Upwork

“One highlight of our spring 2024 update is the launch of Uma, which stands for Upwork's Mindful AI. We're developing Uma on top of industry-leading large language models and fine-tuning it with trillions of tokens of highly relevant Upwork platform data across a range of work interactions.”

“We also have several partnerships that enable us to integrate generative artificial intelligence tools into our work marketplace aimed at improving customer experience and productivity.”

“At the end of last year, we acquired AI startup Headroom and deepened our bench of technical talent and leadership in this area.”

“The sequential increase in R&D also reflects the growth of our AI ML talent bench through the acquisition in Q4 of Headroom and other investments.”

“While we remain committed to ongoing innovation to further enhance our platform, including building new features with a focus on generative artificial intelligence, we expect total research and development expense to decrease in 2025.”

“In 2024, we acquired Objective AI, Inc., which we refer to as Objective AI, an AI-native search-as-a-service platform, with the aim of further enhancing our core search and matching capabilities and enabling richer insights into client needs and talent capabilities.”

“Our highly profitable business model, with gross margins over 75%, as well as the investments we're making in operational improvements like engineering, productivity, and back-office automation, mean that we can make clear and concrete commitments to growing our margins and free cash flow for the foreseeable future.”

“In October 2024, we announced the Restructuring Plan, intended to continue our profitable trajectory, increase efficiency, and accelerate innovation for our customers.”

“While lower-complexity work continues to shift toward automation, we are increasingly seeing what is emerging in its place: growing demand for high-value AI talent, more complex projects, and new categories of work across SMB and Enterprise. We are on track with our enterprise strategy, staying disciplined in how we execute, and continuing to build the AI capabilities that will make Upwork essential infrastructure as work becomes increasingly human-and-agent driven.”

“We incorporate AI and machine learning technologies across our platforms, offerings, and internal operations and are making further investments in expanding our AI capabilities. In addition, GSV from AI-related work performed on the Upwork Marketplace has increased as demand for AI talent has grown in recent periods.”

“To grow and maintain our business, offerings, and features, we need to continue to establish and maintain relationships with third parties, such as staffing providers, software and technology vendors, including third-party providers of AI technologies, and payment processing and disbursement providers.”

“In May 2026, the Company initiated a restructuring plan, referred to as the 2026 Restructuring, intended to build a more efficient operating model and position the Company for profitable growth as the nature of work evolves. The 2026 Restructuring included various cost-reduction measures, including workforce reductions, reductions in operating expenses, as well as decreases in capital expenditures. As part of the 2026 Restructuring, the Company reduced its total workforce by approximately 20% as of June 30, 2026.”

“Non-GAAP operating expenses reflected the early execution of our restructuring actions we announced in May, as the annualized $70 million of OpEx reduction we initiated is expected to generate approximately $40 million in realized savings in fiscal year 2026, allowing us to continuously fund our growth pillars in SMB, Enterprise, and AI while expanding operating leverage.”

“For clients, our work marketplace provides fast, secure, and efficient access to high-quality talent with over 10,000 skills across more than 125 categories of work, such as web, mobile and software development, administrative support, sales and marketing, design and creative, and customer service, as well as more emergent categories and skills like those pertaining to generative artificial intelligence.”

“This directly taps into a growing chorus of client demand for skilled workers who already know how to create exponential business value using these technologies. We are already serving this need, as evidenced by the 50% year-over-year growth rate in our AI Services category in Q1.”

“It's probably not quite as strong as it was maybe three or four quarters ago, like, it's moderated a little bit, but there is still a delta for a lot of this work, and this talent is still highly, highly in demand, as evidenced by the fast growth we saw last quarter, which was, I would note, on top of, I think, quadruple- digit growth, a year ago in that same area.”

“GSV from AI-related work grew 25% year-over-year in Q1 2025 and GSV from prompt engineering increased 52% year-over-year while also growing quarter-over-quarter”

“GSV from AI-related work accelerated to 30% year-over-year growth in Q2 2025, compared to 25% year-over-year growth in Q1 2025.”

