Udemy Beats Q4 Earnings Estimates Amid Subscription Shift, Yet Growth and Retention Concerns Linger

What happened

Udemy reported Q4 2025 earnings of $0.12 per share, beating the Zacks Consensus Estimate of $0.09 and up from $0.10 a year ago, indicating a positive earnings surprise. This performance aligns with the company's ongoing subscription-led pivot, which the DeepValue report notes is lifting gross margins to 66% in Q3 2025 and generating positive adjusted EBITDA. However, the report highlights persistent softness in Enterprise expansion, with UB net dollar retention at 93% (97% for large customers), signaling ongoing upsell and retention challenges. Additionally, Consumer transactional pressure during the subscription-first shift tempers near-term growth visibility, despite management's efforts to improve predictability. The earnings beat may suggest Udemy met or exceeded its Q4 guidance of $191–$194M revenue and $18–$20M adjusted EBITDA, but underlying health depends on key metrics like NDRR and Consumer subscription traction.

Implication

Investors should see the earnings beat as reinforcing the margin expansion from Udemy's subscription shift, which supports profitability and free cash flow. However, it does not address the Enterprise segment's weak expansion, with UB NDRR below 100% indicating continued upsell and retention headwinds. The Consumer pivot to subscriptions may still drag on revenue growth in the short term, despite aiming for long-term durability. Key catalysts like a sustained rebound in NDRR or accelerated Consumer subscription growth remain unmet, preventing an upgrade from the current hold recommendation. Therefore, while the beat offers temporary relief, prudence is essential until clearer evidence emerges on sustainable growth and margin progression.

Thesis delta

The earnings beat affirms the positive margin trajectory from Udemy's subscription pivot but does not materially shift the investment thesis, which remains cautious due to unresolved growth and retention challenges. Investors should continue to monitor key watch items like UB NDRR and Consumer subscription traction before considering a stance change.