Upwork Stock

I think with that, I know there's going to be people that it's amazing how in 5 minutes, people drifted out of rooms. But let's get started in the interest of time, just to keep the trains running. It's my pleasure to have Upwork back at the conference again this year, Hayden Brown, CEO. Hayden, you are always so generous coming every year. Thanks for [ all the conversations ].

Thanks for having me.

Absolutely. So, let's just start. I always do like to start a little bit big picture for the folks who don't know the company as well. Talk a little bit about what you're building, what you're scaling, what your key strategic priorities are, and then we'll build off that answer a little bit deeper.

Yes. Upwork, I think, has always been more than meets the eye. I've been at the company for 15 years. And I think one of the things people discover when they really get to know the business is it's much more than just a talent matching platform or a place for people to come find freelance talent. We really serve customers on both sides, clients, which are small businesses through large enterprise, as well as independent talent with the full end-to-end product around not just finding great talent or finding great work, but also delivering on and getting paid for, paying for that work.

And so it's really an end-to-end platform that spans the entire work life cycle. And so we call it a work marketplace because it's more than just kind of talent matching. And I think that's particularly important in the era of AI when so much is changing, talent discovery methods, recruiting, all of this is kind of, I think, being rewritten in real time. But for us, our ability to provide the trusted platform that gives clients and talent the knowledge that what they need to get done is going to get done and that they only pay for work that's been delivered is incredibly important.

I'd say in the last 12 to 24 months, some of the thematics for us have really been around 3 growth levers that are really working in the business right now. The first of those is our push and our expansion upmarket to serve larger SMB customers. What we're doing there is a custom product called Business Plus, which is really meant for larger businesses operating in our marketplace. It gives them a set of tools, including AI recruitment tools, including access to net 30 payment terms, access to collaborative hiring features, all of the things they need to really run their business at larger scale and with larger programs using independent talent on our website.

And that product is really our fastest-growing in company history. It grew 174% year-over-year last quarter and is ahead of plan. We had set a goal for it to be 5% of our total GSV this year, and already it's at 6.6%. So, it's growing super well. We're seeing a lot of demand for -- from customers that are bigger looking for this type of offering. The second growth strategy we have is also around moving upmarket, but this time into large enterprise. And in this instance, we've had an enterprise business at Upwork for many years. But last year, we actually reconceived and relaunched that business and really had rebuilt it end-to-end.

We bought 2 companies that now are part of that new Lifted business that give us broader ways to serve large enterprise customers. So, this is a huge market. It's $650 billion of enterprise spend. And now with Lifted, we're able to serve all of that spend inside customer accounts across not just independent talent that's doing 1099 or independent contractor arrangements, but also other engagements as well. So, we can do staff augmentation. We can do EOR, or employer of record, AOR, agent of record. We can do managed services and SOW work. So, that change to our Lifted strategy means that now we can sell into the largest enterprises in the world, a solution that really meets the needs of their compliant and contracting and contingent workforce programs.

We can sell into those programs in a centralized way to compete for much more of those budgets, which typically are in a single account might be $100 million or more of contingent spend. So, the Lifted strategy is off to the races. We're seeing really great traction and pick up with our sales team and with kind of conversion in that business. And so that's something that's also performing really well for us this year and is on track for 25% GSV growth in 2026.

The third piece of our growth strategy is really around AI. And I'm sure we're going to talk a lot about AI today in this discussion because it's a big thematic for us and certainly is, for us, a tale of both like headwinds and tailwinds. From a tailwinds perspective, what we're seeing is really the acceleration of demand for talent on our platform who can help small businesses and enterprises with their AI-related needs. And so this entails all of the work around things like AI video generation or AI Strategy & Consulting, which is a category that grew more than 50% year-over-year last quarter.

We're seeing lots of demand for this type of talent because SMBs are trying to figure out how do I adopt AI, like where do I get the talent that can do this for me and get value out of this new technology? And the answer is they can find that talent right on our website. The other piece of our AI thematic is really around our own kind of tooling and rebuilding of our platform to be AI native and specifically to actually integrate into all of the AI tools such as Claude or ChatGPT, which customers are using to get work done. And so just in August, we launched our MCP, which means now customers inside of these AI environments can invoke Upwork and get talent directly inside those environments from our platform and can also execute their workflows related to Upwork from within those tools.

This is also the stepping stone or the building block for us to expand our marketplace to not just serve human talent and human business owners, but also their agents and the agents that are coming to Upwork to actually find human talent, which is a trend we've already seen happening as well as enabling the ability to bring agents into the equation to deliver work on behalf of clients over time. So, these are really important growth building blocks as we think about where the business is going and evolving it not just from a demand standpoint and kind of a channel standpoint, but also in terms of the core offering and who can participate.

Okay. So, there's a lot to unpack there, and I think we're going to go down most of those roads as we talk. But maybe just to level set, with what you've learned about AI over the last 12 to 18 months, you highlighted some of the headwinds and tailwinds that the business is facing today. How has it informed any changed view about the long-term opportunity that presents for your company as a result of AI?

There's probably 2 things. One is this is a business -- we are a broad horizontal platform that serves more than 130 categories of work, more than 10,000 skills. Basically, every type of knowledge work happens on our platform already. And that means that through every past era of work changing, whether it was the advent of social media or the introduction of customers trying to move things to the cloud, like every time work has changed, we have seen those changes in our platform, and we've supported the birth and death of like every type of work that's happened in the last 20-plus years.

AI is, in many ways, no different. There's new demand that's forming around expertise and skills that people didn't even think about a few years ago. And now we're seeing those across our platform, and we're home to more than 300,000 AI practitioners globally on Upwork. We're also seeing the death of certain types of work. And again, that story is not new for us. I think what we're -- the only thing that's different now is kind of the speed of that happening. The AI categories are growing faster than any categories you've seen in our history.

We're also seeing at the low end of our market, automation and displacement of work at a very rapid rate, which is, again, something a cycle we've seen before, but it's kind of being compressed right now. I'd say the other AI thematic for us that's really emerged over the last 12 to 24 months is this idea of moving Upwork from being a destination to being infrastructure. And what I mean by that is previously, in the pre-AI era, you had to come to our website and sign up and manually take steps and actions as a customer to get the value of Upwork.

Now today, with our MCP, you can actually get all of that value through directing your agent to act on your behalf or bringing forward into your own third-party AI tools, the value and the talent that Upwork has to offer like right inside those environments. And so this is an important evolution for us as we think about the world moving in terms of work moving into these AI tools and more of the demand sitting there with customers that are executing work inside these tools.

Now Upwork is integrating directly into those experiences and can be called upon, including with true on-demand talent solutions where you can invoke a fractional CFO or a marketing leader immediately from our platform to come in and review and purchase data work that you're doing inside of a tool like Claude. So, this is really kind of a new direction for us as we expand kind of how and where we're serving customers given AI.

Okay. Let's turn to Business Plus. What do you believe is resonating the most with customers with respect to Business Plus? And how do you think about the market opportunity it continues to open up broadly against the SMB landscape?

Yes. The #1 thing that customers tell us they love about Business Plus is the access they get to our highest quality, kind of most curated talent in the ecosystem. So, they get preferential access to that talent. They also love the AI recruiting tools that do things like AI interviews on their behalf. So, they can ask our AI agent, Uma, to review and generate a short list of candidates from an applicant pool to actually go and interview those candidates and bring back snippets and like a summary of who is a good fit based on that specific client, that specific job.

So, these are some of the things that I think are really drawing in customers on the Business Plus side. And furthermore, the ability, Eric, to scale their work across multiple participants. So, this is really -- we have a multiplayer mode, we call it, in Business Plus where they can really collaborate around work, around hiring, have multiple participants. And again, if you're a larger small business with a team or multiple departments that are using Upwork, these are the types of features that they really need.

And this is proving to be a great, not just like upsell for existing customers who are in our marketplace being very active, but also an attraction and an entry point for new customers who are coming in. We see them on Business Plus spending 2.5x as much in Business Plus as they do coming into our standard marketplace basic product. And we also benefit because this is a higher take rate product. We monetize this at 10% on the client side instead of 5%, which is how we monetize our basic product. And so as we're seeing this really fast growth in Business Plus, it's helping us not just drive GSV and revenue from these customers, but also kind of our take rate is improving as well.

Okay. You mentioned Lifted earlier. Can you talk a little bit about how that is also changing the nature of the business in terms of opening up the larger enterprise opportunity?

Yes. This is such an exciting one for us because the market is so huge and the customers who've been serving enterprise for many years have said to us again and again, Upwork, we love your talent. The talent we get from you is better, it's more qualified, it's more engaged, like everything about it, and frankly, it's more cost effective because it's across 180-plus countries globally. But they've said, we don't want to just consume it as independent freelancers. We have these other programs that, by definition, need to be serviced with different contract types. Can we please consume your talent in these other ways?

Historically, the answer was no because we had not built the in-house capabilities to do that. But since we launched Lifted last year, now we can say, yes. And we are winning RFPs and are in contracting with customers for these new engagement types that include staff augmentation, employer of record engagement, things like that, which previously we were not able to access. So, this has really changed the conversation with our customers, both the existing customers who know us in certain areas and have wanted to expand with us in other ways.

It's also letting us land new customers who would never have historically considered working with us. Just last quarter, we landed one massive multinational company for -- that spends probably north of $100 million a year on contingent work. They are now contracting with us for a type of work that we were not even eligible to compete for in the past before Lifted. And so I think we're really seeing with our sales funnel and the feedback that this is a very differentiated offering, and it's something that's really opening up a lot of new doors with both current and new customers.

Okay. One of the questions I get the most is as you go through this transition to where AI is taking the business longer term, how do you think about which clients to sort of emphasize from a growth standpoint versus elements of clients that are in transition where maybe the nature of the work or the nature of the relationship they have with the company won't be where you want to be from a mix standpoint a couple of years down the road? And how do you think about managing through that transition?

Yes. We've been very focused on a shift that we've really executed over the last couple of years from more volume-based customer acquisition and servicing to much more of a value-based approach. And that shows up both in our marketing spend and our acquisition, our digital acquisition, where we're focused on targeting and converting these larger SMBs who can self-serve in the marketplace and then, of course, through our sales channel, larger enterprises and listed.

It also means that we're building out and putting our product dollars against these newer products like Business Plus, which we know can really attract and convert a set of customers that were maybe bypassing us or not thinking about us before because we didn't have these custom kind of offerings for them. And so I would say for us, it's a view of expansion. We're not saying goodbye to the smaller customers, the very small businesses who are still a bread and butter in our core marketplace. But we know that there's a lot of smaller transactional work that a lot of these customers do that doesn't represent the future of where the business is going.

And so we're really building both for that future that we can already see in our numbers around larger customers with more complex work needs spending more on a per project basis. We hit this past quarter another record high in terms of GSV per client, which is over $5,000. We've seen continued increases in spend per new client because these acquisition approaches are bringing in larger customers. And that is going to continue to happen, I think, as we grow with these bigger customers and just focus less on some of the smaller transactional stuff that even may be here today, but over time, will be gone with AI in the future.

Okay. And to that point, what do you continue to learn from the most forward-leaning clients with respect to AI as to what AI native demand is going to look like for this platform somewhere down the road when there's a greater percentage of the mix being driven by AI-first companies?

I mean we have some real enthusiasts in our customer base who are on the bleeding edge of this stuff. And I think there was a moment earlier this year when a customer was saying to me that like I really wish Upwork would like to use all of what you do like inside these environments. And with these use cases where I could like superscale my work on Upwork because I could have AI 10xing how I use the platform today. And that was a great moment because that was exactly what we were building with the MCP, but hearing it from customers who are saying, look, give me more access to do more on your platform through this capability. I mean that's kind of a dream come true.

And so I'd say we're seeing on the talent side, these very pioneering customers who want to scale their activity. They want to use AI to do more and get more leverage themselves out of their time and their serving clients on our platform. And then on the client side, we see businesses that want to be integrating more of this talent into more of their workflows, but they want it to be seamless, and they want it to be inside the AI environments that they've already invested in building out and tailoring. And this is really where we're taking the product on behalf of these customers and kind of where they're showing us they want to go.

Okay. One of the other things we've talked about on some of the more recent earnings call is agentic workflows and how there's going to be agents that talk to other agents and you sending your agent out into the world. How do you think about positioning the platform medium to long term for the nature of work and sourcing of work becoming more agentic workflow dominated?

Our view is work is going to continue to, frankly, expand, and there's always going to be a portion of work that is purely human delivered, and it needs that human touch. Then there's going to be a portion of work that clearly machines are best at, and they can automate and they can do that work autonomously. And then there's going to be this big messy middle, where there's a lot of work that maybe AI can be part of, but humans need to supervise or qualify or approve. And we're basically extending our platform so we can serve all 3 of those work types.

We definitely have always been the leader on the human-to-human work and the marketplace we have there. Now we have humans and AI agents working collaboratively together on our platform using tools like our MCP. And as agents get more capable, we will be able to support them with this MCP layer to actually directly deliver work on the talent side or again, call into our system and invoke humans or agents to do work on behalf of clients that they're operating for. And we view this as just like a big continuum, and our goal is just to serve customers across all of it. And as work moves from one bucket to another, we're kind of indifferent because we can basically service all those types of work right there on our platform.

Okay. One of the other topics you and I have talked about before is just the evolution of discovery on the platform. Talk a little bit about how you plan for the product road map to continue to sort of amplify and improve upon discovery more broadly. So, you're getting higher quality matches, higher conversion, all those dynamics that come as an output of discovery.

Yes. And you're talking about within the platform versus kind of client acquisition. Yes. We can talk about both...

We can talk about both whichever.

Yes. I mean they're both relevant. I'd say within the platform -- we have this treasure trove of a data asset. We see 3 million jobs posted every year. We don't just see the jobs. We see every candidate that applies to those jobs, who gets interviewed, who gets hired, who gets shortlisted and then the full funnel of that work being delivered. And so that data asset that goes all the way through the work delivery and the payments gives us an incredible set of information to basically train our matching algorithms against and basically use that full 360-degree view of like what happened in every single interaction to then propose the right next candidate for the job and the right next job for the right candidate.

