Is Upwork (UPWK) a Buy After Jefferies' Latest Endorsement?

The recent upgrade of Upwork (UPWK) by Jefferies to a "Buy" rating with a raised price target of $27.00 has reignited investor interest in the freelance platform. This move, coupled with Upwork's mixed financial performance and ambitious growth strategy, raises critical questions about valuation momentum and the timing of catalyst-driven opportunities.

Valuation Momentum: A Compelling Entry Point

Jefferies' decision to raise its price target reflects confidence in Upwork's undervalued metrics. As of December 2025, Upwork trades at a price-to-earnings (P/E) ratio of 9.96 and a price-to-sales (P/S) ratio of 3.25, both below historical medians for its sector. These figures suggest the market has not fully priced in the company's long-term potential, particularly given its disciplined cost control and expanding operating margins. Institutional ownership of 88.28% further underscores institutional confidence, while analysts' average target price of $22.30 implies a potential 23% upside from current levels.

However, near-term headwinds persist. Gross services volume declined by 61,000 in Q3 2025, and enterprise revenue has contracted in two consecutive quarters due to large clients tightening budgets. Despite these challenges, the company's Q3 results-4.1% year-on-year revenue growth and a 25.9% beat on non-GAAP earnings per share- highlight operational resilience.

Catalyst-Driven Timing: AI, Enterprise Expansion, and SMB Monetization

Upwork's long-term thesis hinges on three transformative catalysts: AI integration, enterprise expansion, and small-to-medium business (SMB) monetization.

1. AI-Driven Growth: Upwork's AI tools, including Uma™, have already generated $80 million in additional GSV and driven a 30% year-on-year increase in AI-related work. These tools enhance hiring efficiency for clients and job-finding speed for freelancers, directly boosting average spend per contract and Connects revenue. The company's focus on AI aligns with broader market trends, positioning it to capture value from the freelance economy's digital transformation.

2. Enterprise Expansion: While enterprise revenue has faced temporary setbacks, Upwork is accelerating its pivot to full-stack contingent workforce solutions. The launch of Lifted, targeting a $650 billion total addressable market, and the acquisition of Bubty and Ascen aim to address large clients' evolving needs. Meanwhile, the Business Plus offering has shown strong traction, with a 45% quarter-over-quarter increase in active clients and a 190% surge in GSV.

1. SMB Monetization: The SMB segment remains a growth engine, with Upwork's take rates expanding as clients increasingly adopt premium features. This segment's resilience-unlike enterprise-suggests a buffer against macroeconomic volatility.

Navigating Near-Term Risks and Long-Term Potential

Upwork's Q4 2025 guidance of $193–198 million in revenue and full-year projections of $782–787 million reflect a strategic shift toward profitability. While enterprise revenue declines in Q1 and Q2 2025 were painful, the company's pivot to AI and contingent workforce solutions signals adaptability. Investors must weigh these near-term challenges against the company's 2025–2028 growth targets: 7–9% GSV CAGR, 13–15% revenue CAGR, and 20% adjusted EBITDA CAGR.

Conclusion: A Buy for the Long-Term Vision

Jefferies' endorsement, combined with Upwork's attractive valuation and catalyst-driven roadmap, supports a "Buy" case for investors with a multi-year horizon. While enterprise revenue normalization and macroeconomic risks linger, the company's AI momentum, enterprise innovation, and SMB strength create a compelling risk-reward profile. For those willing to navigate near-term volatility, Upwork's current valuation offers an opportunity to participate in a platform poised for sustained growth.