Online work marketplace Upwork (NASDAQ:UPWK) reported revenue ahead of Wall Street’s expectations in Q1 CY2025, but sales were flat year on year at $192.7 million. The company expects next quarter’s revenue to be around $186.5 million, close to analysts’ estimates. Its non-GAAP profit of $0.27 per share was in line with analysts’ consensus estimates.
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Upwork (UPWK) Q1 CY2025 Highlights:
- Revenue: $192.7 million vs analyst estimates of $188.5 million (flat year on year, 2.2% beat)
- Adjusted EPS: $0.27 vs analyst estimates of $0.27 (in line)
- Adjusted EBITDA: $56.01 million vs analyst estimates of $48.33 million (29.1% margin, 15.9% beat)
- The company reconfirmed its revenue guidance for the full year of $750 million at the midpoint
- Management raised its full-year Adjusted EPS guidance to $1.16 at the midpoint, a 7.9% increase
- EBITDA guidance for the full year is $195 million at the midpoint, above analyst estimates of $185.7 million
- Operating Margin: 20.1%, up from 6.8% in the same quarter last year
- Free Cash Flow Margin: 16%, down from 18.1% in the previous quarter
- Gross Services Volume: 812,000, down 60,000 year on year
- Market Capitalization: $1.79 billion
“Upwork is off to a strong start in 2025, delivering record first-quarter results across revenue and profitability, a testament to the team’s accelerated execution and the resilience of our business model,” said Hayden Brown, president and CEO, Upwork.
Company Overview
Formed through the 2013 merger of Elance and oDesk, Upwork (NASDAQ:UPWK) is an online platform where businesses and independent professionals connect to get work done.
Sales Growth
A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Thankfully, Upwork’s 13.3% annualized revenue growth over the last three years was decent. Its growth was slightly above the average consumer internet company and shows its offerings resonate with customers.
This quarter, Upwork’s $192.7 million of revenue was flat year on year but beat Wall Street’s estimates by 2.2%. Company management is currently guiding for a 3.4% year-on-year decline in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to decline by 1% over the next 12 months, a deceleration versus the last three years. This projection is underwhelming and suggests its products and services will see some demand headwinds. At least the company is tracking well in other measures of financial health.
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Gross Services Volume
Customer Growth
As a gig economy marketplace, Upwork generates revenue growth by expanding the number of services on its platform (e.g. rides, deliveries, freelance jobs) and raising the commission fee from each service provided.
Over the last two years, Upwork’s gross services volume, a key performance metric for the company, increased by 1.6% annually to 812,000 in the latest quarter. This growth rate is one of the lowest in the consumer internet sector. If Upwork wants to accelerate growth, it likely needs to engage users more effectively with its existing offerings or innovate with new products. 
Unfortunately, Upwork’s gross services volume decreased by 60,000 in Q1, a 6.9% drop since last year. The quarterly print was lower than its two-year result, suggesting its new initiatives aren’t moving the needle for customers yet.
Revenue Per Customer
Average revenue per customer (ARPC) is a critical metric to track because it measures how much the company earns in transaction fees from each customer. This number also informs us about Upwork’s take rate, which represents its pricing leverage over the ecosystem, or "cut" from each transaction.
Upwork’s ARPC growth has been impressive over the last two years, averaging 8.3%. Its ability to increase monetization while growing its gross services volume demonstrates its platform’s value, as its customers continue to spend more each year. 
This quarter, Upwork’s ARPC clocked in at $237.32. It grew by 8.4% year on year, faster than its gross services volume.
Key Takeaways from Upwork’s Q1 Results
We were impressed by how significantly Upwork blew past analysts’ revenue and EBITDA expectations this quarter. We were also glad its full-year EBITDA and EPS guidance trumped Wall Street’s estimates. On the other hand, its gross services volume fell short of Wall Street’s estimates and its number of customers declined. Overall, this print was mixed but still had some key positives. The stock traded up 9.7% to $14.60 immediately after reporting.
Should you buy the stock or not? We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.