“While AI automation shrinks demand for some types of work on our platform, AI creates new demand in other areas. This is evident in the 22% growth in GSV from AI-related jobs in Q2, as defined by jobs stating an explicit AI need. These were up 5% quarter-over-quarter to reach an approximate annualized $330 million run rate.”

“This quarter, we saw indications that the quantum of AI-related work on Upwork is actually much greater. Many clients now simply expect the use of AI tools and capabilities without feeling the need to specify this in their job posts. For example, nearly half of talent in a recent survey reported that their most recent jobs were AI-related, despite only 16% of such jobs explicitly referencing AI in the post, demonstrating how prevalent AI-related work is becoming on Upwork.”

“SMBs are telling us that they are hiring AI experts to guide them in making their businesses more AI-native so they can grow and scale.”

“While lower-complexity work continues to shift toward automation, we are increasingly seeing what is emerging in its place: growing demand for high-value AI talent, more complex projects, and new categories of work across SMB and Enterprise. We are on track with our enterprise strategy, staying disciplined in how we execute, and continuing to build the AI capabilities that will make Upwork essential infrastructure as work becomes increasingly human-and-agent driven.”

“GSV from AI-related work increased more than 22% year-over-year in Q2 2026.”

“GSV from AI Strategy & Consulting, an AI-related work sub-category, grew over 50% year-over-year in Q2 2026.”

“We incorporate AI and machine learning technologies across our platforms, offerings, and internal operations and are making further investments in expanding our AI capabilities. In addition, GSV from AI-related work performed on the Upwork Marketplace has increased as demand for AI talent has grown in recent periods.”

“With the proliferation of AI, we've been seeing clients trying to use AI agents to hire on Upwork for projects. We're also seeing a growing volume of clients come to Upwork to find people who can complete or fix a project they started with AI.”

“There is just a transition happening in the ecosystem broadly where AI is now permeating all types of work, and I think that is what is reflected more than anything in the metric here.”

“I'd say on that front, this is really an expansion, not a replacement. We do see with very small business customers that we have today, those that are active in the marketplace basic plan, they are shifting their workloads to be more AI-oriented, and we see huge resonance with SMBs and larger customers who want the combination of both features and functionality of Business Plus and the AI transformation that our business can offer.”

“Sure. On the AI category, this is pacing now at a $330 million run rate, as I mentioned. I want to emphasize this is really an undercount of AI work on Upwork because what we are seeing is customer behavior is changing.”

“Revenue from these levers was up 15% year-over-year, and Connects and talent subscriptions now represent 15% of total revenue.”

“Our global work marketplace enables clients to post jobs and leverage AI-powered recommendations to efficiently connect with talent, rank proposals, and collaborate on projects. We provide a range of advanced tools designed to streamline how talent and clients work together, including our proprietary AI assistant Uma, which enhances productivity for both talent and clients.”

“One highlight of our spring 2024 update is the launch of Uma, which stands for Upwork's Mindful AI. We're developing Uma on top of industry-leading large language models and fine-tuning it with trillions of tokens of highly relevant Upwork platform data across a range of work interactions.”

“Our very early testing of Uma is already showing benefits as a conversational companion for new customers. Clients who used Uma started spending on Upwork in their first month at a 7% higher rate than non-users.”

“So, you know, the Job Post Generator that we launched last year, over 70% of new customers are using that tool in order to post jobs and then, you know, get to activation.”

“Over the past several quarters, we implemented a number of initiatives that positively impacted Marketplace revenue and Marketplace take rate. These include (i) retiring the tiered service fee structure for talent working with clients on our Marketplace offering in favor of a flat fee, (ii) increasing the number of Connects needed by talent to bid on projects, (iii) deploying ads products on our work marketplace, and (iv) introducing new features, with a focus on generative artificial intelligence.”

