10-K: Udemy Returns to Profitability Amid Coursera Merger

Udemy, Inc. reported a net income of $3.8 million in fiscal year 2025, a significant turnaround from previous losses, driven by a strategic shift to a subscription-first model and a pending merger with Coursera.

Summary

• Achieved a net income of $3.8 million in fiscal year 2025, a substantial improvement from net losses of $(85.3) million in 2024 and $(107.3) million in 2023.
• Total revenue saw a modest increase of 0.4% year-over-year, reaching $789.8 million in fiscal year 2025.
• The Enterprise segment's revenue grew by 6% to $524.1 million, now accounting for 66% of total revenue, up from 63% in 2024.
• Consumer segment revenue decreased by 9% to $265.8 million, primarily due to a $39.8 million decline in transactional purchases, partially offset by a $13.5 million increase in consumer subscription revenue.
• Gross margin improved to 66% in fiscal year 2025 from 63% in 2024, attributed to a reduced instructor revenue share and a favorable shift in revenue mix towards subscription offerings.
• Adjusted EBITDA more than doubled to $95.3 million in fiscal year 2025 from $43.0 million in 2024, with the adjusted EBITDA margin rising to 12% from 5%.
• Free cash flow increased to $69.9 million in fiscal year 2025, up from $38.3 million in 2024.
• A proposed all-stock merger with Coursera, Inc. was announced on December 17, 2025, with existing Udemy stockholders expected to own approximately 41% of the combined company.
• The company completed a strategic transformation in 2025 to prioritize predictable, high-value subscription products, resulting in 72% of total revenue derived from subscriptions, up from 66% in 2024.
• Significant investments were made in an AI-powered skills acceleration platform, including AI Role Play technology and Model Context Protocol (MCP) server integration.

Sentiment

Score: 7

Explanation: StockSavvy.ai views this as a positive report, highlighting a return to profitability, strong growth in the Enterprise segment, and improved operational efficiency, despite some softness in the Consumer segment. The pending merger with Coursera and continued AI investments position the company for future strategic growth.

Positives

• Achieved net income of $3.8 million in fiscal year 2025, marking a significant return to profitability from prior year losses.
• Enterprise segment revenue grew by 6% to $524.1 million, increasing its contribution to total revenue to 66%, indicating successful strategic focus on higher-margin business.
• Gross margin improved to 66% in fiscal year 2025, up from 63% in 2024, driven by reduced instructor revenue share for subscription offerings and a favorable revenue mix.
• Adjusted EBITDA more than doubled to $95.3 million in fiscal year 2025 from $43.0 million in 2024, with the adjusted EBITDA margin increasing to 12%.
• Free cash flow significantly increased to $69.9 million in fiscal year 2025 from $38.3 million in 2024, demonstrating improved liquidity.
• Successful transformation to a subscription-first revenue model, with subscriptions accounting for 72% of total revenue in fiscal year 2025, up from 66% in 2024.
• Strong growth in paid Consumer subscribers, increasing to 343,000 in fiscal year 2025 from 170,000 in 2024.
• Operational efficiency initiatives led to decreases in sales and marketing expenses (down $16.5 million or 5%) and research and development expenses (down $23.9 million or 19%).
• Maintained a strong international presence, with 61% of revenue generated outside North America and 85% of marketplace traffic originating from outside the U.S.
• High engagement from instructors, with top courses updated five times on average in 2025 and instructors collectively earning $168 million.

Negatives

• Overall revenue growth was minimal at 0.4% year-over-year, indicating a slowdown in top-line expansion.
• Consumer segment revenue decreased by 9% to $265.8 million, primarily due to a $39.8 million decrease in transactional and other purchases.
• Monthly average buyers decreased to 1,275,000 in fiscal year 2025 from 1,340,000 in 2024, reflecting a decline in individual course purchases.
• Udemy Business Net Dollar Retention Rate (NDRR) decreased to 93% in fiscal year 2025 from 98% in 2024, and Large Customer NDRR decreased to 97% from 103%, indicating that churn outpaced expansion across existing customers.
• Incurred $3.7 million in acquisition-related costs in fiscal year 2025 due to the proposed merger with Coursera.
• Interest income decreased by $5.5 million (28%) in fiscal year 2025 compared to 2024.
• Interest expense increased significantly to $(734) thousand in fiscal year 2025 from $379 thousand in 2024.
• The accumulated deficit remains high at $801.2 million as of December 31, 2025.