So, we're kind of tuning that engine all the time. I would say one thing we've started to do more of as the work on our platform has continued to get bigger and more complex is build out our search and match. So, it is actually even higher fidelity at taking a client requirement, which may be expressed as a job post or a query and decomposing it into the subunits of work or tasks that actually might need to be executed either by one individual or maybe by multiple different experts within our ecosystem and then using that kind of x-ray view of the underlying work that's needed to be done to then go into that database and do all the matching around that.

And so this is obviously something that we're continually iterating on. We've made some, I'd say, leaps forward in the last couple of years with some acquisitions we've done, especially with a company called Objective AI that brought us some really great kind of AI-native search capabilities, which now are fully integrated into our stack. And again, as the work keeps evolving, we continually tune the system for like those new flavors of work and the more complex work that's happening on the ecosystem.

Okay. Going back to the Investor Day you had towards the end of last year, you've been talking about the role that data can play against the broader AI opportunity. Maybe talk a little bit about how you think about the data you have as a company, the value of that data and how to think about ways in which data can turn into monetization and opportunity.

Yes. This is an interesting one, and we're still early in figuring out how we can fully kind of deploy this data asset because, again, what we have is not just kind of a static snapshot from a period of time. We have the full history of work on Upwork. But every day, that data asset is getting refreshed and updated with the most current jobs, the most current skills, what's in demand in the market, who are the practitioners and what are the things they bring to the table that make them really good at doing that work.

And there's multiple ways we've thought about applying this data and certainly been approached by different kind of ecosystem players who are looking for either training data around specific types of work to tune their AI agents or their models. Sometimes they're looking for actual work products as an input into how they can improve their tooling and their solutions. And of course, there's also the aspect of customers -- some of them care a lot about and want to keep their information very private and others actually could care less. And they're like, hey, have at it, this data doesn't matter to me.

And so we're kind of looking at all those things, like what's the demand in the ecosystem, where are our customers in terms of what they're comfortable having shared or not and using that to inform, I think, what could be interesting opportunities going forward. It's still early days. But certainly, the data asset we have, we keep kind of coming up against the reality that it's very differentiated. No one else has this size of the data set around real-time real-world work getting conducted that has a digital trail to it, and that's like completely visible and readable by both humans and machines. And so I think that's something that we'll continue to explore and figure out what can we do with this one.

Okay. When you take a step back and you think about what we've talked about so far, the evolution of the platform, the things you want to invest in to make sure you're capturing some of that growth, bring it back to a conversation about how investors should think about capital being allocated, right? So, you're making sure you're making the growth investments you want to make. You're also probably going to try to deliver on the margin trajectory you talked about and then also the scope for the potential for either M&A to grow the business, which you have pulled that lever before and/or thinking about capital returns. Talk to me about the process which the management and the Board goes through to think about optimizing for that mix in the business.

Yes. I'd say, first and foremost, we know this is an extremely high-margin business and one that we can continue to dial the dials on in terms of margin, both because we have incredible discipline in managing our cost base. We also are growing our highest margin products the fastest of like anything in our portfolio. And we see ongoing opportunities to kind of optimize where and how we're deploying capital. And so margin expansion is certainly something that we continue to foresee for the business. I think it's something that we've demonstrated we can do and we'll continue to do.

We also want to make sure we're investing for these incredible growth opportunities that are unique to our business. And I'd say when we went through our 24% reduction in force earlier this year, we were very mindful of actually concentrating more resources on the things that are really working, our AI strategies, our SMB build-out, our Lifted build-out and investing in those things and bolstering that further even as we streamlined and stripped away either other things that we had previously been investing in that we thought were no longer relevant or did things like optimize spans and layers in the organization and kind of how we're managing the business very efficiently.

So that is going to continue to be something that we do. And as this business continues to generate a lot of capital and cash returns, we are basically executing a capital allocation strategy that spans share buybacks on the one hand. We've done about $110 million of share buybacks this year. We have $254 million left on our authorization from the Board. And so that's certainly going to continue to be a priority.

We'll always reserve a good amount of capital for operations and some dry powder for M&A because certainly in our space, we're constantly looking at ways that we can accelerate our growth strategy with M&A. We don't need to do M&A to achieve our goals, but certainly, there are opportunities that can come along that are very attractive. And so we're really, I think, able to balance with our strong balance sheet, like kind of investments across all of those buckets and continuing to improve our margin in the backdrop of that.

Okay. And then maybe last one, just to wrap up. When you think about what you're most excited about and then you measure that against the debates and the conversations you have with investors, where do you think there's a gap between what's underappreciated today about where the platform is going, especially when measured against what you're most excited about delivering against over the next 3 to 5 years?

There's probably 2 things that I think are very underappreciated about the business today. One of them is its durability and both the fundamental profitability of the business model and the durable moats that we've built through investing in a 2-sided marketplace that's the pioneer in our space that competitors have come at time and again and really not made a dent in our business. And so I think the durability of this platform, I think there's an over-indexing of fear around AI automating work, which is certainly happening in pockets, but I do not foresee a future where humans don't have jobs. I think that's going to -- there's going to be a lot of work for people on our platform to do.

And so there's an underappreciation, I think, of the durability of the model and how well that's going to kind of perform once we're through just the short-term transition of what's going on around both AI and also some of the acquisition-related headwinds from Google and other things that are impacting the entire industry. I think the other thing that's underappreciated is just how exciting these opportunities around becoming an AI infrastructure play can be for our business because no one else can do what we can do here. No one else has a talent pool of 18 million professionals that are ready to work on demand, and we can deploy through a technology platform into the full ecosystem of work that's happening.

And frankly, with AI, more and more of the work is moving kind of online and into these technical tools versus sitting offline inside of offices. And as that work moves into these tools, we then have access to so much more of that ecosystem and sending our workers into these endpoints to do this on-demand work, which I think is, again, expectations are changing. With the advent of AI, customer expectations are that they need everything now, everything real time. They want intelligence in real time from AI, but they don't always get what they want, and therefore, they need human solutions to augment that, but they need it in real time.

And that is something that, again, Upwork is uniquely positioned to do. So that really sets us up, I think, with an incredible set of growth levers that we can lean into both on the AI side and then also, of course, with these larger customers. And I think time will tell and demonstrate the value there that's maybe not fully appreciated today.

Okay. Hayden, I always appreciate the opportunity to have the conversation. Thanks so much for coming to the conference. Please join me in thanking Upwork for being part of the conversation.

Thank you, Eric.

Thank you.

Thank you. Good day. Thank you for standing by. Welcome to Upwork's second quarter 2026 earnings conference call. At this time, all participants are on the listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 111. telephone. You will then hear an automated message advising your hand is raised. Please note today's conference may be recorded.

I will now hand the conference over to your speaker host, Peter Sandberg, Chief Business Officer. Please go ahead.

Thank you, and welcome to Upwork's discussion of its second quarter 2026 financial results. Joining me today is Hayden Brown, Upwork's President and Chief Executive Officer. Following our prepared remarks, we will be happy to take your questions, but first I'll review the Safe Harbor Statement. During this call, we may make statements related to our business that are forward-looking statements under federal securities laws. Forward-looking statements include all statements other than those of historical fact. These statements are not guarantees of future performance, but rather are subject to a variety of risks, uncertainties, and risks. Our actual results could differ materially from expectations reflected in any forward-looking statements.

For a discussion of the material risks and other important factors that could affect our actual results, please refer to our SEC filings available on the SEC website and on our Investor Relations website, as well as risks, and other important factors discussed in today's earnings press release. Additional information is also available in our quarterly report on Form 10-Q for the quarter ended June 30, 2026, which was filed today. In addition, references will be made to certain non-GAAP financial measures. Adjusted EBITDA, adjusted EBITDA margin, non-GAAP operating expense, non-GAAP net income, non-GAAP diluted EPS, and free cash flow are non-GAAP financial measures, and all other financial measures are GAAP unless cited as non-GAAP. regarding non-GAAP financial measures, including reconciliations to their most directly comparable GAAP financial measures, can be found in the press release that was issued this afternoon on our Investor Relations website at investors.upwork.com. Unless otherwise noted, reported figures are rounded and comparisons of the second quarter of 2026 are to the second quarter of 2025. With that, I'll now turn the call over to Hayden.

Good afternoon and welcome to Upwork's second quarter 2026 earnings call. In Q2, Upwork demonstrated strong execution in an operating environment that continues to be challenging. We delivered revenue of $191.7 million at the high end of our guidance range and adjusted EBITDA of 64%. exceeding the high end of our guidance range. This was driven by disciplined cost management across our entire business. Our growth building blocks of SMB, enterprise, and AI are delivering results. We're driving momentum with larger clients, capturing higher value projects, and scaling our position as a platform of choice for complex AI-enabled work. In SMB, our prioritization of quality and customer value, not volume, continues to pay off.

Business Plus continues to pace ahead of plan, with GSV growing 174% year over year as larger customers utilize Upwork for complex recurring needs. GSV per active client reached another record at 5,230, up 5% year over year, marking our eighth consecutive quarter of sequential growth in this metric. The core part of our SMB strategy is helping these businesses tap into AI for practical outcomes. For many of these customers, the constraint is not access to AI technology, but access to people who understand how to apply it to their specific industry, workflow, or business problem. Upwork is uniquely able to solve this at scale, combining a deep pool of AI skilled talent with the marketplace infrastructure and trust that lets customers confidently tap into the human expertise they need. This is reflected in the 51% year-over-year growth we saw in our AI strategy and consulting category in Q2. SMBs are telling us that they're hiring AI experts to guide them in making their businesses more AI native so they can grow and scale.

In enterprise, our goals for Lifted remain on track and demand signals are strong. We initiated customer migrations to the new platform on schedule in June. We also saw positive developments with customers advancing through later stages of the sales process. The thesis around serving larger customers with this differentiated offering is working. Our focus on an expanded ability to support and grow larger customers that fit our ideal customer profile contributed to 7% year-over-year growth in GSV per enterprise account, the highest level it's been in more than three years. We also saw 29% year-over-year growth in GSV from employer of record, or EOR, solutions, which are made possible due to Lyft's acquisition of Ascend. Moving our employment infrastructure in the U.S. and Canada from third-party partners to Ascend's wholly-owned entities is garnering the improvement to our value proposition we anticipated, accelerating our sales funnel with the added benefit of improving our gross margins.

We continue to expect Lifted to achieve approximately 25% year-over-year GSV growth in 2026. 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 with an acceleration in the pace of AI-related automation. We now have greater visibility into the work transition underway and are updating our guidance outlook accordingly. Short-term headwinds do not change our confidence in the enduring value proposition of Upwork. 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 QA. 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. 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 our customer acquisition efficiency. increasing efficiency. Cost per new contract start improved 22% quarter-on-quarter, and this performance gives us confidence in increasing our paid acquisition investments for the balance of the year. 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% of the total. percentage points higher than our closest peer. 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. The expansion of our acquisition channels goes hand in hand with how we're expanding our platform capabilities.

With the proliferation of AI, we've been seeing clients trying to use AI agents to hire on Upwork for projects. a growing volume of clients come to Upwork to find people who can complete or fix a project they started with AI. Requests like turn my vibe-coded concept into a production website or humanize the translation output from this AI are growing, among many others. In the second quarter, we delivered key milestones on our product roadmap to support these use cases at scale. And today we announced the Upwork MCP server, our next capability for enabling agentic interactions on both sides of the marketplace, backed by the talent and job access, trust, guarantees, and quality that only Upwork offers. In Q2, we embedded Upwork directly into both ChatGPT and QWOD. 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.

The demand for human taste, judgment, and quality assessment is increasingly commanding a premium. We're building these capabilities that let clients reach directly into our marketplace from inside the AI tools where they're already working to find the human expert they need the moment they need them. And as agents become a bigger part of how work gets done, we're 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. Bringing both sides of this emerging human and agent economy together on one platform is something no other marketplace can do at our scale. Innovations will help position Upwork as a key beneficiary of the AI shift that is underway. Now, I'll walk through our financial performance for the second quarter in more detail, as well as our updated guidance. Our financial results in Q2 demonstrate our capability to execute with discipline, driving profit expansion even as top-line volume reflects the transition underway.

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. Total revenue for the second quarter was $191.7 million, representing the high end of our guidance range. supported by strong, high margin contributions from our ads and monetization levers, including dynamic pricing, connects, and business plus. Revenue from these levers was up 15% year over year, and connects and talent subscriptions now represent 15% of total revenue. This drove a strong take rate of 19.8% with highly accretive, high margin revenue streams that also improve high quality matching. Due to active client count was 763,000. 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. Our average spend per contract reached an all time high over any 12 month period in company history, presenting the sixth consecutive quarter of positive year-over-year growth.

GSV per new client grew year-over-year for another consecutive quarter, confirming that we are attracting clients with larger initial budgets and longer project horizons. Non-GAAP gross margin for the second quarter was 77%, remaining near record levels as we manage infrastructure and support costs efficiently. 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 pillars in SMB, enterprise, and AI while expanding operating leverage. Adjusted EBITDA for Q2 was $64.1 million, exceeding the high end of our guidance range and delivering an adjusted EBITDA margin of 33.4%. Non-GAAP net income and non-GAAP diluted EPS were similarly strong, while our GAAP metrics reflect the impact of our Q2 restructuring charges. While our Capital Light Marketplace model consistently yields exceptional free cash flow conversion, this quarter's free cash flow of $35.9 million included the impact of one-time cash payments related to our restructuring. During the quarter, we closed a new $150 million revolving credit facility with a $50 million accordion. This positions us to repay the August 2026 convertible notes at maturity while supporting our disciplined capital allocation strategy, opportunistic M&A, and our share repurchase program.