“We also have several partnerships that enable us to integrate generative artificial intelligence tools into our work marketplace aimed at improving customer experience and productivity.”

“In 2024, we acquired Objective AI, Inc., which we refer to as Objective AI, an AI-native search-as-a-service platform, with the aim of further enhancing our core search and matching capabilities and enabling richer insights into client needs and talent capabilities.”

“(iv) advancing our AI capabilities and AI-native experiences, including through Uma™, our proprietary AI work agent, and other AI-driven features that enhance productivity for talent and clients across the Upwork Marketplace.”

“While the execution of these initiatives contributed to Marketplace take rate expansion for the three and six months ended June 30, 2026, GSV and active clients declined during these periods driven by the evolving impact of AI on certain categories of freelance work and on new client acquisition and retention, as well as macroeconomic uncertainty.”

“GSV also includes other client and talent value-added services, such as AI-based services, purchases of Connects, payment processing, memberships, and currency services.”

“In Q1, GoDaddy, BigCommerce, and Constant Contact joined existing partners like OpenAI and ClickUp, and are now able to connect their customers directly with exactly the right freelancer on Upwork at exactly the moment they need to get work done, thus enabling greater usage of their own products.”

“Additionally, our AI integrations are beginning to drive AI-based referral traffic and set us up for growth from these channels as OpenAI, Anthropic, and others enhance their approaches. These levers give us new paths to acquire customers in this unfolding AI and marketing landscape.”

“We've also begun tuning our acquisition approaches for new channels that we expect to scale over time, like answer engine optimization, or AEO, and LLM-based referrals. While these channels are still nascent, third-party measures show that our share of AI-based mentions and referrals is 18 percentage points higher than our closest peer.”

“AI is also changing search. Our client acquisition strategy is to diversify beyond paid and organic Google search to build a highly durable growth engine spanning emergent channels, including LLM-based search.”

“In Q2, we embedded Upwork directly into both ChatGPT and Claude, and with today's launch, Upwork Talent and Jobs are now accessible inside any AI tool that connects to our MCP. This lets both humans and their AI agents hire and collaborate with Upwork talent without leaving their own environments while giving freelancers a way to win and deliver work without leaving their preferred AI tools.”

“Following the April launch of Upwork’s app for ChatGPT, launched the Upwork Claude Connector, a new app inside Anthropic’s Claude that embeds Upwork’s marketplace at the moment businesses use AI to plan and scope work, connecting them with the experts they need as a project takes shape.”

“Launched Upwork’s Model Context Protocol (MCP) server, allowing clients and freelancers to direct AI agents to find talent, source opportunities, and help manage work on Upwork's marketplace from within the tools and workflows they already use.”

“With the proliferation of AI, we've been seeing clients trying to use AI agents to hire on Upwork for projects. We're also seeing a growing volume of clients come to Upwork to find people who can complete or fix a project they started with AI.”

“With the launch of the MCP, we really are stepping into new AI-first client acquisition strategies, which started working already with the integrations that we made in the last few months with Claude and ChatGPT. This now opens up Upwork to integrating agents and agent participants on both sides of our marketplace in a very at-scale way.”

“Maybe that is the right transition to answer your MCP question, because the reason we built this is not just to create this new demand channel, it is actually in response to seeing agents already coming to our website trying to do work on behalf of clients. This has been a fascinating phenomenon that started to grow, and previously they could not get very far because of our restrictions on agent activity.”

“It's a key development towards realizing a much larger vision as we leverage AI to deliver an experience where customers move from idea to outcome, from dream to delivery, powered by a combination of AI and humans working effortlessly together.”

“As agents become a bigger part of how work gets done, we are building toward a marketplace where clients and their agents can hire not just human talent, but can also hire specialized AI agents and human agent teams.”