Risks

• The pendency of the merger with Coursera, Inc., or its failure to complete, could adversely affect business, financial condition, results of operations, and stock price, including business uncertainties, contractual restrictions, potential litigation, employee uncertainty, and loss of business partners.
• A history of losses and an accumulated deficit of $801.2 million as of December 31, 2025, indicate that the company may not be able to generate sufficient revenue to increase or sustain profitability in the future.
• Operating in an emerging and dynamic market for online learning solutions makes it difficult to evaluate future prospects and results of operations.
• Results of operations may fluctuate significantly from period to period due to a wide range of factors, making future results difficult to predict.
• Growth may not be sustainable and depends on the ability to attract new learners, instructors, and organizations and retain existing ones.
• The platform relies on a limited number of instructors who create a significant portion of the most popular content, and the loss of these relationships could adversely affect the business.
• Failure to maintain and expand relationships with Udemy Business customers could harm the ability to grow the business and revenue.
• Operates in a highly competitive market, facing competition from traditional e-learning providers, specialized content offerings, and increasingly from large language models (LLMs) and other generative AI offerings.
• The revolving credit facility contains customary affirmative and negative covenants, including financial covenants, that may limit operating flexibility, and failure to meet these could lead to default.
• The market for online learning solutions is relatively new and may not grow as expected, which could harm the business.
• Changes in laws or regulations relating to privacy, data protection, or cybersecurity, or any actual or perceived failure to comply, could adversely affect the business, potentially leading to fines (e.g., up to 6% of global turnover under EU DSA, 17.5 million British pounds or 4% of global turnover under UK GDPR, 50 million renminbi or 5% of revenue under China's PIPL, 35 million euros or 7% of turnover under EU AI Act).
• Inability to adequately obtain, maintain, protect, and enforce intellectual property and proprietary information could adversely affect the business.
• Potential liability or harm to reputation could arise from courses posted to the platform by instructors, including intellectual property infringement claims.
• The company may not be able to successfully deploy AI, machine learning, and other evolving technologies, or may face legal liability or reputational harm from AI system outputs (e.g., deficiency, inaccuracy, bias, infringement).
• Interruptions or performance problems associated with technology and infrastructure could adversely affect the business and results of operations.
• Applicable regulations that permit Internet Service Providers (ISPs) to limit internet consumption could harm the business.
• Reliance on Amazon Web Services for a substantial portion of platform services means any disruption or interference could negatively impact business and operations.
• Dependence on third-party payment providers and evolving laws and regulations could lead to issues with payment processing.
• If mobile apps are not effective, the use of the platform could be adversely affected, impacting the ability to attract learners.
• Failure to appear prominently in internet search results could lead to a decline in growth rate and adversely affect the business.
• Unanticipated changes in the effective tax rate and additional tax liabilities, including as a result of international operations or implementation of new tax rules (e.g., One Big Beautiful Bill Act, OECD Pillar Two), could harm future results of operations.
• The ability to use net operating loss carryforwards and certain other tax attributes may be limited due to ownership changes (Section 382 of the Internal Revenue Code) or state laws (e.g., California's temporary suspension).
• Results of operations, reported in U.S. dollars, could be adversely affected if currency exchange rates fluctuate substantially in the future, as 26% of 2025 sales were non-U.S. dollar denominated.
• The business could be adversely impacted by the effects of inflation on operating costs and pricing strategies.

Future Outlook

The proposed merger with Coursera, Inc. is expected to close by the second half of 2026, contingent on stockholder and regulatory approvals. The company anticipates that revenue from its Enterprise segment will continue to grow faster than the Consumer segment, which is expected to positively impact overall margins. Operating expenses are projected to generally decrease as a percentage of revenue over the long term due to a focus on operational efficiency and high-growth opportunities. Free cash flow is expected to increase in the near term, driven by operational efficiency initiatives. The instructor revenue share for subscription offerings is set to be reduced to 15% by January 1, 2026. The company plans to continue investing in global expansion, deepening relationships with larger enterprise customers, and pursuing strategic partnerships and acquisitions. Capitalized software costs may fluctuate based on the nature and timing of investments in the platform and new offerings.

Management Comments

• Our mission is to transform lives through learning.
• We believe that our AI-powered platform, combined with our subscription-first business model and demonstrated ability to deliver measurable outcomes, positions Udemy as a critical partner for organizations and individuals navigating the global AI-driven workforce transformation.
• We believe many of today's learning platforms have a number of shortcomings, including relevance, quality, breadth, scalability, and affordability of content. Udemys platform is designed to address these shortcomings.
• Our customer success teams partner with leaders of organizations to develop learning strategies to achieve their corporate objectives and to give learners guidance to help them develop and foster a culture of continuous learning.
• With under 10% penetration of total available seats for Udemy Business customers, our opportunity within our existing customer base is significant.
• Our land-and-expand strategy is an investment in building long-term, high ROI relationships with our customers.
• We are actively investing in our business as we believe that we are only just beginning to penetrate our market opportunity.
• Our employees are our greatest asset. We believe we have a world-class culture with employees committed to redefining the future of work through a skills based approach and continuous learning.
• At Udemy, we are committed to operating responsibly and sustainably to create long-term value for all stakeholders.

Industry Context

StockSavvy.ai notes that Udemy's strategic shift towards an AI-powered, subscription-first model aligns with broader industry trends emphasizing continuous reskilling and upskilling in response to rapid technological advancements, particularly generative AI. The World Economic Forum's finding that approximately 80% of employers plan to reskill and upskill their existing workers over the next five years to work better alongside AI, and that 60% of global professionals will need new skills by 2030, underscores the significant market opportunity Udemy is targeting. The pending merger with Coursera indicates a move towards consolidation in the fragmented online learning market, aiming to create a more comprehensive platform to compete against both traditional e-learning providers and emerging AI-driven solutions from technology giants.