We repurchased approximately 164,000 shares in Q2 while we closed the revolving credit facility. Year-to-date, we have repurchased approximately 8.3 million shares. Turning now to our updated outlook, as I mentioned at the top of this call, the near-term AI and macro headwinds we identified last quarter have persisted throughout Q2 and into Q3, with an uptick in the pace of AI-related automation and impacts from SEO. We are adjusting our full year guidance on both the top and bottom line accordingly. For the full year 2026, we now expect revenue in the range of $730 to $750 million. This assumes a heightened pace of AI-related automation and no improvements in the labor market. As planned, we will continue to expand take rate this year as part of our overall growth story.

We expect full year 2026 adjusted EBITDA of approximately $225 to $235 million, which represents an adjusted EBITDA margin of 31% at the midpoint. This is driven by the flow through of our reduced revenue outlook alongside planned marketing spend. We expect full year 2026 non-GAAP diluted EPS to be between $138 and $143. Our updated guidance also assumes stock-based compensation of approximately $60 to $65 million for the full year 2026. For the third quarter, we expect to generate revenue in the range of $176 to $184 million and adjusted EBITDA in the range of $50 to $54 million, which represents an adjusted EBITDA margin of 29% at the midpoint. We expect Q3 non-GAAP diluted EPS to be between 31 and 33 cents. Our underlying metrics, including record GSV per active client and continued business plus and AI work growth, confirm Upwork's strong value proposition, even in a changing market.

Our product innovations and tailored offerings for larger customers are deepening our moat, and we continue to do so. continue operating with financial discipline. We're navigating the near-term impacts of this significant evolution in how work gets done, while continuing to build Upwork to capture the demand, talent, and economic opportunity that this new era of work offers. Thank you for your continued support.

we are now ready to open the call to questions. Thank you. As a reminder, to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. One moment while we compile the Q&A roster. And our first question comes from Ron Josie of Citi. Your line is open.

Great. Thanks for taking the question. Hayden, I had two questions, one on operations. And you talked about the challenging operating environment continuing. We'd love to hear more about the view and the visibility, and then more insights on the SEO challenges that you mentioned. And then some interesting data came out today, or at least a press release around the MCP server. Wanted to understand directly how that might impact.

the business going forward just given the AI benefits. Thank you. Thanks, Ron. So from a visibility standpoint, you know, we are really in the midst of a transition of work broadly. And what we're seeing is that our decisions, including our growth strategy and our effective cost management, are enabling us to navigate this situation from a real position of strength. The 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. And that's understandable given that demand for less complex work is shrinking as customers embrace AI. and this is just flowing through to our platform. But the important thing here is it really is an evolution with a situation that's quite fluid. We are already seeing really great green shoots that our strategy is working, and this is showing us what Upwork will look like as this transition unfolds.

We can see that Upwork will be home to a lot of new work. AI relevant work is already a big and enduring part of Upwork. We're seeing this with $330 million of GSV run rate in our AI categories. And as I mentioned a few moments ago, this is really an undercount because there's a lot more AI usage that is de facto across the platform. We can also see that on the other side of this transition, projects are becoming much bigger. This is how we've seen eight consecutive quarters of increased GSD per client. And it's not just a mixed shift, we are actually seeing increases in things like the length of hourly work contracts, which hit a record of 100 hours on average this quarter.

The final thing that's really going to be a hallmark of the new up work on the other side of this are these new channels. and the new participants in those channels. And that speaks to the MCP part of your question, which I'll answer in a moment. With the launch of the MCP, you know, 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. But this now opens up work to integrating agents and agent participants on both sides of our marketplace in a very at scale way. So for us, the good news is we know how to navigate through these changes. It's in the DNA of our company to navigate changes and work. And we are very focused on just executing through them and seeing our strategies scale.

Now, to your question about SEO, I would say these are industry-wide trends that are hitting the business. And so the impact to us is very similar to what we're seeing, I think, across our peer group. 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. referral to any kind of business. And that's really what's weighing on new client acquisition. And of course, it's coming at a moment that's kind of compounding the impact because the labor market is subdued, AI work is happening, and this is happening kind of all at the same time. The good news is we've 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's leaving us the confidence to increase our marketing spend by approximately $5 to $10 million incrementally in the back half of the year. these new acquisition channels around AI are the future really for organic low-cost acquisition that really lets us integrate into these endpoints and get customers right where the work is happening.

And maybe that's the right transition to answer your MCP question because the reason we built this is not just to create this new demand channel, it's 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 couldn't get very far because of our restrictions on agent activity. Now with the MCP server, Upwork can be called by and embedded into any AI tool that a client wants. or a freelancer is using. So this really lets clients do more in terms of their job posting activity, their hiring activity, getting the benefit of both Upwork and their favorite AI tools together in one place. It also lets freelancers do more in terms of managing their proposals, their projects, client communications inside their own AI tools. and lets them actually operate as human supervisors to trusted AI tools that are integrated into Upwork and give clients and talent the full visibility, auditability, et cetera, of what those tools are being used for. So this is a launch that really was about going to where customers already are and not waiting for that demand to come to us, but really opening up more broadly by bringing Upwork into these channels. And this is something that really is unique to Upwork because one of the expectations that is coming along with this from clients is as they work in AI tools, they want things instantly.

They want human impact, they want people on demand, they expect answers now. And because of our unique scale and talent breadth and quality, we can actually actually offer humans at scale on demand through these types of solutions, which no one else in the market can do.

Thank you, Hayden. Much appreciated. Thank you.

And our next question comes from Eric Sheridan of Goldman Sachs. Your line is open.

Thanks so much for taking the questions. Maybe two if I could. You know, one I think is going to sort of dominate the debate around the space for a while is how do you think about the duration to get to the end state? Is the visibility that this transition is a six to 12 month transition or could it be more than a 12 month transition? I'm just curious for any framing. you think about what the sort of countervailing factors in the business might lead to in terms of a mixture of these headwinds and tailwinds before we get back to some sort of more normalized levels of growth. And second, among the active client base you have today, how many of those active clients do you think will eventually be transitioned into high-end higher quality AI-driven work and how much of it is about rebuilding your active client base to be centered around where the nature of work on your platform is going for the longer term. Thanks so much.

Yes, thanks, Eric. So in terms of your question around timing, you know, I think these things are incredibly hard to predict and, you know, it would be probably disingenuous for me to say that I know exactly how long this is going to take. But the important thing is it really is an evolution and it's. a situation where on the other side of these changes, Upwork is actually emerging structurally as a beneficiary because it's unique to our platform, as I was just mentioning on the MCP side, for us to serve the market where it's going and really displace legacy and other solutions that can't do what we can do here. So we're staying laser focused just on our execution on these strategies that are working. And we see everything from our enterprise growing, our business plus offering up 174% year over year, and AI tailwinds in the parts of our business that really speak to AI work. All of those things will continue to scale and compound as we work through this. And that makes me incredibly optimistic about where we'll land. To your second part of your question, which was, sorry,.

When you think about the active client base today relative to where the active client base needs to evolve, how much of your active clients today do you think are along this journey towards higher quality work as opposed to rebuilding the client base around higher quality AI-driven work when we think about over the next 12, 24 months?.

Got it. Yes, 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 kind of transformation that our business can offer. This is why we saw our AI strategy consulting practice or categories up significantly in the quarter. And I think this is just an example of how customers are using these new tools to do, you know, different types of work than they were doing a few months ago. So we really see it across all of our customer segments that they're leaning in more on these AI workloads and just they're changing what they do, and so that changes what they come to Upwork to do.

Thank you. Thank you. And our next question comes from Bernie McTernan of Niedermann Company. Your line is open.

Great, thanks for taking the question. Two for me. First, just on the AI category work, we've seen a slowdown over the past two quarters growing 50% year over year in the fourth quarter, then 40% last quarter, then 22% now. I know there's some caveats you gave, Hayden, in your prepared remarks. Just anything you could dig in deeper there. And then second, the marketplace take rate, we were expecting to be down sequentially, and I think some pressure on like connects and more ancillary revenue, but it came in actually higher sequentially. I'm assuming that's just business plus, but was there anything else to call out in the quarter and how to think about the marketplace take rate for the rest of the year? Thank you.

Sure. So on the AI category, this is pacing now to $330 million run rate, as I mentioned. I want to emphasize this is really an undercount of AI work on Upwork because what we're seeing is customer behavior is changing. Customers who previously felt they needed to specify, hey, this is an AI job or I really need help with this AI project, now they just assume that that is expected and they don't even talk about it in their job posts. That's why in a survey we did just in the last few weeks, when we talked to talent, almost half of them said their most recent project was an AI related effort. Whereas when we looked at the job posts and what we would capture in this AI category metric, only 16% of jobs specifically mentioned from clients that they wanted AI help. So there's just a transition happening in the ecosystem broadly where AI is now permeating all types of work. And I think that is what's reflected more than anything in the metric here.

In terms of the marketplace take rate trends, we did have some success with our ad monetization efforts in Q2, and we will continue to expand on those in Q3 and Q4. So the expansion of things like dynamic pricing on freelancer fees and some other things were some of the big contributors to the over-promotion. performance and take rate and our outlook is for take rate to continue to step up in the back of the year.

Thank you. And our next question comes from John Byen of Jefferies through Linus Open.

Hi, thank you. This is John on behalf of Brentville. Question on lifted, you mentioned that it's on track, it's still growth, GSP 25 percent and guess that the employer of record category did very well. I'm wondering if there's anything more you could share about the migration there, the different project categories that's able to achieve in the pipeline, how it's building. Thank you.

John, in Q2 we did see really great progress with both customer migrations and pipeline building for Lyfted, and that's what gives us confidence that we're on track for the approximate 25% GSV growth in full year 26. June was when we really started the customer migrations, and that activity will be ramping up. because it's going very well. Customers are giving us very positive feedback. As we're running these customers through the new systems and workflows, things are going very well. So we feel good about that. From a pipeline perspective, the pipeline continues to be incredibly healthy and customers are converting. We talked about pipeline expansion last quarter.

Now we're seeing those customers continue to move move through our funnel. One example is we recently won a multimillion-dollar RFP with a very large global company for a staff augmentation contract that we would never have been invited to participate in before Lifted and before everything we've done to round out that set of capabilities. So we're really seeing the proof point. between that, between the EOR data I shared earlier, that these new capabilities are helping us close deals and also improve our margins versus what we were doing before with third parties. So we're very excited about what's going to happen here through the rest of the year and in 2027.

Thank you. And then maybe a quick follow-up on the SEO change. In terms of what you're seeing there, I mean, does it look like it's stabilizing or is still kind of ongoing in terms of what the impact could be from the search changes?.

for me. Thank you. Sure. You know we started seeing these impacts accelerating Q2 and because you know there is some kind of volatility in the industry around this, our outlook is that they will continue to get worse through Q3 and Q4. So that's what's baked into our our current guide. We haven't seen them stabilized yet, but certainly to the extent they do, that would be better than our current outlook, which is for further deceleration.

Thank you. Thank you. And our next question comes from Josh Chan of UBS. Your line is open.

Hi, good afternoon. Thanks for taking my questions. Maybe just two quick ones. Could you give us some sense in terms of monthly cadence on when things start to weaken? And I think you said that they're not kind of stabilizing yet at the moment, but when did that kind of start happening? And then maybe secondly, I think previously there was some thought that that only a portion of Upwork's GSV may be susceptible to AI. So I was wondering if there's a change in that thinking there. Thank you.

So at the time of our last earnings call, we had seen some of these trends, particularly around the pace of AI automation stabilize. Subsequent to that, in this past quarter, over the last few months, we've seen those trends accelerate. 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. So it's kind of a pull forward in that activity versus what we had previously expected.

Okay, that's great. Thank you for the color. Thank you.

And our next question comes from Matt Condon of Citizens Bank. Your line is open.

Thank you for taking the questions. Hayden, I just wanted to ask on the enterprise opportunity, we're hearing more and more from enterprise clients or enterprise type clients that they're leaning more and more into AI and that's reducing their full-time employee workforce. But I just wanted to get your thoughts and see what you think about the potential of.

maybe impacting freelancer work in that segment as well? Yes, it's a good question. I'd say the whole reason that we built out Lifted the way we did to enable us to tap into, you know, not just freelancer budgets, but into the full $650 billion enterprise market was predicated on the idea that enterprises, you know, spend all this money on contingent labor, but only 10% historically has gone to freelancers. And that's the part that we were eligible for before. Now we can serve customers across all of these different work types. And I think that's yet another reason why this business is moving towards, you know, more and more insulation from AI related risk. Not to say that freelancing is is going to be highly automated, but it's just that now we can diversify how we serve customers across every type of work. So if they're changing their workloads and bringing AI to different parts of the business, this just gives us more opportunity to both bring AI talent to bear across those things and help them lean into those strategies as well as insulates us, from any one part of their business where they might be automating at a faster rate.

So this is definitely a really healthy expansion for us that just has multiple benefits for the business and is why we're very leaned in on driving this growth here in the back of the year and in 2027.

That's very helpful. And then just to follow up on go-to-market, obviously you have the SEO changes and those don't seem to have stabilized yet. And I understand the LLM investments, but those remain nascent today. As we think about the back half of the year and the increased investment in customer acquisition, are there different channels that you're leaning into in finding success here?.

Thank you so much. Yes, there are. So, you know, certainly on the paid side, we're seeing strength on international SEM. That's one area where we're relatively under-penetrated and have seen really good returns with some of the testing we did in Q2. There's also a bunch of other channels where we see that we have headroom. That includes Meta, Reddit. We've seen some great results with podcasts and connective TV. And that's just like a few of them. So I'd say overall, when we look at our paid acquisition channels, you know, we're seeing the paid part from SEM grow on a relative basis, but we're also seeing a really good mix shift across other more nascent channels that we've been ramping over the last few quarters and they're getting more sizable.

That's one of the reasons We now have the confidence kind of seeing that scaling, seeing the ROI. We know we can put more money into those channels with room for it to be very efficient spend in the back half of the year. And we think that's the right thing to do.

Thank you. And as a reminder, if you have a question, please press star 1-1. And our next question comes from Marvin Fong of BTIG. Your line is open.

