Upwork (UPWK) Q2 2025: AI-Driven GSV Up $80M, Enterprise Acquisitions Set Stage for 2026
Upwork’s Q2 showcased accelerating AI-fueled marketplace gains and a strategic leap into enterprise workforce management via two targeted acquisitions. With Business Plus and AI work driving higher spend per client, Upwork is raising full-year guidance and positioning for top-line growth in 2026. The company’s margin expansion and capital allocation discipline highlight a pivot toward larger enterprise deals and durable profitability despite a challenging macro backdrop.
Summary
- AI Work Drives Platform Upside: AI-related GSV and product enhancements accelerated client spend and marketplace engagement.
- Enterprise Acquisitions Expand TAM: Bubty and Ascend acquisitions position Upwork to serve complex enterprise needs with a unified solution.
- Business Plus Surges as Growth Engine: Premium SMB segment delivered triple-digit GSV growth, signaling momentum heading into 2026.
Performance Analysis
Upwork delivered record Q2 revenue and profitability, with marketplace momentum led by AI and premium client segments. Marketplace revenue rose as product improvements in search, matching, and AI workflows increased average spend per contract and engagement with high-value features. Business Plus, Upwork’s premium plan for larger SMB clients, drove a 190% quarter-over-quarter surge in gross services volume (GSV) from this segment, while 35% of Business Plus clients were new to the platform.
AI-related work was a standout, with GSV from AI categories up 30% year-over-year, and prompt engineering GSV up 51%. The number of clients posting AI jobs grew 38% year-over-year, with these clients spending over three times the platform average. Product innovation velocity, including UMA, Upwork’s mindful AI, and AI-native search, lifted average spend per contract by 4% and Connects revenue by 3%. Take rate expansion, driven by pricing experiments and monetization products, contributed to margin gains.
- GSV Per Active Client Rebounds: Average GSV per client surpassed $5,000 for the first time since 2022, up 5% year-over-year, with strength across all major segments.
- Margin Structure Strengthens: Adjusted EBITDA margin hit a record 29.3%, supported by AI-enabled cost efficiency and disciplined expense management.
- Share Repurchase and Cash Position: $38 million deployed for buybacks in Q2, with $635 million in cash and equivalents providing ample flexibility for growth and capital returns.
Despite macro headwinds weighing on new client acquisition, Upwork’s focus on quality clients and high-value categories is yielding higher spend and retention, setting the stage for sustained margin and GSV growth into 2026.
Executive Commentary
"Our innovation velocity was on display in our summer 2025 Upwork updates... rooted in our unique ability to combine the world's best human talent with cutting edge AI to deliver unparalleled outcomes and pioneering customer experiences."
Hayden Brown, President and Chief Executive Officer
"Our focused, disciplined approach to margin expansion while investing in growth was evident across our business, as our adjusted EBITDA margin hit a new record high of 29.3%, exceeding our guidance range."
Erica Gesser, Chief Financial Officer
Strategic Positioning
1. AI as a Core Marketplace Multiplier
Upwork’s rapid AI integration—spanning UMA, AI-native search, and proposal tools—has directly fueled higher client spend and engagement. Over 35% of code deployed is now AI-generated, driving faster product iteration and enhanced matching. AI-related categories are outpacing overall platform growth, with clients in these verticals spending significantly more and driving up GSV per client.
2. Enterprise Expansion via Bubty and Ascend
The acquisitions of Bubty, a contingent workforce management platform, and Ascend, a digitally native W-2 employment solution, enable Upwork to address the full spectrum of contingent workforce needs for large enterprises. This positions Upwork to tap into the $650 billion contingent workforce total addressable market (TAM) by offering a contract-agnostic, unified solution that integrates talent sourcing, contracting, and workforce management.
3. Business Plus as a High-Value Growth Segment
Business Plus, Upwork’s premium SMB and team-focused offering, is emerging as a major revenue driver, with 45% quarter-over-quarter active client growth and a 190% GSV surge. The segment appeals to both existing and new clients, with 35% of Business Plus customers new to Upwork, and is expected to materially contribute to 2026 revenue as adoption scales.
