Udemy, Inc. Reports Strong Third Quarter 2025 Financial Results

The Event in Detail

Udemy, Inc. (UDMY) announced robust third-quarter 2025 financial results, reporting earnings and revenue figures that surpassed analyst expectations. For the quarter ending September 2025, Udemy reported earnings per share (EPS) of $0.13, significantly exceeding the Zacks Consensus Estimate of $0.10 by 30.00%. This marks the fourth consecutive quarter that Udemy has successfully surpassed consensus EPS estimates.

Revenue for the quarter reached $195.68 million, representing a 0.1% increase year-over-year. This figure also outperformed the Zacks Consensus Estimate of $193.15 million by 1.31%. The company reported a net income of $1.6 million, a notable turnaround from a net loss of $25.3 million in the same quarter of the previous year.

Operational highlights include an 8% year-over-year growth in subscription revenue, totaling $143.9 million. Furthermore, the gross margin improved by 300 basis points to 66%, and the adjusted EBITDA margin doubled to 12%, indicating enhanced operational efficiency.

Analysis of Market Reaction

The positive earnings surprise from Udemy suggests that the company effectively managed its operations and met, or exceeded, market expectations. Financial analyses often indicate that stocks of companies delivering substantial positive earnings surprises tend to exhibit above-average performance, fostering investor confidence in the company's trajectory. The reported improvements in operational efficiency, specifically the increased gross and adjusted EBITDA margins, likely contributed to a favorable investor outlook, potentially mitigating any prior concerns surrounding the stock's performance.

Broader Context & Implications

Despite these strong quarterly results, Udemy shares have experienced a decline of 16.8% since the beginning of the year, contrasting with the S&P 500's gain of 17.2% over the same period. Over the past year, the stock has seen a decrease of 24.59%.

However, current valuation metrics may suggest a potential opportunity. The company's Price-to-Sales (P/S) ratio stands at 1.2, which is close to its five-year low of 1.15. Similarly, its Price-to-Book (P/B) ratio is 4.09, near its two-year low. These ratios could indicate a possible undervaluation in the stock. Udemy maintains a strong liquidity position, with cash and cash equivalents totaling $235.9 million, alongside $15.7 million in net cash generated from operating activities, contributing to a positive free cash flow of $12.1 million for the quarter.

Expert Commentary

Leading analysts have set a target price of $10.32 for Udemy, reflecting a degree of optimism regarding its future performance. This positive sentiment is underscored by the consistent earnings beats and the company's strategic growth, particularly within its Enterprise segment. The marketplace platform focused on education continues to be a key revenue driver and a focus of sustained analyst interest.

Looking Ahead

Udemy has provided forward-looking guidance, projecting revenue for the fourth quarter of 2025 to be between $191 million and $194 million. The company also anticipates an adjusted EBITDA ranging from $18 million to $20 million for the upcoming quarter. For the full fiscal year 2025, Udemy expects total revenue to be approximately $791.05 million, with adjusted EBITDA projected to fall between $92 million and $94 million. These projections collectively indicate continued confidence in the company's strategic initiatives and ongoing operational execution.