All right. Good evening, Hayden. Thanks for taking the questions. Yes, I just wanted to follow up on that point you made about investing more in marketing. How did you arrive at five to 10 million? Is there potential you could do even more than that? Yes. you know, drive more growth there. And then second question on the monetization levers, uh, you know, growing connection, you cited business plus and dynamic pricing, but, um, you know, on pricing and connect specifically, you know, how are you managing that, you know, in this environment? It's, it's clearly kind of, uh, more growing faster in the overall marketplace, but, uh, Just kind of comment on how you think about pulling those levers to drive revenue growth.

and that'd be great. Thank you. Sure. So on your first question, you know, we've done a lot of testing in the first half of the year around these varied channels that I mentioned. And through that testing, we really arrived at this optimal $5 to $10 million of incremental spend based on where we're seeing performance and kind of the degradation curves in those different channels. So obviously, it's a dynamic space, but we feel pretty confident based on all the work we did in Q2 that this is a place where we can deploy capital very efficiently and start to get some of that benefit even in Q4 of this year. So we'll be hard at work doing that. To your other question about monetization levers, it's a really good one because as we've seen our shift from customer volume to value and all of these ecosystem changes happening, of course, the marketplace is becoming even more competitive for these jobs. And that has good and bad factors.

And we're trying to always balance how much we charge on the talent side, for example, for job access. still really focusing on using these levers to drive match quality and fill rate. And that is always our North Star with these changes. 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... are beneficial to both take rate, but also beneficial to matching and keeping the marketplace super high quality in terms of those signals. So that's where we're always performing the balance. And I'd say in the back half of this year, we will be pulling some of those levers as we see these marketplace dynamics play out, as well as ensuring that we're always working within our guardrails around match quality, et cetera. Got it. Thanks so much.

Thank you. This concludes our question and answer session and also today's conference call. Thank you for participating and you may now disconnect.

This live transcript is auto-generated without human intervention or review.

[Call has ended.]

Good day, and thank you for standing by. Welcome to Upwork Q1 2026 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference call is being recorded. I would now like to hand the conference over to your first speaker, Gary Fuges, VP of Investor Relations at Upwork.

Thank you, and welcome to Upwork's discussion of its first quarter 2026 financial results. Joining me today are Hayden Brown, Upwork's President and Chief Executive Officer; and Erica Gessert, Upwork's Chief Financial Officer. Following management's prepared remarks, they will be happy to take your questions. But first, I'll review the safe harbor statement.

During this call, we may make statements related to our business that are forward-looking statements under federal securities laws. Forward-looking statements include all statements other than those of historical fact. These statements are not guarantees of future performance, but rather are subject to a variety of risks, uncertainties and assumptions. Our actual results could differ materially from the expectations reflected in any forward-looking statements. For a discussion of the material risks and other important factors that could affect our actual results, please refer to our SEC filings available on the SEC website and on our Investor Relations website as well as the risks and other important factors discussed in today's earnings press release. Additional information is also available in our quarterly report on Form 10-Q for the quarter ended March 31, 2026, which was filed today.

In addition, references will be made to certain non-GAAP financial measures. Adjusted EBITDA, adjusted EBITDA margin and free cash flow are non-GAAP financial measures, and all other financial measures are GAAP unless cited as non-GAAP. Information regarding non-GAAP financial measures, including reconciliations to the most directly comparable GAAP financial measures can be found in the press release that was issued this afternoon on our Investor Relations website at investors.upwork.com. Finally, unless otherwise noted, reported figures are rounded in comparisons to the first quarter of 2026 are to the first quarter of 2025. And with that, I'll now turn the call over to Hayden.

Good afternoon, and welcome to Upwork's First Quarter 2026 Earnings Call. Q1 was a dynamic quarter that demonstrated our ability to produce value under a range of market conditions. We delivered in-line revenue and phenomenal bottom line results with a $10 million adjusted EBITDA beat. Upwork continues to be uniquely positioned to power the AI-enabled labor market of the future. The dynamism this quarter was notable, and we're going to spend today's call unpacking this moment and the opportunities in front of Upwork, which continue to be formidable.

Starting in late February, we began to see two clear trends. First, geopolitical instability and concerns around the war began slowing the volume of higher-value contracts. Secondly, accelerated AI adoption degraded the volume of client activity on the low end, impacting contracts of $500 and below. While this dynamic is not new, the pace of AI automation was faster than previously seen. We see the impact of AI in two discrete ways. On the low end, simple tasks are getting replaced with AI tools. Conversely, GSV from AI-related work exceeded $300 million on an annualized basis, growing at more than 40% year-over-year.

Through an in-depth analysis that Erica will touch on in more detail, we have determined that the portion of our GSV at high risk of being replaced by AI has continued to shrink, while we anticipate the market opportunity for AI-related work will far exceed this. While the overall impact of AI is marginally a net headwind for Upwork today, we are confident it will become a longer-term tailwind. Importantly, our strategy of growing larger complex work with bigger customers is working and will have a greater impact in future quarters. We have yet to fully tap additional growth levers, including launching agents in our marketplace and AI data opportunities. As all these efforts begin contributing more growth, they add firepower to offset cyclical near-term labor market and AI factors in driving business outcomes.

With the ongoing geopolitical uncertainty and continued softness amongst our lowest value contracts, we are adjusting our 2026 revenue guidance to account for the continuation of these trends. At the same time, we are focused on executing our cost management plans and have moved swiftly to pull key levers in the business. We launched multiple new AI-related features and exciting products in the quarter and showcased our spring Upwork updates earlier this week.

In Q1, we announced leadership adjustments to bolster our execution and pave the way for a cost management program that we are announcing today, which will further reduce our OpEx. These measures give us confidence in increasing our adjusted EBITDA outlook for this year. We have been on a journey of transforming our business as recapped in our Investor Day in November. The new Upwork is focused, nimble and AI forward. In Q1, we saw that our strategies around SMB, enterprise and AI are delivering above our expectations.

First, we have great traction with SMBs and enterprises. Our Business+ plan continues to be the fastest-growing product in our company's history, growing 34% quarter-over-quarter as we expand into the $530 billion market with SMBs. In our listed subsidiary, our enterprise pipeline grew 3x for new clients and 9x for existing clients in the quarter. The new lifted product is on track for the first customer migrations in June and is our differentiated wedge into the $650 billion enterprise market. These successes will continue to drive spend per client up and underscore our unique market positioning and success in attracting and converting larger customers. And with our expanded OpenAI relationship, including the launch of the Upwork app in ChatGPT last month and a robust road map in this area, we are just scratching the surface on a promising new set of demand channels.

Second, our SMB AI value proposition continues to expand with our investments in Ooma, our AI work agent. This quarter and in our spring 2026 Upwork updates, we launched features which make Ooma a more capable agent that synthesizes hiring insights, assists in evaluating candidates and helps move decisions forward so SMBs can hire faster and with greater confidence. We also are rolling out a new project continuity offering in which we seamlessly source replacement talent if a hire is not working out.

Third, we're also becoming the AI diffusion layer for SMBs, providing the AI skilled talent they need to create value from this exciting technology. AI-related work in our marketplace continues to grow and in Q1 was 8% of our marketplace GSV, with low-end AI-impacted jobs on the platform continuing to burn off and the net new AI work continuing to grow substantially, AI overall is an enduring massive opportunity for Upwork. And AI is adding a tailwind to our enterprise business with approximately 20% of our net new client pipeline being AI-related work. We are in the early stages of ramping our products to tap into this large and growing AI opportunity.

Additionally, our platform uniquely positions us to offer human-supervised agents at scale. The AI agent market is estimated to be $120 billion by 2028. We're building on our strong marketplace chops to extend our supply and demand sides to include AI agents. Our human-supervised agent solution was in beta in Q2 and is receiving extremely positive customer feedback. Businesses report an ongoing and increasing need to add a human layer of oversight to AI agents, and we are evolving our marketplace to meet this demand. The size and scale of our talent asset is a tremendous differentiator and will underpin a new playbook for how SMBs can leverage AI safely and securely with humans in the loop. This exciting addition to our marketplace will roll out to all customers this year.

Finally, we are just scratching the surface on our AI data opportunity. As AI data needs evolve from synthetic and static data sets toward real-time learning scenarios, we believe Upwork has a unique role to play with 3 million job posts per year across more than 125 categories. We are in early stages of exploring what this could look like in a way that enhances our platform and adds value for customers. We're building rapidly, and we're focused in this area, which would be upside to our model.

At the same time, as we drive these strategies forward, our multiyear investments in cost management and take rate levers bolster our strong financial position and give us the freedom to navigate choppy waters on our own terms. Building a more efficient, resilient organization that is best positioned for the opportunity ahead requires us to say goodbye to many talented people who have been vital to our journey. We are thankful for their impact and dedicated to supporting them through this period of change.

Efficient, disciplined operations and strong profitability will remain a critical feature of how we operate. Our control over adjusted EBITDA comes from the growth of our high-margin offerings, our ad and monetization levers that improve take rate and our internal operational efficiency. These measures bolster our confidence in increasing our adjusted EBITDA outlook for this year despite the softer demand environment. Our confidence in the positive outlook for Upwork and its essential role in the new AI world of work is stronger than ever. There is no doubt that AI is changing the future of work. Against this backdrop, we are building Upwork to power the AI-enabled labor and agentic market of the future. We're excited to drive the business through this transformation of work and the workforce. And with that, I'll hand it over to Erica to discuss our financial results in more detail.

Thanks, Hayden. I first want to unpack the trends that we saw in Q1. Leading up to our Q4 earnings call on February 9, our GSV and active contract trends were within our expectations for the year, right on plan and within the 99th percentile of our outlook for the year. Starting in late February through early April, demand trends slowed materially. We heard directly from customers that macro factors, most notably the combination of ongoing inflationary pressures from tariffs and new ones from soaring energy prices as well as persistent higher interest rates were impacting their business and spend.

In some places, particularly at the lowest end, customers are adopting AI tools to supplement their needs as they experience financial pressures. Consistent with this, we continue to see the greatest pressures on our business at the lowest end of contracts at the sub-$500 level. These trends have since stabilized, albeit at lower growth rates and consistent with the volume trends we have seen in our business over the past 2 years rather than the heightened growth expectations we expected at our Investor Day 6 months ago. While our growth expectations are tempered for this year, signals of strength within the key growth pillars we have identified for our business give us confidence in the long term. We know that there are questions about the impact of macro versus AI on our business.

To disentangle these impacts, we have built a new in-depth analysis of our AI risk exposure. This new analysis uses an LLM classifier trained on methodologies from Anthropic and Stanford, amongst others, to assess AI automatability at the underlying task rather than the contract or job level. This is a more advanced approach than our prior job level analysis, and therefore, we believe more comprehensively assesses the true AI risks and opportunities we see in our business.

This methodology estimates that tasks representing approximately 10% of the GSV on our platform are in the AI at-risk category and tend to be concentrated in our smallest jobs. This is down from 11% a year ago and declining. The remaining 90% are net new AI work and AI insulated jobs and contracts because the majority of the underlying tasks in these jobs are considered insulated from automation by leading frontier AI companies or they are AI work itself. We expect our AI exposure to continue to diminish over time as new AI work and AI resilient jobs are the fastest growing on our platform and AI-exposed jobs concentrated in our smallest contracts are declining the fastest.

I now want to shift gears to the restructuring actions that we announced today. We have always said that we saw ongoing cost optimization opportunities in this business, and we've been preparing ourselves for the next stage of operational excellence and increased productivity. Our focus on our cost structure and internal tool development are enabling us to not just commit to our profitability goals, but to raise them. Our results in Q1 show that we have the discipline to produce strong profitability and free cash flow regardless of the vagaries of the broader macro environment.

Today, we announced the next step in this direction by reducing our cost base by an estimated $70 million on an annualized basis over the next few months. This will include an approximate 24% reduction to our total workforce. These decisions are never easy, but we will treat our colleagues with transparency, fairness and dignity as we work through our plans. We expect to incur onetime charges in the range of $16 million to $23 million, primarily related to severance and other separation costs, the majority of which we will recognize this quarter.

Turning now to guidance. While we remain confident in and committed to the growth levers for our business that Hayden outlined, we also acknowledge that we are operating in an environment of heightened volatility this year. As such, we are both lowering and widening our top line outlook for 2026. For the full year 2026, we now expect revenue growth in the range of $760 million to $790 million. This reflects the increased uncertainty in demand, as I previously discussed, and assumes heightened external pressures throughout the year. As planned, we will continue to expand take rate this year as a part of our overall growth story. We expect full year 2026 adjusted EBITDA of approximately $250 million to $260 million, which represents an adjusted EBITDA margin of 33%. We're able to raise our guide because of our ongoing disciplined cost management and the restructuring we've announced today, which will contribute approximately $40 million in savings in 2026.

With this raised guide, we now expect to achieve our 35% adjusted EBITDA margin target in the back half of this year, more than 2 years ahead of schedule. We expect full year 2026 non-GAAP diluted EPS to be between $1.50 and $1.55. Our updated guidance also assumes stock-based compensation of approximately $60 million to $65 million for the full year 2026, which reflects the impact of the restructuring. For the second quarter of 2026, we expect to generate revenue in the range of $187 million to $193 million and adjusted EBITDA in the range of $56 million to $59 million, which represents an adjusted EBITDA margin in the range of 30% to 31%. We expect Q2 2026 non-GAAP diluted EPS to be between $0.35 and $0.37.

In closing, while the trends this year continue to evolve, two things remain true and very consistent for our business. The growth levers we've identified are showing promise and our confidence in producing growing profitability and free cash flow in 2026 and beyond is unchanged. With a clear vision for our growth levers and a firm handle on our cost base, we are in control of our destiny. We have ample cash to pay down the debt on our balance sheet if we choose to, invest in strategic M&A as opportunities arise and return money to shareholders. Our confidence in Upwork's ability to grow and take our rightful place in the future of work is steadfast, and we will continue to execute with strength and efficiency in the new world of work. And with that, we will now take your questions.

[Operator Instructions] Our first call comes from Maria Ripps from Canaccord.