“In Q2, we embedded Upwork directly into both ChatGPT and Claude, and with today's launch, Upwork Talent and Jobs are now accessible inside any AI tool that connects to our MCP. This lets both humans and their AI agents hire and collaborate with Upwork talent without leaving their own environments while giving freelancers a way to win and deliver work without leaving their preferred AI tools.”

“Launched Upwork’s Model Context Protocol (MCP) server, allowing clients and freelancers to direct AI agents to find talent, source opportunities, and help manage work on Upwork's marketplace from within the tools and workflows they already use.”

“With the launch of the MCP, we really are stepping into new AI-first client acquisition strategies, which started working already with the integrations that we made in the last few months with Claude and ChatGPT. This now opens up Upwork to integrating agents and agent participants on both sides of our marketplace in a very at-scale way.”

“Maybe that is the right transition to answer your MCP question, because the reason we built this is not just to create this new demand channel, it is actually in response to seeing agents already coming to our website trying to do work on behalf of clients. This has been a fascinating phenomenon that started to grow, and previously they could not get very far because of our restrictions on agent activity.”

“Clients may decrease or cease their use of our work marketplace and our revenue may be adversely impacted for many reasons, including: if we fail to attract and retain talent; if the quality or types of services provided, or the pricing offered, by talent are not satisfactory to clients; or if generative artificial intelligence tools provide a suitable replacement for traditional talent tasks.”

“We also compete with companies that utilize emerging technologies and assets, such as artificial intelligence and machine learning, blockchain, augmented reality, and cryptocurrency, to provide automated alternatives to the talent on our work marketplace, connect businesses with service providers, or otherwise change the way that businesses engage or pay service providers or that service providers perform work.”

“The overall demand for independent talent will continue to be impacted by competition in the marketplace, technological developments (including artificial intelligence), and macroeconomic, geopolitical, legal, and regulatory conditions.”

“During the year ended December 31, 2024, macroeconomic conditions adversely impacted GSV, which declined 3%, compared to 2023. The number of active clients decreased 2% as of December 31, 2024 compared to December 31, 2023, driven by slower growth in acquisition of new clients.”

“Our industry is in a period of transition as AI is changing work and transforming our marketplace in real time. The near-term AI and macro headwinds we identified last quarter have persisted in Q2 with an acceleration in the pace of AI-related automation.”

“While AI automation shrinks demand for some types of work on our platform, AI creates new demand in other areas. This is evident in the 22% growth in GSV from AI-related jobs in Q2, as defined by jobs stating an explicit AI need. These were up 5% quarter-over-quarter to reach an approximate annualized $330 million run rate.”

“GSV was $966 million, reflecting the continued burn-off of lower-value, highly automatable work, the evolving impact of AI on new client acquisition, and a subdued labor market.”

“The trend we saw this quarter is really a continuation of last quarter, but with an acceleration in the AI automation of very low complexity work and further deterioration on Google SEO, especially notable in the non-brand channel. That is understandable given that demand for less complex work is shrinking as customers embrace AI, and this is just flowing through to our platform.”

“Active client count continues to be pressured by AI automation and search trends, labor market conditions, and our strategy to focus on client value over volume.”

“One thing that's super important here to your question about the kind of 10%, this really is an acceleration of erosion in the part of the business we had already identified as being more exposed to AI automation. It's kind of a pull forward in that activity versus what we had previously expected.”

“While lower-complexity work continues to shift toward automation, we are increasingly seeing what is emerging in its place: growing demand for high-value AI talent, more complex projects, and new categories of work across SMB and Enterprise. We are on track with our enterprise strategy, staying disciplined in how we execute, and continuing to build the AI capabilities that will make Upwork essential infrastructure as work becomes increasingly human-and-agent driven.”

“While the execution of these initiatives contributed to Marketplace take rate expansion for the three and six months ended June 30, 2026, GSV and active clients declined during these periods driven by the evolving impact of AI on certain categories of freelance work and on new client acquisition and retention, as well as macroeconomic uncertainty.”

