Coursera's Q4 Call Highlights AI Progress and Merger Prep, But Underlying Enterprise Weakness Remains

What happened

Coursera's fourth-quarter 2025 earnings call emphasized stronger execution and improving profitability, driven by cost discipline and AI product innovation like the Coach feature. Management highlighted accelerating AI initiatives tied to growing skills demand, but glossed over persistent enterprise net retention in the high-80s to low-90s, a key vulnerability noted in the DeepValue report. The call also focused on preparations for the proposed Udemy merger, reaffirming the $115 million cost synergy target and a 2H26 closing timeline, despite looming regulatory and integration risks. While the company maintains robust free cash flow and a net cash position of ~$725 million, providing downside cushion, investor skepticism persists due to muted enterprise expansion and merger execution uncertainties. Overall, the narrative reinforces operational improvements but fails to address core retention challenges, leaving the investment thesis unchanged.

Implication

The Q4 call confirms Coursera's progress on cost control and AI innovation, yet it does not demonstrate a turnaround in enterprise retention, which is critical for sustainable growth and pricing power. Management's upbeat tone on the Udemy merger synergy plan is encouraging, but regulatory hurdles and past edtech integration failures pose significant execution risks that could derail the bullish case. AI-driven enrollment growth, such as in GenAI courses, supports top-line momentum but may not boost margins without improved customer stickiness or clear monetization gains. The strong balance sheet with ~$725 million net cash and consistent free cash flow generation provides a margin of safety, limiting near-term downside while allowing time for the thesis to unfold. However, without evidence of stabilization in enterprise metrics or smooth merger progress, the stock is likely to remain range-bound, reflecting the balanced risk-reward profile outlined in the DeepValue report.

Thesis delta

The Q4 earnings call does not materially shift the investment thesis, which remains anchored on enterprise net retention stabilization above 85% and successful Udemy merger execution with the $115 million synergy target. Continued emphasis on AI innovation and profitability supports the base case, but the lack of improvement in retention metrics keeps the bear risk alive, requiring investors to maintain a cautious stance until clearer signs of fundamental recovery emerge.