Can you maybe help us understand how to think about your enterprise business sort of in the second half of the year with this new guidance? Do you still anticipate to see some benefits from the launch of lifted here in the second half? And then secondly, just broadly, given your new guidance, it feels like things have changed very rapidly over the past 90 days. I guess what gives you confidence that the current framework sort of captures the right range of outcomes for the rest of this year?

Thanks, Maria. On the lifted side, we're really pleased with the progress and everything in that part of the business is 100% on track. The pipeline is extremely strong. Customer feedback and demand continues to mount. And even though our fully integrated product following our acquisitions is not yet live, we've already received recognition in the form of a star performer or top quadrant rating from the Everest Group in a competitive landscaping study. And these ratings are a big consideration for customers in the whole kind of RFP and selection process. So all of this is really validating our approach and the acceleration that we are going to see here. And certainly, we're doing everything we can to even pull that forward where we can. But June is when we're going to be migrating customers, and we are going to see that back half impact, which Erica can share a little bit more about.

Yes. So to be clear, Maria, there's absolutely no change in our outlook for lifted, and we still feel really confident in the kind of the 25% GSV growth that we provided for the outlook for the year. The changes in our trends we really saw on the marketplace side -- and it really was kind of distinctively a change in trajectory starting really in late February and deteriorating into March and early April. Those trends have since stabilized, and we can talk more about kind of the underlying impacts to kind of marketplace volumes, but we talked a little bit on the call about really the declines being at the lowest end of contracts.

We have prudently -- despite the kind of stabilization we're seeing right now, we have prudently forecast through the rest of the year some ongoing deterioration in marketplace trends just given the rapidity of change that we saw at the end of Q1. So we do feel that we have worked into our outlook some additional kind of deterioration and conservatism just given the volatility of the trends. I'd also just emphasize, we do continue to see strength in the growth pillars that we've identified. We're excited about it lifted the SMB growth with GSV up 34% quarter-over-quarter for Business+. All of these also give us some very good contra indicators to some of the weakness we saw at the low end.

Our next question will come from Matt Condon of Citizens Bank.

My first one is just on -- were there any new categories that were impacted by AI in the quarter? Was there any shift in the actual category impact? And then I know that it's 10% today, but as model capabilities continue to improve, what gives you the confidence that, that 10% is not going to go to 15% and 20% here in the future? And then a follow-up just on enterprise, along the AI lines as well, like what makes you -- gives you confidence that enterprise clients aren't going to lean more heavily on their internal workforces with AI versus needing to go outside the freelancer platforms such as Upwork for external talent, just given the efficiency and productivity gains from AI.

Sure. So on the category side, there really were no big changes in the quarter. I would say the thing that we would continue to focus on is the AI work category, which is a tremendous bright spot for us. It keeps growing above 40% year-over-year. And really, the leading indicators there are even more promising. We saw in the quarter that 11% of our job posts were in the AI category, even though GSV, which is more of the lagging metric, was only at 8% from that category. So we're going to be capturing more and more of this opportunity going forward. Stepping back and to your question about why do we feel good about this 10% kind of boundary around where our exposure is now, there's a few reasons for that.

First of all, the reason we have an updated number is really the methodologies that came out in the last few months from folks like Anthropic and Stanford gave us an opportunity to revise our approach and incorporate some factors that were not previously available. And that's where we really broke down all of the jobs in our marketplace to their subtasks that contribute to getting those jobs done. And then we classified every task as whether it could be automated or not. And that is the exercise that led us to see that 10% of our GSV today is in jobs with tasks that theoretically can be automated depending on the capabilities of different AI tools deployed. So you're right to question like, okay, where does this go from here? And actually, the good news is that all of the trends that we're seeing and the strategies we're executing are what really reduce our exposure over time.

So first of all, we've seen in both the old methodology and this new methodology that the trend has been consistent that our exposure to AI automation has actually been diminishing, and it was down significantly this quarter versus last quarter -- last -- a year ago, even though there was some acceleration because these tasks are basically burning off the platform and the residual work is AI insulated. So that's just the reality of what's been happening and what happened in Q1. Also, we see that enterprise, as an example, and to your question, is one area where we actually have a very clear AI tailwind in the pipeline. 20% of the opportunities we're looking at are in contention for today are actually due to AI work.

And so we're really not seeing any indicator that enterprises are turning more inwardly. In fact, it's quite the opposite. They're looking for skilled and capable both vendors and teams to come in and help them with expert work, and that's what we're doing for them. Then we've got helpful areas like our SMB program. That is really attracting larger, more complex projects that are AI insulated. And that's why we've been investing in this for several years now, and we're seeing great growth with 34% GSV growth in that product just quarter-over-quarter.

Finally, as the mix shift in our business continues to evolve, we just have less exposure because, again, these AI categories that are growing so quickly are taking up more and more of our mix and represent a very insulated part of the business. The final thing I'd say is that the AI strategies we're deploying like launching human supervised agents in our marketplace -- this really gives us another way to keep spend on our platform even as it gets automated because the humans on our platform are the on supervising agents doing that work and the funds flow through us in that instance. So that product is launching later this year. It's live in testing now. So the market is absolutely going to keep evolving. We're sharing all the insights we have today and really have the confidence given our growth levers that each of them is really positioning us to minimize AI exposure and expand our market opportunity as we move forward.

Our next question comes from the line of Bernie McTernan from Needham & Company.

Maybe to start acknowledging that 40% growth for AI work is still obviously extremely robust, but it is a slight slowdown from the 50% growth last quarter. Just was first wondering what the underlying trends that you're seeing there. And then second, you mentioned leveraging data. And I think -- but can you just talk more about that data opportunity within AI? I think you mentioned job posts and leveraging all that information that you have, but can you just maybe expound upon that? And then third, I think we normally get it in the presentation, but I don't see it. But if you could just provide the marketplace take rate, that would be helpful.

Sure. Let me start on the AI growth. We feel really good about the trajectory of this. The volume of customers looking for AI work on our platform is growing and growing. And this is an extremely dynamic space. So of course, there are going to be quarter-to-quarter fluctuations. But Q1 this year was growing faster than Q1 last year, even though that's on a bigger base. We also see these really strong leading indicators, as I mentioned, around our job post mix shift is increasingly AI-related work, and that's -- this is just a giant market that's just growing. And frankly, businesses are still waking up to the fact that they need to deploy these new technologies and that Upwork is the place to find that talent. And that's what we see in these indicators. It's really getting traction.

To your question around the AI data opportunity, -- we think this could be a very meaningful opportunity for us. As AI data needs are evolving, and we see this across the ecosystem where it's going from these kind of synthetic and static data sets towards more real-time learning scenarios. I think a good example of this is what Meta just announced in the last few weeks around tracking computer activity inside their own organization. There is a real need for companies to have more of these environments to deploy agents within to learn and to access the data that is generated from work activity actually happening end-to-end.

So we've been approached by numerous players on this topic. We know we have a unique role to play with 3 million job posts per year in more than 125 categories. And I'd say we're just in the early stages of exploring what this could look like in a way that is value additive for our customers and for our business. And so it's too soon to say what exactly that will look like, but we've got some conversations and pilots in flight. And anything we do end up doing here will be incremental to our current outlook.

Bernie, just to answer on the marketplace, a great question of 19.4%.

Our next question will come from the line of Brian Tomahen from UBS.

This is Brian on for Josh Chan. Just a couple of questions on my end. I guess can you explain how the restructuring came about? What's changed from 3 to 6 months ago to now? And then I have a follow-up.

Sure. This is something where we have, I think, quite a track record of really disciplined cost management and efficiency in this business, and we've been on that path for several years now. And so as we've continued to see those plans come to fruition, some of the multi-quarter initiatives around automation in our own business, which I know we've shared with you guys, have been making a lot of progress. And as we saw market conditions getting a little bit more choppy, this was the right time to make these changes, both to ensure we are delivering everything we want to be delivering on the profitability side.

But frankly, also just to make sure we're leaning into every opportunity to be more nimble, more fast moving. We've seen benefits as we've made kind of similar changes in the past and have really unleashed faster innovation cycles in the business, and we have that opportunity now. So these are tough decisions because they do impact our people in a meaningful way, but we know they're the right ones to set up work out for the next chapter.

Yes. And then last question, are you seeing non-AI GSP decelerating at an accelerating pace? And if so, where may that be?

Briana, yes, look, if you really take a step back and kind of look at the dynamics on the platform, where we're seeing the deceleration is really with the very small businesses on our platform. And as we talked about with our growth pillars, enterprise pipeline is super strong. The SMB kind of work that we've done on the platform to attract larger customers above kind of 50 employees and more is really continuing to grow and improve. So where we've seen the weakness is really in very small businesses, which are most affected in this macro environment and where wallets get tight, both for them and for consumers. And then below that, where we're seeing it is in the smallest contract types.

So I'll just add to that. We've done some really extensive work to talk with these customers, survey our landscape and understand what's going on behind these changes. And just to underscore what we've shared, the things they are telling us are things like cost of living is up, so people are buying food and gas, not the product I sell or I work in a business that's automotive related and tariffs and government decisions have created a lot of volatility, so I'm spending less. There's just a ton of these stories coming into us about how businesses are just getting more cautious. And again, these are the very smallest businesses in the economy. So when things change, they really feel it and they have to make decisions. And I think that's what's been flowing through to what we shared in terms of the trends at the end of the quarter.

Thank you. This does now conclude the question-and-answer session. We thank everyone for your participation in today's conference, and it does conclude the program, and you may now disconnect.

Hello, and thank you for standing by. Welcome to Upwork Fourth Quarter 2025 Earnings Conference Call. At this time, all participants on a listen-only mode. [Operator Instructions]

I would now like to hand the conference over to Gary Fuges, Vice President of Investor Relations. You may begin.

Thank you and welcome to Upwork's discussion of its fourth quarter and full year 2025 financial results. Joining me today are Hayden Brown, Upwork's President and Chief Executive Officer; and Erica Gessert, Upwork's Chief Financial Officer. Following management's prepared remarks, they will be happy to take your questions. But first, I'll review the safe harbor statement.

During this call, we may make statements related to our business that are forward-looking statements under federal securities laws. Forward-looking statements include all statements other than statements of historical fact. These statements are not guarantees of future performance, but rather are subject to a variety of risks, uncertainties and assumptions and our actual results could differ materially from expectations reflected in any forward-looking statements. For a discussion of the material risks and other important factors that could affect our actual results, please refer to our SEC filings available on the SEC website and on our Investor Relations website as well as the risks and other important factors discussed in today's earnings press release. Additional information will also be available on our annual report on Form 10-K for the year ended December 31, 2025, when filed.

In addition, reference will be made to certain non-GAAP financial measures. Adjusted EBITDA, adjusted EBITDA margin and free cash flow are non-GAAP financial measures, and all other financial measures are GAAP unless cited as non-GAAP. Information regarding non-GAAP financial measures, including reconciliations to their most directly comparable GAAP financial measures can be found in the press release that was issued this afternoon on our Investor Relations website at investors.upwork.com.

Finally, unless otherwise noted, reported figures are rounded, comparisons to the fourth quarter of 2025 are to the fourth quarter of 2024 and comparisons of the full year 2025 are to the full year 2024. With that, I'll now turn the call over to Hayden.

Good afternoon, and welcome to Upwork's Fourth Quarter and Full Year 2025 Earnings Call. In 2025, we completed a 3-year journey to fundamentally transform the business and position Upwork to extend our leadership in the AI era. We've reinvented our product, customer experience and operations to enable Upwork to become the human plus AI solution for the market. Today, we're seeing the early benefits of the new Upwork in our full year 2025 financial performance, which included over $4 billion in GSV, $788 million in revenue and $226 million in adjusted EBITDA. Both revenue and adjusted EBITDA were at record levels with revenue growth of 2.4% and adjusted EBITDA margin of 29%, and we finished the year with a strong Q4 that included year-over-year growth of 3% in GSV, 4% in revenue and a 27% adjusted EBITDA margin.

We're entering the year well positioned to accelerate growth and generate strong margins in 2026 and beyond by capitalizing on the $1.3 trillion market opportunity in front of us. In this new era of work reshaped by AI, Upwork is positioned to lead the shift towards flexible skills-based talent.

I'll unpack our fourth quarter operating achievements across the 3 growth pillars we shared at our November Investor Day, AI, SMB and Enterprise and share our 2026 goals for each. Erica will discuss our Q4 and full year 2025 financial performance and 2026 guidance, and then we'll take your questions.

There's no doubt that AI is reshaping how work gets done. From what we see every day on our platform, AI and humans do their best work together. Our research published in November shows that human plus agent collaboration increases job completion rates by up to 70% compared to agents working alone and we're not an outlier. Third-party reports from Anthropic, LinkedIn and Workday further support Upwork's vision for a future of work that keeps humans at the center with AI amplifying their results. We're evolving the Upwork Marketplace to harness this reality.

In Q4, we embedded more AI functionality in the Marketplace that helped clients and talent work together more easily, generated more than 50% GSV growth from AI-related work on the platform and laid the foundation to integrate agents to deliver work outcomes. With respect to Upwork's AI native Marketplace, we continue to advance our search and recommendation functionality and Uma, Upwork's AI agent to help clients hire faster and more effectively. In total, we estimate that these improvements contributed $100 million in incremental GSV in 2025.

In Q4, we introduced AI generated work summaries to give clients a richer multidimensional view of a freelancer's experience and to enable more confident and better fit hiring decisions. This new feature is already delivering an increased spend per client. By continuously adding AI functionality to our Marketplace, we're removing friction between talent and clients and improving monetization in our platform.

We're also seeing strong durable growth in AI-related work as companies move from AI experimentation to execution, as business leaders work to translate AI promises into tangible business impact. Many are turning to independent professionals to help with strategy, integration and implementation. GSV from AI-related work surpassed $300 million on an annualized basis in Q4, up more than 50% from the prior year. This performance was driven by categories like generative AI and creative production and AI integration and automation, which nearly doubled year-over-year in Q4. Further, in Q4, we saw the number of clients engaging in AI work increase over 50% year-over-year with GSV from these clients exceeding our average spend per client by about 3x. While this is still a minority of the total work done in the Upwork Marketplace, AI work is becoming more material every day and is an exciting indicator of our AI tailwind.

