Udemy shares surge on first annual profit, EBITDA doubles
Online learning platform delivers $70M in free cash flow, suspends guidance amid Coursera merger
Udemy shares climbed in after-hours trading Thursday after the online learning platform reported its first full year of profitability and delivered quarterly earnings that far exceeded analyst expectations, marking a significant milestone in the company's path to financial sustainability.
The San Francisco-based company reported fourth-quarter adjusted earnings per share of 12 cents, beating the consensus estimate of 9.4 cents by 27.9%, according to the company's earnings announcement. More significantly, Udemy delivered its first full year of positive net income at $3.8 million, a dramatic reversal from the $85.3 million net loss recorded in the prior year.
The profitability achievement represents a watershed moment for Udemy, which has operated in the red since going public in 2021. The company's operational improvements were underscored by adjusted EBITDA that surged 122% year-over-year to $95.3 million, with margin expansion of 700 basis points. Free cash flow reached $70 million, providing Udemy with substantial financial flexibility as it navigates a pending merger with rival Coursera.
"This marks a pivotal quarter and year for Udemy, demonstrating the strength of our business model and our ability to generate sustainable profitability," the company stated in its earnings release. "Our disciplined execution across both consumer and enterprise segments has positioned us for continued growth."
Subscription revenue, which carries higher margins and more predictable cash flows, increased 8% year-over-year and now represents 72% of total revenue. This shift toward subscription-based offerings has been a strategic priority for management, as enterprise clients increasingly seek comprehensive learning solutions for employee upskilling and development programs.
Despite the strong performance, Udemy declined to provide forward guidance, citing uncertainty surrounding the pending all-stock merger with Coursera announced in December. The deal, which values the combined entity at approximately $2.5 billion, would create one of the world's largest online learning platforms, bringing together Udemy's marketplace of instructor-led courses with Coursera's university partnerships and degree programs.
The merger integration presents both opportunities and challenges. On one hand, the combined company could leverage cross-selling opportunities across enterprise and consumer segments, potentially accelerating revenue growth. On the other, integration risks and regulatory scrutiny loom as antitrust authorities examine the competitive impact of uniting two major players in the online education market.
Udemy's stock performance has been volatile over the past year, with shares trading between $4.52 and $10.61. The current market capitalization stands at approximately $676 million. Analysts maintain a mixed outlook, with an average target price of $8.00, according to market data. Two analysts rate the stock a strong buy, one recommends buy, and three advise hold.
The online education sector has experienced consolidation pressure as investors demand clearer paths to profitability. Coursera's acquisition of Udemy reflects a broader trend of platform operators seeking scale to compete in an increasingly crowded market dominated by tech giants entering the education space.
Enterprise demand for workforce training has remained resilient despite economic uncertainty, particularly in technology and artificial intelligence skills. Udemy's business segment has been the primary growth driver, offsetting softer consumer demand as individual learners reduce discretionary spending on online courses.
Looking ahead, investors will focus on merger integration progress and regulatory approval timelines. The companies have indicated they expect the transaction to close in the second half of 2026, subject to shareholder and regulatory approvals. Until then, Udemy's ability to maintain its profitability momentum while managing integration preparations will be closely watched by market participants.