consists of net new AI work and AI-insulated jobs and contracts.

Brown said there were no major category shifts in the quarter related to AI impact. She said AI-related work exceeded $300 million on an annualized basis and grew more than 40% year over year. In the first quarter, AI-related work represented 8% of marketplace GSV, while 11% of job posts were in the AI category.

Company Highlights SMB, Enterprise and AI Growth Levers

Despite weaker trends in low-value contracts, management pointed to growth in larger customer segments. Brown said Upwork’s Business Plus plan, aimed at small and medium-sized businesses, remains the fastest-growing product in the company’s history and grew 34% quarter over quarter.

Brown also said the enterprise pipeline at Lifted, Upwork’s enterprise-focused subsidiary, grew threefold for new clients and ninefold for existing clients during the quarter. She said the new Lifted product is on track for first customer migrations in June.

In response to an analyst question, Brown said there was “no change” in the company’s outlook for Lifted, and Gessert added that Upwork still expects 25% GSV growth for Lifted this year. Gessert said the weaker trends were concentrated in the marketplace business rather than enterprise.

Brown also highlighted Upwork’s expanded OpenAI relationship, including the launch of the Upwork app in ChatGPT. She said the company is investing in Uma, its AI work agent, with new features designed to help customers evaluate candidates and make hiring decisions faster. Upwork is also rolling out a project continuity offering to source replacement talent when a hire is not working out.

The company is also testing human-supervised AI agents. Brown said the beta is receiving “extremely positive customer feedback” and that the offering is expected to roll out to all customers this year. She said businesses continue to express a need for human oversight of AI agents.

Restructuring Targets $70 Million in Annualized Savings

Upwork announced a cost reduction program that Gessert said is expected to lower the company’s cost base by about $70 million on an annualized basis over the next few months. The plan includes an approximately 24% reduction in total workforce.

Gessert said Upwork expects one-time charges of $16 million to $23 million, primarily related to severance and separation costs, with most recognized in the current quarter. She said the restructuring is expected to contribute about $40 million in savings in 2026.

Brown said the move is part of a broader effort to make Upwork more efficient and nimble, while acknowledging the impact on employees. “Building a more efficient, resilient organization that is best positioned for the opportunity ahead requires us to say goodbye to many talented people who have been vital to our journey,” she said.

Guidance Cut for Revenue, Raised for Profitability

For full-year 2026, Upwork now expects revenue of $760 million to $790 million, reflecting increased uncertainty in demand and management’s assumption that external pressures continue throughout the year. The company raised its adjusted EBITDA outlook to $250 million to $260 million, representing an adjusted EBITDA margin of 33%.

Gessert said the company now expects to achieve its 35% adjusted EBITDA margin target in the back half of 2026, more than two years ahead of schedule. Upwork expects full-year non-GAAP diluted EPS of $1.50 to $1.55 and stock-based compensation of about $60 million to $65 million.

For the second quarter, Upwork expects revenue of $187 million to $193 million and adjusted EBITDA of $56 million to $59 million, representing an adjusted EBITDA margin of 30% to 31%. The company expects second-quarter non-GAAP diluted EPS of $0.35 to $0.37.

During the Q&A session, Gessert said the marketplace take rate was 19.4%. She said Upwork has built additional conservatism into its outlook, even though demand trends have stabilized, because of the rapid changes seen at the end of the first quarter.

About Upwork NASDAQ: UPWK

Upwork Inc operates a leading online talent marketplace that connects businesses with independent professionals worldwide. Through its digital platform, the company enables clients across industries—including technology, marketing, creative services and customer support—to source, hire and manage freelance talent on demand. Key features of the Upwork platform include streamlined job posting, proposal evaluation, time-tracking tools, invoicing and secure payment processing, all designed to simplify collaboration between clients and remote workers.

The company traces its roots to the merger of two pioneering freelance marketplaces, Elance (founded in 1998) and oDesk (founded in 2003), which combined in 2015 to form a unified entity.

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