“During the three and six months ended June 30, 2026, GSV decreased 4% and 2%, respectively, as compared to the same periods in 2025. The decreases for both periods were primarily driven by declines in client acquisition and retention, partially offset by growth in Enterprise Solutions driven by the acquisition of Ascen.”

“or if AI tools provide a suitable replacement for traditional talent tasks. Further, expenditures by clients may be cyclical and may reflect overall macroeconomic conditions or budgeting patterns. For example, GSV and active clients declined during the three and six months ended June 30, 2026, driven by the evolving impact of AI on certain categories of freelance work and on new client acquisition and retention, as well as macroeconomic uncertainty.”

“For the full year 2026, we now expect revenue in the range of $730 million- $750 million. This assumes a heightened pace of AI-related automation and no improvements in the labor market.”

“The reality is, in places where the marketplace is more congested and has a lot more talent than client demand at the moment, we have the ability to do some things with pricing that are beneficial to both take rate, but also beneficial to matching and keeping the marketplace super high quality in terms of those signals.”

“I think that's yet another reason why this business is moving towards more and more insulation from AI-related risk. Not to say that freelancing is going to be highly automated, but it's just that now we can diversify how we serve customers across every type of work.”

“In addition, search engines and other channels that we utilize to drive customers to our website and mobile applications periodically change their algorithms, policies, and technologies, sometimes in ways that cause traffic to our website and mobile applications to decline.”

“We may also be forced to significantly increase marketing expenditures in the event that market prices for online advertising and paid listings escalate or our organic ranking decreases.”

“We depend in part on internet search engines and other channels to direct a significant amount of traffic to our website and mobile applications.”

“AI is also changing search. Our client acquisition strategy is to diversify beyond paid and organic Google search to build a highly durable growth engine spanning emergent channels, including LLM-based search.”

“Google's changes to search have dampened new customer acquisition with accelerated negative impact in Q2. Our SEO rankings have continued to step up, but the channel overall is smaller, underscoring the importance of the ongoing paid acquisition efficiencies we've been driving. Paid search has become our largest customer acquisition channel, and we have grown it in both relative and absolute size while increasing efficiency.”

“Specifically, Google has changed SEO referrals and the layout of the search page so that many fewer searches on Google result in any kind of referral to any kind of business. That is really what is weighing on new client acquisition.”

“The trend we saw this quarter is really a continuation of last quarter, but with an acceleration in the AI automation of very low complexity work and further deterioration on Google SEO, especially notable in the non-brand channel. That is understandable given that demand for less complex work is shrinking as customers embrace AI, and this is just flowing through to our platform.”

“Active client count continues to be pressured by AI automation and search trends, labor market conditions, and our strategy to focus on client value over volume.”

“GSV was $966 million, reflecting the continued burn-off of lower-value, highly automatable work, the evolving impact of AI on new client acquisition, and a subdued labor market.”

“While the execution of these initiatives contributed to Marketplace take rate expansion for the three and six months ended June 30, 2026, GSV and active clients declined during these periods driven by the evolving impact of AI on certain categories of freelance work and on new client acquisition and retention, as well as macroeconomic uncertainty.”

“or if AI tools provide a suitable replacement for traditional talent tasks. Further, expenditures by clients may be cyclical and may reflect overall macroeconomic conditions or budgeting patterns. For example, GSV and active clients declined during the three and six months ended June 30, 2026, driven by the evolving impact of AI on certain categories of freelance work and on new client acquisition and retention, as well as macroeconomic uncertainty.”

“The good news is we have done a lot to counter this, and that includes rebuilding our marketing funnels for this new world. As I mentioned earlier, paid acquisition is really doing well for us in Q2, and that is leaving us the confidence to increase our marketing spend by approximately $5 million-$10 million incrementally in the back half of the year.”

“We started seeing these impacts accelerate in Q2, and because there is some volatility in the industry around this, our outlook is that they will continue to get worse through Q3 and Q4.”