Udemy's Weak Demand Trends and Guidance Cuts Prompt Rating Upgrade

Udemy's (NASDAQ:UDMY) FY25 guidance was cut, and underlying demand trends are weak in both the US and international markets. Despite this, the company's rating was upgraded due to visible weaknesses. However, the finance expert remains cautious, citing the need for more positive signs before becoming bullish.

Udemy Inc. (NASDAQ: UDMY) reported its 2Q25 earnings, showing signs of stabilization and growth despite earlier concerns about weak demand trends. The company's revenue grew by 3% year-over-year (YoY) to $199.9 million, driven primarily by its Enterprise segment, Udemy Business (UB), which grew by 7% YoY to $129.3 million. This marked the first positive GAAP net income since the company's initial public offering (IPO), with $6.3 million in net income. Gross margin expanded by 300 basis points (bps) YoY to 67%, while EBITDA grew to $28.4 million, representing a 1,100 bps YoY improvement [1].

The consumer segment, which had been in a steep decline, showed signs of stabilization. The YoY revenue decline moderated significantly, supported by good momentum in the subscription model. Subscription gross merchandise value (GMV) grew by more than 40% YoY in June and was tracking toward 50% YoY in July. Paid consumer subscribers surpassed 200,000, with subscriptions contributing 15% of segment revenue, up two points in just one quarter. Management also raised the FY25 revenue guidance to a midpoint of $789 million, implying slightly positive growth for the year [1].

However, the finance expert remains cautious. The UB underlying expansion metrics are still weak, with net dollar retention (NDR) declining sequentially to 95% and large-customer NDR down to 99%. The first sequential drop in UB customer count, down by 109 to 17,107, was framed as a deliberate move upmarket but remains a concern. The consumer segment's reported 4% YoY decline was supported by a one-time $2.5 million gain from breakage revenue, indicating a closer to 7% YoY decline in like-for-like terms. The company is in a "show me" phase, needing to prove it can translate these positive indicators into sustained top-line growth and improved expansion metrics before the market re-rates the stock meaningfully [1].

In contrast, Adtalem Global Education Inc. (NYSE: ATGE), a leading healthcare educator, reported exceptional fiscal year 2025 results. Total enrollment grew by 10.2% YoY, and revenue increased by 12.9% YoY to $1,788.3 million. Adjusted earnings per share (EPS) grew by 33.1% YoY to $6.67. The company's disciplined strategic execution and strategic partnerships have created repeatable high-return pathways from education to employment, positioning it well for long-term growth [2].

References:
[1] https://seekingalpha.com/article/4813530-udemy-still-not-bullish-yet-because-of-visible-weaknesses-rating-upgrade
[2] https://www.stocktitan.net/news/ATGE/adtalem-global-education-announces-exceptional-fiscal-year-2025-n42d8hn7qf45.html