Finally, on agents. In Q4, we outlined our AI agent strategy and introduced the human and agent productivity index or HAPI, the first of its kind real-world evaluation framework measuring agent performance with humans in the loop. Early learnings validated that human plus agent collaboration delivers superior outcomes to agents alone, and this is shaping our next phase with agent human pairs already in testing in our product today and rolling out to all customers by year-end.

Turning to our second growth pillar, SMBs remain a major growth driver for Upwork, and we're seeing strong traction here with Business Plus, our purpose-built SMB solution. Since launching at the end of 2024, Business Plus has scaled quickly demonstrating the strength of the product and its fit with this segment. In Q4, we kicked off new targeted marketing efforts with the launch of our first dedicated campaign going after small businesses. This campaign highlights how Business Plus addresses SMB's most pressing needs from access to top talent to team-based hiring and credit-based payment terms. In Q4 and active Business Plus clients grew 49% sequentially, with 38% of these clients being new to Upwork. Business Plus is one of our fastest growing products ever and its clients spend almost 2.5x more than our Marketplace average. These results position Business Plus as a scalable high-value growth engine at the center of our SMB strategy.

Turning to Enterprise. 2025 was a pivotal year with the introduction of Lifted, enabled by the acquisition of 2 companies, Lifted's offering is designed to support every major contingent work contract type and integrate directly into the workflows used by the world's largest companies. Enterprise customers tell us they want these capabilities and can't get them from anyone else in the market today. In Q4, we focused on bringing teams and platforms together and finalized and launched the first phase of a go-to-market strategy to expand with existing customers and pursue a focused set of about 3,000 prioritized Enterprise accounts, each with more than $50 million in annual contingent spend.

Today, Lifted has built a strong pipeline, including dozens of existing and new logos and is already seeing early success. Lifted has already won 2 new clients, given that Enterprise sales cycles can take a year or more, we are encouraged by this early progress and remain confident in our ability to execute on the ambitious growth targets for Lifted that we outlined in our Investor Day.

Looking ahead to 2026, we're continuing to build on the progress we made last year across our 3 growth pillars. In AI, we're taking our AI native Marketplace to the next level. In 2025, Uma was like Tesla's self-driving mode, powerful, capable and ready to take the wheel. In 2026, Uma will become a Waymo chauffeur for clients and talent, transforming a client's goals into job requirements, postings and recruiting plans, coordinating with talent and AI agents, and managing projects from inception to delivery. We're launching a fundamentally different customer experience, powered by our growing data moat. This means customers can get more complex, higher-value work done even more easily on the platform, leveraging the data and insights we've built over time.

We are also continuing to nurture growth in our AI work categories. Demand for AI skilled talent continues to increase. Our recent in-demand skills report found that demand for top AI-enabled skills more than doubled year-over-year and that human expertise commands a premium across work categories. We're helping talent develop and deploy deeper AI skills, including through our partnership with OpenAI to offer AI training, certifications, and upskilling to global independent professionals on Upwork. Through a range of ecosystem partners like OpenAI, we see an opportunity to continue to extend our reach in new ways.

With respect to AI agents, in 2026, we will deepen human agent collaboration across the Marketplace. Our work with third-party agent developers will enable us to offer a differentiated human and AI experience for delivering high-quality work outcomes. Our unique human and AI agent benchmark provides both a critical training ground for agents and a quality bar for ensuring great work outcomes. With spend on AI agents projected to reach $120 billion by 2028, we're positioning Upwork to capture a meaningful share of this emerging market.

For SMB, 2026 is about expanding and scaling our offering. We're doubling down on SMB-specific features for onboarding, team hiring and AI-driven curation and running targeted marketing programs for Business Plus to drive broader adoption. As we said in our November Investor Day, our goal for Business Plus is to double in GSV, to represent over 5% of our total annual GSV in 2026. At the end of Q4, we're already pacing ahead of plan to reach these 2026 targets, underscoring our early progress in capturing more of the $530 billion SMB market.

Finally, in Enterprise, our 2026 playbook also remains consistent with what we shared at our Investor Day. Our focus of the first half of the year is on integration and implementation of the Lifted platform as we continue to nurture the growing pipeline of enterprises interested in this solution. On the back of sales efforts that are already underway, we expect ramping the Lifted business in the second half of this year and then driving scale in 2027 as we unlock the $650 billion Enterprise market opportunity.

In parallel, we'll look to accelerate our road map and time to market through targeted acquisitions. Through thoughtful M&A over the last 2.5 years, we successfully raised our game in AI and Enterprise. We'll continue to look for strategic investments that further accelerate our AI, SMB and Enterprise growth initiatives.

2025 marked the capstone year in our transformation of Upwork we rebuilt the company for the age of human plus AI work, while demonstrating strong financial performance. Now we're positioned to lead as the operational backbone for customers navigating this new era. The opportunity ahead is massive, and we're entering 2026 prepared to build on our momentum.

With that, I'll turn it over to Erica.

Thanks, Hayden. Before reviewing our Q4 and full year 2025 results, I would like to take a minute to say how proud I am to be a part of the fantastic Upwork team. Our teams executed relentlessly over the past 3 years, working with discipline and speed to transform Upwork, preparing us to lead in the future of work. We grew GSV to over $4 billion in 2025 with fourth quarter GSV accelerating to 3% growth year-over-year at over $1 billion. We continue to evolve the Upwork and Lifted platforms to serve the highest value customers and use cases which is showing up in key leading indicators on our platform.

In addition to the AI and Business Plus growth metrics Hayden shared, average GSV per active client increased throughout the year, growing 7% year-over-year in Q4 to a record level of over $5,100. And overall spend per contract increased 10% year-over-year, resulting in the highest ever average spend per contract over any 12-month period at Upwork. While Marketplace GSV growth was relatively flat in the fourth quarter over last year. This was driven primarily by fewer low-value, high-volume contracts. Given the positive fundamentals around larger clients, we expect positive GSV and revenue growth in each quarter of 2026. We ended the quarter with 785,000 active clients. GSV per new client increased 5% year-over-year and 3% quarter-over-quarter, representing our sixth consecutive quarter of annual growth for this key value signal.

Our churn rate declined over the course of 2025 with fourth quarter churn reaching its lowest level in over 8 quarters. Churn in Q4 was over 130 basis points lower than the churn rate in Q4 2024. These improving churn rates as well as growing yields in our acquisition marketing mean that we expect to resume sequential active client growth in Q1. Our Q4 results reflect the success of several key customer experience improvement initiatives, starting with GSV from Business Plus, which increased 24% quarter-over-quarter. Revenue from Freelancer Plus grew 29% year-over-year, helping to drive total ads and monetization revenue growth of 24% year-over-year. These and other enhanced value proposition strategies enabled us to grow our Marketplace take rate to 19.0% in Q4 2025, up from 18.1% in Q4 2024 which helped drive 5% year-over-year growth in Q4 2025 Marketplace revenue.

Enterprise revenue decreased 3% year-over-year in Q4 as anticipated. Following our 2025 pause in selling our legacy Enterprise plans as we shifted to our new strategy with Lifted. As discussed at Investor Day, we are targeting 25% GSV growth for our Enterprise business this year, with significant acceleration in the second half when integration is complete and we onboard and ramp customers onto the new Lifted platform.

As Hayden discussed, we are seeing strong signals of customer interest and we're focused on executing on our integration plans with speed to capture this opportunity. As such, we continue to expect Lifted to ramp in the second half of 2026 and to be meaningfully accretive to GSV, revenue and adjusted EBITDA in 2027.

Gross margin was 78.0% in Q4, and a record high of 77.8% for the full year 2025 as we continue to execute disciplined cost management across every part of our business. Non-GAAP operating expense was $107 million in the fourth quarter or 54% of revenue, on par with Q4 2024, even as we absorbed approximately $6 million in incremental operating expenses and integration costs, from the 2 acquisitions supporting the Lifted strategy. For the full year, non-GAAP operating expense was $405 million or 51% of revenue compared to 57% of revenue in 2024, reflecting our strong execution and cost management with our business.

Adjusted EBITDA was $53 million in the fourth quarter, exceeding the high end of our Q4 guidance range and reaching a record fourth quarter adjusted EBITDA margin of 27%. For the full year, adjusted EBITDA was a record $226 million and reached our highest ever annual EBITDA margin of 29%. Free cash flow for the fourth quarter was $57 million. We generated a record $223 million in free cash flow in 2025, which we expect to use to support organic growth initiatives, M&A to accelerate our growth strategies and additional share repurchases. In the quarter, we used $34 million in cash to buy back approximately 2 million shares and used a total of $136 million in 2025 to purchase more than 9 million shares as part of our commitment to driving long-term shareholder value. Cash, cash equivalents and marketable securities were approximately $673 million at the end of the year.

Now turning to guidance. For the full year 2026, we continue to expect GSV growth in the range of 4% to 6% and revenue growth in the range of 6% to 8% or between $835 million to $850 million. Starting in Q2, we expect GSV total take rate and revenue to increase sequentially throughout the remainder of 2026, driven in part by Lifted completing its integration efforts and beginning to ramp GSV in revenue in the second half of the year.

We also continue to expect full year 2026 adjusted EBITDA margin of approximately 29% or between $240 million to $250 million. While we were incurring about 2 percentage points of margin dilution from investments in the Lifted growth strategy in 2026, we are maintaining our margin rate on a year-over-year basis. We expect to exit 2026 at a margin in the low 30s as a number of longer-term cost optimization strategies start to bear fruit in the back half of the year.

We expect full year 2026 non-GAAP diluted EPS to be between $1.43 and $1.48. For the first quarter of 2026, we expect to generate revenue in the range of $192 million to $197 million. In 2025, we delivered major platform improvements and a return to growth through our focus on higher value clients and more complex work. The key long-term growth levers we've identified on our Upwork platforms, AI, SMB and Enterprise, are all progressing well, including the growth metrics across Business Plus, the AI category and other leading growth indicators that Hayden and I shared today. This gives us confidence in achieving our top line growth outlook for the year. While also continuing to invest in growth and optimize our cost base.

For adjusted EBITDA in the first quarter, we are guiding to a range of $45 million to $47 million, which represents an adjusted EBITDA margin in the range of 23% to 24%. Our margin outlook in Q1 is lower than is typical for our business due to the rapid pace of our Lifted integration projects, investments to support growth on the Lifted platform and some incremental marketing investments to support additional growth opportunities in the Marketplace. With the long-term cost optimization initiatives we have implemented, we have strong confidence in our 29% margin outlook for the year and in our ongoing progress toward our long-term 35% margin target. We expect Q1 2026 non-GAAP diluted EPS to be between $0.26 and $0.28.

In closing, Upwork is well positioned for accelerating multiyear growth starting this year. I'm excited about the growth opportunities ahead and look forward to building on our current momentum in 2026. We are entering the year with strong progress on our key growth levers, on a highly profitable foundation and with a very strong track record of producing operating leverage. We have proven our commitment to growing shareholder value, and our strong balance sheet and tremendous free cash flow yield give us flexibility to maximize value and continue to solidify our market leadership. I know I speak for everyone at Upwork when I say we are excited about 2026 and the great growth prospects for our business. And with that, we would be happy to take your questions.

[Operator Instructions] Our first question comes from the line of Eric Sheridan with Goldman Sachs.

Maybe one, just putting a finer point on the way you're framing 2026. When you think about the investments you're making exiting 2025 and moving it to the front half of 26, whether it be AI features on the platform or Business Plus expansion or even Lifted. How should we think about those investments scaling as you move deeper into 2026. But more importantly, how should we think about some of the contributions to GSV and revenue growth building and momentum as you get deeper into 2026 and the exit velocity of 2026.

Thanks, Eric. This is Erica. We've always anticipated when we guided to the 4% to 6% GSV growth and 6% to 8% revenue growth at our Investor Day. We always anticipated a ramp throughout the year in kind of both GSV and revenue. As we mentioned on the call, Lifted -- the investment side of Lifted, we're engaging in right now really moving as quickly as possible with our integration. That includes kind of initial investments in kind of sales and marketing there as well as finalizing our national entity structure. We expect to onboard and ramp new customers and existing customers on to Lifted platform in the back half of the year. And so we're going to see some acceleration there on the Enterprise side.

Similarly, on the Marketplace side, we have very strong kind of growth trajectory of our growth levers. The AI category growing over 50% year-over-year. Business Plus growing 24%. And actually, its ramp into Q1 is even stronger than we expected when we planned for the year. So we feel very good about the growth trajectory of these growth levers and expect them to ramp throughout the year and exit at our high point for growth rates on both Lifted and the Marketplace.

Our next question comes from the line of Ron Josey with Citi.

I wanted to ask a little bit about the search and recommendation functionality that Hayden, I think, you talked about on -- from an AI perspective. Just wanted to hear about the early benefits here and help us understand how the search and recommendation functionalities can improve overall visibility? And then on, Erica, back to sort of Eric's question on visibility on the margin side. Talk to us about the sales and marketing initiatives that you're running from a Business Plus perspective and the results you've seen thus far?

On the AI and search side, we've made a few types of investments here that already started having impact for us last year, and we'll continue to ramp this year, both in terms of features that are live and new features we'll be shipping. To give you a little bit of color on that, we launched Uma Recruiter as one example, which is a key feature currently in the Business Plus plan. That's really accelerating time to hire by getting clients to a short list of really high fit candidates very quickly. We've also been launching some features around things like conversational search and messaging where we can get a much richer idea of a client's goals and needs and then go into our tremendous talent pool and target the right prospects for that based on that more enriched search experience.

So some of those things are already live and having impact, and we'll continue to ramp across our customer base this year. And then, of course, we're also doing more this year to take the investments in the Uma platform and really make some changes to the user experience, both on the side of kind of pre-hire, so the search and match side as well as the collaboration and project management area. Those are places where we're investing this year. We're shipping new experiences that really are transformative and are much more AI-powered with Uma at the center of those experiences. And what we're seeing in early testing is they really are having a positive impact to customers as they go through our funnel and are able to offload more of the work to Uma and move more quickly towards their goals. So that work is ongoing and is definitely going to propel our results this year.

