Udemy Third Quarter 2024 Earnings: Revenues Beat Expectations, EPS Lags

Udemy, a leading online skills marketplace and learning platform, reported its third-quarter 2024 earnings on October 29, 2024. The company's revenue surpassed analyst estimates, driven by strong growth in its enterprise segment. However, earnings per share (EPS) fell short of expectations, highlighting the challenges Udemy faces in managing operational costs.

Udemy's revenue for the quarter reached $195.4 million, marking a 6% year-over-year increase despite a 2% negative impact from foreign exchange rates. This performance exceeded analyst estimates of $192.66 million. The company's gross margin improved to 63%, up from 58% in the prior year, indicating enhanced operational efficiency.

The enterprise segment, Udemy Business, was the primary driver of Udemy's growth. Revenue from this segment increased by 16% year-over-year to $126.1 million, while Udemy Business Annual Recurring Revenue (ARR) surged 14% to $504.6 million. This growth is attributable to the addition of new enterprise customers and the expansion of existing relationships, as well as the successful integration of AI capabilities.

Udemy's consumer segment, however, experienced a decline in revenue. Revenue from this segment decreased by 8% year-over-year to $69.3 million, despite a 3% negative impact from foreign exchange rates. This decrease highlights the challenges Udemy faces in maintaining growth in its consumer-facing business.

Despite the strong revenue growth, Udemy's net loss widened to $25.3 million from $16.8 million in the previous year, reflecting a 51% increase in losses. The company's EPS recorded a loss of $0.17 per share, compared to a loss of $0.11 per share in the same quarter last year. This widening net loss indicates ongoing challenges in managing operational costs and suggests that Udemy may need to focus on cost control and profitability.

Udemy's share repurchase program, part of a $150 million plan, reflects the company's confidence in its long-term growth prospects. The company bought back approximately $51 million worth of shares during the quarter, demonstrating its commitment to returning value to shareholders.

In conclusion, Udemy's third-quarter 2024 earnings report highlights the company's strong revenue growth, driven by its enterprise segment. However, the widening net loss and EPS shortfall indicate that Udemy must address its operational costs and focus on profitability. As Udemy continues to expand its global reach and invest in AI-enabled capabilities, investors should monitor the company's ability to manage its costs and maintain its strong revenue growth.