The News: Udemy announced its third quarter (Q3) 2023 earnings on November 2, reporting revenue of $184.7 million, exceeding guidance for the quarter and increasing 17% on a year-over-year (YoY) basis. The company also posted YoY gains in enterprise segment revenue, annual recurring revenue (ARR), and consumer segment revenue. For the full earning press release, please visit Udemy’s website.
By the numbers:
- Q3 2023 Revenue: $184.7 million, up 17% on a YoY basis. Revenue growth exceeded the high end of the guidance range for the quarter by $4.7 million and includes a negative impact of 1 percentage point from changes in foreign exchange (FX) rates YoY.
- Q3 2023 Enterprise Customers: 15,378, up 14% on a YoY basis.
The company also reported the following results:
- Enterprise segment, or Udemy Business, revenue increased to $109.1 million, up 30% YoY, and includes the negative impact of 2 percentage points from changes in FX rates.
- Udemy Business ARR increased to $443.1 million, up 26% YoY.
- Consumer segment revenue increased to $75.6 million, up 1% YoY, including the negative impact of 0.5 percentage points from changes in FX rates.
- Non-generally accepted accounting principles (non-GAAP) loss of $0.05 per share, representing a YoY improvement from Q3 2022’s non-GAAP loss of $0.15 per share.
Udemy Reports Revenue Growth Across Enterprise and Consumer Segments
Analyst Take: The online learning market has experienced a significant transformation in recent years, primarily accelerated by the pandemic-induced shift toward remote education and the subsequent adoption of advanced technologies such as AI and machine learning (ML). This rapid evolution is marked by a growing emphasis on personalized learning experiences, the proliferation of micro-credentialing, and the integration of immersive technologies such as virtual reality (VR) and augmented reality (AR) to engage learners, creating a more competitive landscape where traditional and emerging educational providers vie for market share.
Against this backdrop, Udemy announced strong Q3 2023 revenue across a variety of business segments, reflecting the growth in the number of enterprise customers, monthly subscribers, and expansion of business in the Asia Pacific region. The company also reported a YoY improvement in its non-GAAP reported loss, improving to a net loss of $0.05 per share, from a net loss of $0.15 per share.
Udemy is the operator of a marketplace platform for learning technical and business skills, as well as personal development courses, targeted at individual learners and enterprise customers. The company’s offerings are provided through a platform that is accessible globally and provides access to about 200,000 courses through direct-to-consumer or Udemy Business offerings in approximately 75 languages.
New Customer Wins and Geographic Expansion Driving Revenue
Udemy’s marketplace platform revenue is driven in two ways: by expanding the number of customers and subscribers and by getting each customer to take additional courses. The company reported that it had added or expanded its relationships with several customers around the world, including Assurant (US), Bosch Global Software Technologies (India), Compasso Tecnologia LTD (Brazil), Deutsche Telekom (Slovakia), DHL Express (Belgium), Elektrobit Automotive GmbH (Germany), Shell (UK), Sanofi (France), Sun Life Assurance Company (Canada), Schlumberger Limited (US) and Vimeo (US).
The company also noted that it is continuing to expand its marketplace platform in the Asia-Pacific region, highlighting new Q3 2023 customer wins and expansions through strategic reseller partnerships, including The Bank of Yokohama (Japan), Daiwa Securities Group (Japan), Samsung Human Resource Development Center (South Korea), and Tokyo Electric Power Company Holdings (Japan).
In addition, Udemy is driving revenue within its consumer segment, announcing it has recently passed the 100,000 paid monthly and annual subscriber mark for Udemy’s consumer subscription, Personal Plan.
The company also announced a new partnership with Docker that provides active Docker developers with access to dedicated learning paths and more than 350 real-time Docker training modules on emerging technologies.
Leveraging Generative AI to Enable More Personalized Skills
A key strategy being deployed by Udemy is using AI to create more personalized skill development across its marketplace platform. According to the company, curated generative AI learning paths for Udemy Business customers are being developed to address four common use cases, consisting of more than 300 hours of learning content.
Other AI-focused initiatives include revamping its instructors’ AI-powered Coding Exercise Practice Insights dashboard to include learner engagement insights and expanding the AI-assisted coding exercise creation functionality for instructors to include new ChatGPT integrations for Spanish courses and JavaScript.
Looking Ahead
Udemy is also expected to drive revenue by reducing its operating expenses. The company announced plans to adjust the content payment structure for its Udemy Business and consumer subscription offerings, reducing instructor partners’ share of subscription revenue that can be earned, based on the consumption of their content.
Under the current payment structure, instructor partners earn 25% of subscription revenue, with plans to reduce the instructor share to 15% by 2026, with the first adjustment to 20% effective as of January 1, 2024. This adjustment will positively impact future gross margin and should enable the company to make more investments in brand initiatives and product innovation on a move-forward basis.
For fourth quarter (Q4) 2023, the company is providing revenue guidance of $184 million-$187 million, with full-year 2023 guidance of $723 million-$726 million. The company noted that its revenue guidance range assumes historical changes in FX rates will negatively impact total revenue YoY growth by approximately 2 percentage points in Q4 and 3 percentage points for the full year 2023. It also assumes that FX rates will remain constant for the remainder of the year.
Disclosure: The Futurum Group is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The author does not hold any equity positions with any company mentioned in this article.
Analysis and opinions expressed herein are specific to the analyst individually and data and other information that might have been provided for validation, not those of The Futurum Group as a whole.
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Author Information
Steven engages with the world’s largest technology brands to explore new operating models and how they drive innovation and competitive edge.
Keith Kirkpatrick is VP & Research Director, Enterprise Software & Digital Workflows for The Futurum Group. Keith has over 25 years of experience in research, marketing, and consulting-based fields.
He has authored in-depth reports and market forecast studies covering artificial intelligence, biometrics, data analytics, robotics, high performance computing, and quantum computing, with a specific focus on the use of these technologies within large enterprise organizations and SMBs. He has also established strong working relationships with the international technology vendor community and is a frequent speaker at industry conferences and events.
In his career as a financial and technology journalist he has written for national and trade publications, including BusinessWeek, CNBC.com, Investment Dealers’ Digest, The Red Herring, The Communications of the ACM, and Mobile Computing & Communications, among others.
He is a member of the Association of Independent Information Professionals (AIIP).
Keith holds dual Bachelor of Arts degrees in Magazine Journalism and Sociology from Syracuse University.