And Ron, to your question on marketing and specifically on Business Plus, but we did start to have some Business Plus dedicated campaigns launching in Q4 and have continued some of those into Q1. The great thing about Business Plus is these customers spend 2.5x the platform average in GSV and new customers who onboard onto Business Plus have a higher spend profile than the average. And so these are very good investments for us. And one of the reasons we're stepping -- kind of marketing up a little bit around the Marketplace side in Q1 is because we are seeing some very nice yields in terms of the spend that we've been doing.

And so the great thing about kind of how we've been managing our cost base is, we will have capacity this year to spend a little bit more on the sales and marketing side, because we have other longer-term kind of cost optimization projects coming through that we expect to benefit the back half of the year. That includes some back-end automation we've been working on for a couple of years now as well as a location strategy to hire and kind of lower cost locations. So all those things will benefit us in the back half, enable us to kind of continue to grow our margins and invest in marketing.

Next question comes from the line of Brent Thill with Jefferies.

This is John Byun on for Brent Thill. Maybe 2 questions. One, in terms of the Q1 guide on maybe revenue and GSV, are there any special seasonal factors there, given I think people expect a little more in Q1, excluding the ramp in Lifted, especially, I guess, in the Marketplace segment. And then second on, I think, sorry about that, second, on the top of funnel, if you could talk about any impact from SEO versus GEO and performance marketing, that would be great.

John, I'm sorry, could you repeat the question? We were having some technical difficulties on our end.

Okay. Yes, I did hear the echo. Yes. The first question was on the Q1 guide for GSV and revenue. I mean wondering if there are any special seasonal factors given, I think, people expect a little more. I mean I know you're ramping Lifted more in the second half, but I don't know if there's any other factors in the Marketplace segment. And then at the top of the funnel, I don't know if you've seen any impact still in SEO versus GEO in the different performance marketing channels. Thank you.

For the first question on the Q1 guide, I apologize, we're having a little bit of audio difficulty here on our end, but hopefully, everyone can hear me. On the Q1 guide, look, Q1 is manifesting as we expected when we guided at our Investor Day in November, this was always going to be a little bit of a bridge quarter for us, first and foremost, as you referenced on the Enterprise side with the investments upfront in Lifted and really the acceleration of revenue in GSV coming when we start to transfer people onto the platform.

On the Marketplace side, we have been focusing on growing these larger customers with longer-term relationships. And that's been extremely successful for us. It's showing up across our platform and are lowering churn rates and other things like that. But there is some ramp to the spend with these customers. And so if there's been kind of an any kind of smaller impacts on the margins to volumes. It's really been at the very lowest end smallest contract types kind of sub-$100 contracts.

Every leading indicator on our platform for future growth, including GSV per active, up 7% year-over-year, spend per contract of 10% year-over-year and importantly, spend per new customer continues to grow, which is a very important value signal for us. So we feel really good about the underlying growth trajectory of our business and are confident in our guide for the year.

On the top of funnel question on SEO and GEO. I think, we actually have seen some very, very good initial yields on the GEO side, but it's super early days. These are very, very new channels for everyone. And I also think there's some interplay still between SEO and GEO. So we feel really confident and positive about what we're seeing from a signal point of view on that side of the house, but it's also very early days.

Our next question comes from the line of Maria Ripps with Canaccord.

First, can you maybe expand a little more on active client trends in Q4? And I guess, what are some of the dynamics that you are seeing that should drive expected client growth setting this quarter? I think you mentioned marketing campaign, but is there anything else to highlight?

Yes. So obviously, we talked on the call, our churn rate has been coming down kind of sequentially throughout 2025, and down 130 bps throughout the year, year-over-year in Q4. So the ongoing benefits to churn rate, this is -- if you -- the active client number is a trailing 12-month number. So those are going to continue to compound and benefit us as we go into 2026. So that is one of the dynamics helping us as well as the fact that we are seeing some good top-of-funnel yields as we go into Q1. And so we're feeling pleased with also the kind of top-of-funnel acquisition, which is going to benefit us and help to resume active client growth.

Got it. That's helpful. And then so given expanding demand for AI work, did you feel like you have sufficient AI talent on the platform? I guess, is that a bottleneck in any sense? And are you doing anything different to maybe attract AI platform -- to the platform?

Sure, Maria. We are really pleased with the category growth that we've already seen, up more than 50% year-over-year. This is our fastest-growing category and subcategories within the AI group are really on fire, which is exciting for us. We expect this to continue to be a trend throughout this year and into the future years. We are not seeing strong indications on the platform. However, we're always looking at making sure we have exactly the right talent to do this work, augmenting the pool we have of 250,000 AI experts already working with our clients in the last year alone. And that's where we're doing things like the partnership with OpenAI where we're helping them on the side of sort of certifying 10 million talent that they've committed to with their OpenAI for jobs initiative, and we are definitely exited to see a place where those can come and find work.

So we're not seeing a bottleneck here. We're excited about the growth. We think it's extremely durable based on what we're seeing in the ecosystem and our investing in 2025 and 2026 rather.

Our next question comes from the line of Matt Condon with Citizens.

My first one is just -- it's great to see the 2 new clients in the Enterprise side of the business. But is there any color you can give on just existing clients and the demand that you're seeing from them, whether it be test budgets or any other signals that would give us confidence as we move into the back half of the year? And then my second one is just on the variable freelancer fee. Just wanted to see how that's progressing as you roll that out more broadly across the Marketplace.

Sure, Matt. On the listed side, we are very pleased that we're tracking to plan with this work. And yes, we've seen both the new client interest, including the 2 clients you referenced, which given the sales cycle in Enterprise is so long, we are very pleased to already have those clients coming on board with us. But you're right, we're also in conversations with our existing customers who are moving us in for RFPs and contracts that we would not have been in contention with before. And so our funnel is quite healthy, and that's a mix of both new demand and folks that are really new to our story, but also existing customers who now are considering us for work that was previously really not in the cards for us. So all the signs there are extremely promising in terms of the green shoots, and we see a really clear path to accelerating this business over the course of the year.

Yes. And then just on the variable freelancer fee, Matt, we are really excited about the strategy. We had some real success with the very early testing that we did in 2025. We are going to be rolling out the variable freelancer fee to more categories starting in Q1 and kind of doing more of a gradual rollout throughout the year. And so that's another reason that we have a lot of confidence in the ramp for the year from a revenue point of view and GSV because we are kind of rolling this out gradually and we'll continue to test. But this has been a super successful strategy for us and actually really speaks to the strength of our data science bench here, which has been really creative and come up with something that is using the supply and demand dynamics on the platform to drive both GSV and revenue.

Our next question comes from the line of Bernie McTernan with Needham.

Great, appreciate it. Maybe just to start on Business Plus it was -- the large number, 38% of clients are actually being new to Upwork. I was just surprised it seems like it's a pretty strong acquisition to why I thought it might be more of an existing selling. So maybe you can just talk to the go-to-market there and what you're seeing that's successful. And then on the -- just a clarification on the fourth quarter, given the Marketplace take rate of 19%, I think it implies the Enterprise GSV was up a lot year-over-year. So basically, should we expect a step down in 1Q before ramp back up throughout the year? Or just how to think about the shape of the GSV trends on Enterprise.

On the side of Business Plus, you're right, this has actually proven to be an extremely effective client acquisition strategy. And I think we're still very early in kind of fully deploying the opportunity around that. And we did this first targeted SMB marketing campaign in Q4. We saw some really positive results from that. We are seeing great acceleration both in terms of client volumes, 49% client growth quarter-on-quarter and the spend, which is really important because this is a key part of our strategy for moving Upmarket to larger small businesses. Those that maybe have 50-plus employees, have much more sustaining spend, are looking to get more complex work done. This is really the sweet spot for that product. And we're already ahead of plan as we enter Q1 in terms of the contribution of Business Plus to GSV against the target we have exiting the year coming from Business Plus.

So all signs are really showing that this is something that's appealing to both new and existing customers. And I think there's a lot of run room for us to continue to both expand the value proposition, but also execute the marketing and other things behind that growth that's going to be durable this year and beyond.

Yes. And on the GSV trends on Enterprise, there obviously is some contribution from the acquisitions in terms of the year-over-year growth. But overall kind of Enterprise revenue, we are in sort of a holding pattern right now in terms of the revenue that we're recognizing from our legacy business. As -- just to remind everyone, we stopped selling new Enterprise plans. And actually, we stopped both the land and expand motion on legacy Enterprise at the beginning of 2025. And so to the extent there is some minor churn at the low end on Enterprise right now. We don't have new customers coming on the platform right now to replace it. So in Q1, we do expect there to be some kind of slight decline in overall Enterprise revenue sequentially, but that's all in anticipation of the build on Lifted and really ramping up very quickly once we put the new platform -- light up the new platform.

Our next question comes from the line of Rohit Kulkarni with ROTH Capital Partners.

Does data point on AI clients spending 3x your average spend per client. Can you comment on what's specifically driving that higher spend? Is it higher rates, longer duration, more scope of projects, more projects at the same time? And then just to clarify on this -- when we reconcile your first quarter and full year guide, it implies a path where revenue growth exits this year and possibly mid-teens from where you are right now. So pretty significant back-end loaded acceleration. Can you talk about whether that's a fair way to think about it? And apart from Enterprise, is there something that gives you confidence to that stronger second half growth?

Yes, sure. In terms of the AI category, Rohit, so several of the factors you mentioned are true about the spend on the AI category. First and foremost, average kind of hourly weight or hourly rate or wage in the AI category is about 40% higher than kind of average kind of tech wages on the platform. So it is significantly higher rate. There is also just higher volume of work. So if you think about some of the spend and actually where we're seeing very fast growth, it is in kind of AI infrastructure work, also generative AI, kind of prompt engineering type work and some of these are quite big or long-term projects. So yes. So it's -- overall, there's a good reason to see -- to believe that this is going to continue to grow, and we really see no end in sight to the growth in that category.

In terms of sorry, what was -- I think the other question was the exit rate for revenue growth. Yes. Enterprise is a big factor here because the 25% year-over-year GSV growth that we're targeting for Enterprise that's really all in the back half of the year. So that is ramping quickly in the back half of the year, like we said, once that platform lights up. But we also have a lot of confidence, and we do expect that Marketplace GSV and revenue will continue to ramp from a growth rate point of view throughout the rest of this year. And the reason for that is that we are -- all of these kind of growth drivers in the platform are scaling up. Business Plus continues to grow and scale every single quarter. The AI category growing 50% year-over-year. We have visibility into that and expect that to at least continue the current growth rates throughout 2026. And then like I said, things like the variable freelancer fee, which will also be ramping. All of these are drivers to enable the growth of GSV and revenue throughout the year.

Okay. And if I could ask a question like a big picture question to Hayden on agents, fascinating stuff in the prepared remarks, when you say human agent collaboration, can you elaborate what does the workflow actually look like in practice as in an Upwork, where do you see humans add value? And where do you see agents fully automate tasks? And how does kind of Upwork actually end up benefiting on either of those 2 sides?

So there's, I'd say, like raging debate about is it AI or humans or is it AI and human. And we are looking at the data on our platform in this every single day, and it is very clear that the solutions that are winning in the market today bring together the best of what agents can do with human judgment, with human as an overlay and a supplement to what the AI agents are capable of, even the most powerful ones.

We launched this Benchmark last year, called the HAPI Benchmark, which really is benchmarking humans and agents together. And that really shows that when you bring a human into the mix, agents are able to complete work with a 70% or more success rate than when they're just operating alone. So there's a big step up when you bring humans into the equation.

So all of that is a backdrop for our strategy, which is really about bringing our incredible asset in terms of a talent network that is skilled, that is capable, that is AI equipped, alongside agents, whether they are our own agents like Uma, but also the huge and growing ecosystem of third-party agents. So that those humans and agents can collaborate seamlessly to deliver outcomes for our clients. And you're right, Rohit. This is not a user experience that exists anywhere else, and we are really building it from the ground up here at Upwork. We have a product in testing today where clients can submit jobs or submit work they're trying to get done and human and agent pairs collaborate on delivering those results.

That's the experience that we are using as kind of the initial framing for what we'll be rolling out over the course of this year, where we bring humans and agents together as collaborative workers inside of our ecosystem, delivering work for customers. But our view is that this is -- we are in the early innings of a huge opportunity. I think it's roughly $130 billion of agentic spend by 2028. And we believe we can participate in a meaningful part of that by enabling third-party agents and our talent to collaborate together to deliver incredible work outcomes right here on our platform.

Our next question comes from the line of Josh Chan with UBS.

Just 2 questions from me. I guess the first question is on EBITDA. I was wondering if you could bridge us from the $59 million to almost $60 million of EBITDA you did in Q3 to the $53 million in Q4 and then and then the Q1 guide. I know that revenue is a little bit lower, but just curious to hear what moving pieces are leading to that EBITDA cadence over the last couple of quarters?

And then, I guess, secondly, on Enterprise, what are some of the milestones that you are looking for to achieve in order to hit your kind of 2026 aspirations? I know you mentioned winning 2 clients. So how many clients do you need to win by midyear to get there? Just something to help us understand the pace of what we should be hoping for would be helpful on that side.

Yes, Josh, on the EBITDA bridge, in Q4 is when we really -- Q3 we closed the Ascen deal and so had only about, I think, half a quarter of their cost base in our results. So we -- the full quarter of the 2 cost bases, but more importantly, we incurred in Q4, we started to incur a number of kind of integration costs that are temporary in nature to -- in order to kind of enable that business largely on the kind of platform enablement side. Similarly, in Q1, I think, we're projecting about $6 million of investment in Q1, much of which is temporary in nature as we kind of invest in the final international entity structure and other things for the Lifted platform. Also in Q4, we -- it tends to be a slightly lighter adjusted EBITDA quarter, and that's largely because of kind of bonus accruals and other things that happened in that quarter.