Comparison to Industry Standards

• The company competes with corporate training offerings, direct-to-consumer training offerings, specialized content training offerings, and free online resources.
• Increasingly, competition also comes from large language models (LLMs) and other generative AI offerings that provide on-demand, conversational responses, customized learning content, or aggregated educational materials.
• Udemy highlights its competitive advantages including a comprehensive global content marketplace with over 290,000 courses (over 122,000 non-English, 5,500+ AI-focused), high-quality and up-to-date content (top courses updated five times annually), a global instructor network of over 90,000 instructors who earned $168 million in 2025, and global distribution and reach (61% of revenue from outside North America, 85% of marketplace traffic from outside the U.S., courses in 78 languages).
• The company also emphasizes its powerful network effects, data insights and analytics (40 million monthly unique visitors, over 1 billion cumulative course enrollments), and a flexible technology platform leveraging AI and machine learning for personalization and efficiency.
• Specific comparable companies or projects with detailed results are not provided in the filing for direct benchmarking, but the general competitive landscape is described as rapidly evolving with limited barriers to entry.

Management Changes

Corporate Governance

Legal Proceedings

• The company is involved in litigation matters from time to time, including intellectual property, commercial, employment, class action, whistleblower, accessibility, and other litigation and claims, and governmental and other regulatory investigations and proceedings.
• Currently, the company is not party to any legal proceedings which, if determined adversely, would individually or taken together have a material adverse effect on its business, operating results, or financial condition.
• Udemy India LLP has received tax assessments from the India Income Tax Department challenging its transfer pricing methodology for the fiscal years ended March 31, 2022, and 2021. The company believes these proposed adjustments are without merit and intends to vigorously defend its position.

Related Party Transactions

• Naspers Ltd., through an investment entity controlled by Prosus N.V., beneficially owns more than 5% of the company's outstanding capital stock and is a customer of the Enterprise subscription offering, generating $1.7 million in revenue in fiscal year 2025.
• Insight Partners, where a board member is a Managing Director, has affiliates who are customers of the Enterprise subscription offering, generating $0.4 million in revenue in fiscal year 2025.
• Insight Partners is also affiliated with certain vendors that the company has contracted to provide technology and software solutions, resulting in $1.1 million in expenses in fiscal year 2025.
• Certain members of the company's board of directors also served as executive officers for customers of the Enterprise subscription offering, generating $0.1 million in revenue in fiscal year 2025.

Stakeholder Impact

• Shareholders face potential dilution from future equity issuances and market price volatility. The pending merger with Coursera will alter ownership percentages and could impact the value of their investment. No dividends are expected in the foreseeable future, requiring reliance on stock appreciation for gains.
• Employees may experience uncertainty regarding their future roles due to the Coursera merger, potentially leading to key employee departures. Operational efficiency initiatives resulted in restructuring charges of $1.6 million in FY2025, $16.7 million in FY2024, and $10.3 million in FY2023. Employees benefit from the WholeU program and internal learning and development opportunities, with 95% of employees utilizing the platform for learning in FY2025.
• Customers, including individual learners and Udemy Business clients, can expect enhanced learning experiences through AI-powered personalization and new platform features. However, they may face reduced demand due to economic uncertainty or increased competition from large language models (LLMs). The merger could also impact service continuity or offerings.
• Instructors benefit from monetization opportunities, collectively earning $168 million in 2025, and access to AI-assisted content creation tools. They will be impacted by the reduction of instructor revenue share for subscription offerings to 15% by January 1, 2026.
• Creditors, particularly Citibank under the $200 million revolving credit facility (currently undrawn), are subject to financial covenants. The company's improved profitability and free cash flow enhance its ability to meet financial obligations.

Next Steps

• Completion of the merger with Coursera, Inc. by the second half of 2026, subject to stockholder and regulatory approvals.
• Continued investment in the growth and development of the platform, including generative AI capabilities.
• Further expansion and deepening of opportunities with larger enterprise customers.
• Continued penetration of the existing customer base.
• Pursuit of strategic partnerships and acquisitions.
• Reduction of instructor revenue share for subscription offerings to 15% by January 1, 2026.
• Monitoring of future developments regarding tax legislation (e.g., OBBB Act, OECD Pillar Two) and regulatory guidance.
• Evaluation of the impact of new accounting standards (ASU 2024-03, ASU 2025-05, ASU 2025-06, ASU 2025-10, ASU 2025-11).

Key Dates

Recommendation

The return to profitability, strong Enterprise segment growth, and significant improvements in Adjusted EBITDA and free cash flow are positive indicators. However, the decline in the Consumer segment, reduced Net Dollar Retention Rates, and the uncertainties surrounding the pending merger with Coursera introduce considerable risk. A 'Hold' recommendation reflects the balanced view of these positive operational improvements against the integration risks and market challenges, suggesting investors monitor the merger's progress and the company's ability to sustain growth in key metrics.

Keywords

Online learning, EdTech, Corporate training, AI-powered learning, Skills development, Udemy Business, Subscription model, SEC filing, 10-K, Financial results, Coursera merger, Workforce transformation, Generative AI, Enterprise SaaS