4. Monetization and Take Rate Levers
Upwork’s experimentation with freelancer fees, Connects, and subscription products is expanding take rate and monetization, contributing to margin expansion. Variable freelancer fees, still in early rollout, and new pricing strategies are driving both higher take rates and improved matching, supporting GSV growth into 2026.
5. Internal AI-Driven Efficiency
AI is materially improving Upwork’s internal productivity, with 35% of code AI-generated and tangible efficiency gains in customer support, finance, and HR. These efforts are visible in the margin structure and are expected to provide further operating leverage as adoption deepens.
Key Considerations
Upwork’s Q2 results reflect a strategic pivot toward larger, more profitable segments and a platform increasingly powered by AI. The company’s multiyear investments in product, enterprise, and monetization are converging to drive both top-line and margin expansion, though the macro environment remains a constraint for new client acquisition.
Key Considerations:
- AI-Enhanced Client Spend: AI features are driving higher GSV per client and expanding Upwork’s addressable market.
- Enterprise TAM Unlock: Bubty and Ascend acquisitions complete Upwork’s enterprise offering, positioning for large, multi-year contracts.
- Business Plus Traction: Rapid growth in premium SMB segment is building a pipeline for future platform-wide revenue gains.
- Take Rate Expansion: Ongoing pricing and monetization experiments are supporting margin gains and revenue resilience.
- Capital Allocation Discipline: Share buybacks and strong cash flow provide flexibility for both M&A and shareholder returns.
Risks
Upwork’s outlook is tempered by persistent macro uncertainty, which continues to weigh on new client acquisition and could impact GSV growth if economic conditions deteriorate. The integration of Bubty and Ascend introduces execution risk, with synergies and revenue impact likely back-end loaded into 2026 and beyond. Competitive pressures from both legacy staffing firms and emerging digital platforms remain a long-term challenge, especially as Upwork expands into more complex enterprise workflows.
Forward Outlook
For Q3 2025, Upwork guided to:
- Revenue of $190 to $195 million
- Adjusted EBITDA of $47 to $51 million (25% to 26% margin), absorbing $10 million in incremental acquisition and integration costs
For full-year 2025, management raised guidance:
- Revenue of $765 to $775 million
- Adjusted EBITDA of $206 to $214 million (27% margin at midpoint)
- Non-GAAP diluted EPS of $1.14 to $1.18
Management highlighted:
- Minimal near-term revenue from Bubty and Ascend, with more substantial contribution expected in late 2026
- Continued focus on margin expansion, with a reiterated long-term adjusted EBITDA margin target of 35%
Takeaways
Upwork’s Q2 marks a turning point, as AI-fueled product enhancements and strategic M&A set the stage for multi-year enterprise growth.
- AI and Business Plus Momentum: Both are driving higher spend and engagement, offsetting macro softness in new client adds.
- Enterprise Leap: Bubty and Ascend acquisitions enable Upwork to compete for large, complex contracts and move upmarket.
- 2026 Inflection Watch: Investors should monitor enterprise pipeline build and continued take rate expansion, as these will be critical to sustaining revenue and margin gains.
Conclusion
Upwork’s Q2 results and guidance raise reflect the company’s successful pivot to AI-driven platform growth and enterprise expansion. With margin discipline, strong cash flow, and a pipeline of high-value initiatives, Upwork is positioned to capture a larger share of the evolving contingent workforce market despite external headwinds.
Industry Read-Through
Upwork’s results signal a broader shift in the freelance and contingent workforce industry, where AI-powered platforms are driving higher client value and spend. The move to integrate end-to-end workforce management and employment solutions reflects growing enterprise demand for unified, digital-first solutions. Competitors in staffing, HR tech, and gig platforms will face mounting pressure to match AI-driven productivity and margin gains, while also addressing the complex compliance and integration needs of large customers. The focus on premium SMB and enterprise segments suggests that platforms able to blend automation with human expertise will capture disproportionate share as work models evolve.