On the side of the Enterprise milestones, Josh, we feel great about where the pipeline is right now in order to achieve those growth goals that we have for later in the year. Just to give you the sense, we're going after a target set of about 3,000 Enterprise customers who all spend each one $50 million or more on contingent labor. And so a shift in our strategy now that Lifted is coming into fruition really lets us go after much bigger customers with much bigger contracts than what we are eligible for in the past. And so to hit our growth goal, we don't need hundreds of customers to onboard. We need a small number of high-quality clients who are ramping their programs with us and not we're very focused on, and we see the signs of that happening.

So key milestones as we look out across the year, but first of all, we'll be launching and migrating clients onto the Lifted platform once our integration work is complete, and we're targeting the middle of the year for that. And then, of course, on the back of those migrations and turning on both new and existing customers with that functionality, we will see those step ups in GSV revenue that we're expecting in Q3 and Q4.

Our next question comes from the line of Brad Erickson with RBC Capital Markets.

Two for me. One, you shared -- you talked a lot today about all the way AI is driving growth, GSV active customers, et cetera. So when we kind of put that in the context of GSV up 3% in Q4, what are the parts of the Marketplace business that are still kind of seeing headwinds? And any help you can give us there about kind of the persistence of that? And then I have a follow-up.

Sure. We are really excited about the momentum we see in the AI categories. And I would say we continue to see on the flip side, a minor impact from categories like writing and translation, which for many quarters and now even years have been declining due to automation broadly and AI more recently. So that's one small factor, but I'd actually say the bigger factor behind some of our more modest growth rates in the immediate term, it's really just like -- it's a transition quarter for us.

We've really been launching our Enterprise sales strategy. That's ramping the SMB strategy around Business Plus, that's ramping. Those things are really coming into effect over the course of this year. And at the same time, I'd say on the margin, this is a labor market that's not great and certainly hasn't improved. We saw in December, the lowest BLS data on job openings since September of 2020. And I think that's just indicative of the slowness in the market overall, which, of course, tracks through to our platform to an extent, even though we're growing faster than competitors. Even though we're growing when folks staffing firms are reporting negative growth numbers still.

So I think the comparison is we're taking share and we're positioned well with our growth strategy. A lot of these tailwinds are not very durable like AI, and we're very focused on that that's are working.

I would just add, Brad, real quick to this, which is that if we're seeing headwinds, it's not so much on a category level, aside from writing and translation, which has been consistent in our platform for a while. But we are -- we see some kind of a little bit of negative growth on these very, very small, very transactional projects, kind of sub-$300 or more and so -- or less. And so honestly, that just reinforces the power of our strategy to focus on these longer-term relationships, which are durable they ramp over time, they improve our churn rates, and we maintain these relationships for a long time.

So I think this is going to be the winning strategy. It's really been working for us. And you can see it in the leading indicators in our base with GSV per client, GSV per contract, you use for a new customer, all of these things going up into the right. So we feel good about it.

Yes. That's great. That makes a lot of sense. And then second, just I think you mentioned M&A in your prepared remarks. Just curious kind of what's interesting there between maybe product type of acquisitions or maybe better access to certain channels or maybe something else strategic? Just help us kind of what do you guys spitball as the management team around potential M&A.

So our guidance and our outlook for this year is definitely not predicated on any additional M&A. We are going to achieve our plans just based on or organic levers that are written for us. However, we have done some fantastic and very beneficial M&A over the last 2.5 years. That includes AI-related acquisitions and Enterprise-related acquisitions. And so we will continue to run a playbook that's working for us. And if we see targets out there that are really lined up against our AI, our SMB or Enterprise strategies, those are the places where we would get more interested.

Our next question comes from the line of Marvin Fong with BTIG.

Maybe to start on the 2 new Lifted customers, it's a great sign of validation of the strategy, just very early days, I understand. But would love to hear anything you could say about these 2 clients, I mean, to the extent you're able to speak to how much they spend on contingent labor or just how many employees they have in general? Or even if you can give us that, just anything on how that sales process evolved? Did the deal close as you'd expected on the time line you expect? And then I have a follow-up.

Sure. So we can't disclose too many specifics on these customers, but I can tell you they're really in the sweet spot of that ideal customer profile we have with tens of millions of dollars of contingent work spend with programmatic work happening through this part of their business, the contingent work program. And I'd say they, like many of the other customers that are in our funnel, they have really lit up when we pitch them on this Lifted proposition and the fact that we could provide a differentiated solution that gives them compliant contracting across all 5 different types of contingent work, through a single platform with the highest quality talent that's out there.

So they really were, I think, indicative of the product market fit that we've been building towards with the Lifted strategy. And we have many more customers like them in our funnel, which -- we're pleased to be nurturing over the year. We know this long sales cycle. Some of these buyers only make a decision once annually around going to the vendor in the space. So we're nurturing those relationships. It's working, and we're very excited what that's going to do in the back half of the year.

Great. And my follow-up, just on the Q1 guidance, just trying to square all the points being made. I think you said clients would be up sequentially yet the revenue guide is down sequentially. Is there something going on with the GSV per client? Or I know you also said Enterprise revenue would be down sequentially. Any more color on the moving parts would be great.

Yes. So Enterprise revenue, we do expect to be down sequentially. And again, this is really as we kind of invest for the future and make the Lifted platform kind of transaction ready. Overall, our -- I think we're very comfortable with the guide for Q1. And the reality is that when customers join us on the platform, right, as new customers come on, their spend ramps over time. So we are -- we do expect that our kind of new customer count will resume growth sequentially in Q1. But it takes time for those customers to kind of dip their toes in the water and then ramp with us. So we don't get as big of an impact in Q1 from kind of increasing new customer counts.

Ladies and gentlemen, I'm showing no further questions in the queue. That does conclude today's conference call. Thank you for your participation. You may now disconnect.

Good afternoon. I'm Josh Chen, business services analyst here at UBS. Very pleased today to have Upwork join us. They are an online marketplace connecting freelancers with SMB and enterprise clients globally.

With us today from the company is Erica Gessert, CFO. And we'll have a fireside chat here. Feel free to raise your hand. You can send some questions in this iPad, and I'll pick them up as well. So -- but with that, Erica, great to have you at the conference again.

Thanks for having us -- thanks for having me, Josh.

Yes. Thanks for being here. So maybe to level set the audience about Upwork, could you start by giving a brief intro about the company and for anybody that may be less familiar and then we can dive into different topics from here.

Sure. Sounds good. Yes, Upwork is the world's human and AI work marketplace. We are a global marketplace that connects talent from all over the world with businesses of all sizes. We serve globally. We have over 130 job types on our platform and thousands of skills of all size companies.

Great. Great. So maybe to start off with the recent return to GSV growth. So could you frame for us the GSV trajectory over the past several years? And then why it was briefly negative, but then more importantly, how you've been able to return to positive GSV growth recently?

Yes, sure. Yes. Look, the past few years, particularly, I think, as companies exited the pandemic, there were many pandemic beneficiaries. We were included in that. And as companies came out of the -- as companies came out of the pandemic, I think the broader human capital industry really kind of suffered in that environment.

And most of our kind of staffing industry competitors were down double digits from the volume point of view over the past few years. Upwork was relatively flat.

And we kind of really worked over the past few years to invest in 3 key growth catalysts for our business, which we're now seeing an inflection point across all 3 of these areas. So there are really 3 pockets of very large TAM that we have access to that are really showing very strong growth characteristics right now.

The first, of course, is the AI category of work itself. And kind of the AI opportunity for our business is kind of threefold. The first is growth of the AI category, which is accelerating on our platform. It's at a run rate of about $300 million of volume on our platform right now, growing at over 50% a year and accelerating. That's largely organic growth.

And so we're making some investments now to even further catalyze the growth of that category. And so it's super exciting time there on the marketplace. The other part of AI growth is actually the front-end customer experience and the AI enablement of the hiring experience itself.

So if you think about the hiring experience, it's really traditionally very friction filled, right? We're a marketplace. Our clients would come on to the marketplace, have to write up a job post, post the job, talent writes a proposal for the job and the client has to read through those proposals and then choose talent.

Now all of that is done by AI. AI writes the job post, AI writes the job proposals, AI helps with the match all across. And now even in more recent quarters, and really in Q3, we've launched the ability for AI to do recruitment, to do interviewing and other things.

So just in 2025 alone, we saw about $100 million GSV lift from these kind of experiences to reduce friction. And then the third opportunity from an AI point of view is actually a little bit longer horizon, but introduction of actual agentic work on the platform, which we've just introduced kind of benchmark work where developers can come and test their AI agents doing work on the platform as well. So there's a huge growth catalyst there. And then there's a second growth catalyst on the marketplace, which is the growth of the SMB category itself, which we can get into a little bit more.

Sure. On the AI topic, I guess, there's been discussions about positive negative effects. Clearly, you highlighted the GSV growth from AI recently. How do you think about any headwinds? And what's the aggregate impact of AI in your business, you think?

Yes. It's a really good important question because I think that we've -- businesses like ours that are in the human capital contingent labor industry have had an AI overhang over our stock and valuation, certainly since during my tenure in this business. And I think it's been really a misunderstanding of kind of the external markets in terms of how and where disruption happens in the labor market.

And we have actually one of the best data sets out there on this topic because we have hundreds of job types on our platform and billions of dollars of volume every year, right? So we can see very clearly where there is substitution and where there's actually augmentation from AI and then even acceleration with these kind of net new job types.

The places where we did see substitution, and we've talked about this a lot, is the biggest categories that saw substitution were in writing and translation. A few years ago, writing was a relatively big category on our platform. Now it's quite small.

But even more so, where we saw substitution was we have to sort of a proxy in our business that we talk about when it comes to substitution. And it's really jobs that are $300 and less on the platform. So if you think about where AI can substitute human work, it's really in the smallest, most transactional types of work.

Now our -- so a couple of years ago, the $300 and lower job types were about 5% of our volume. It's now about 3.5%. Our platform overall actually specializes in longer, more complex projects. And so our average GSV per client is actually about $5,000 and growing. It's growing sequentially every single quarter.

And that is actually partly because of the growth of AI category itself, which is 3x the GSV per client that kind of our platform averages. And then also actually the kind of our further penetration into larger SMB customers who, by nature, do much more complex and longer-term projects.

Any questions from the audience so far?

I [indiscernible] either.

Yes. So -- and then maybe transitioning to the macro backdrop, which employment markets have been tough like you mentioned. So what's your view about where we are in the macro now and then kind of as we're heading right into 2026?

I mean, look, I would say the macro is not doing anybody in any favors right now. I think that inflationary characteristics and sort of persistent high interest rates are not great for particularly SMB spend. But that said, I think that we have really put in place the kind of growth catalysts that I described, AI, the growth of SMB, which we have really built out the products on our platform.

We have a strategy where we're kind of tiering kind of our servicing on the platform and features on the platform in order to have greater service for these larger SMB customers. So if you actually think about the kind of history of the Upwork platform, it's really been kind of one size fits all and optimized largely for -- if you think about SMB customers, these are companies that are ranging from anywhere from like 1 to 9 employees all the way up to 100 to 200 employees.

And the needs of those customer types are very, very different, right? So if you think about a 10-person employee company, they can go around on the platform, they need a software developer for a couple of months. They can just hire it's super easy, right? If you're in a 100-person company and you need a group of developers to build a long-term complex project, well, you probably need a real invoicing product like you need net 30 billing. You need the ability to build teams in an easy way where they can collaborate on platform. You need the ability to have different people interview these people, all these kinds of things, we didn't offer any of those types of products that are really custom-built for these larger businesses.

We just launched all of those in the past year and really some of these features in the past couple of quarters. And this is now a premium take rate product that is also aimed at these much larger businesses and longer contract types, and we're starting to see some real acceleration here. In Q3, the GSV in this business plus category grew 36% year-over-year. That's also accelerating. And it's still very low penetration on our platform. Less than 5% of our GSV is in this kind of new tiering product. And so this is a super exciting catalyst for our business as well.

And what I'm hearing you say is that regardless of what the macro is, you feel like these catalysts can kind of continue to help you grow?

Yes. I think for us, we've really spent the last couple of years rebuilding the platform in these new profound ways that are truly different from anything we've done before. The third area actually is in the enterprise side of our business, which is separate from the marketplace and really focused on the very large Fortune 200 businesses in the world.

Now for those who don't know the contingent labor market that well, these businesses -- I actually came from large enterprise. These businesses spend hundreds of millions of dollars in contingent labor a year. Most of the large enterprises, their kind of employment portfolio is, call it, 70-30 FTE to contingent labor or sometimes even more.

And so there's hundreds of millions of dollars of opportunity in all these businesses. Previously, Upwork was really only offering one contract type to enterprises, which was an independent labor contract type. That meant that we only accessed about 10% of that enterprise wallet.

And in Q3, we announced 2 acquisitions to kind of change that. We acquired a business called Ascen, which offers all the different contract types that we were offering before. And then another business called Bubty, which is actually a workforce management platform that can plug in API-ready into all these enterprise systems. So that's going to be a huge game changer for us.

It opens up the other 90% of a $650 billion TAM enterprise market that just was not accessible to our business before. Now we're in the middle of integration. We're not quite ready to kind of launch all these new contracts, but that's coming in 2026. And that's another reason that we feel very strongly that we can kind of be macro agnostic as we penetrate these very large TAM opportunities.

Okay. That makes a lot of sense. Recently, you had an Analyst Day and you outlined some near- and medium-term targets. So maybe just like stepping back, what made you decide to put together an Analyst Day now? It really does seem like you feel like there's a little bit of an inflection?

We definitely do feel like there's an inflection point in this business. And I think we planned the Analyst Day very carefully for that reason. We've been hard at work for 2 years on all of these strategies. We actually -- if you go back and look, we -- at the end of 2024, we said that we were going to -- 2025 was going to be kind of a negative GSV growth year for us as we rebuilt a bunch of these strategies and these businesses.

And we even -- we announced at the end of '24 that we're going to stop selling our legacy enterprise plans while we worked on this new enterprise strategy of acquiring these companies that could offer the full suite of products that these businesses needed.

And so we really did take a step back, rebuilt and we are now seeing the benefits of that work across all 3 of the fronts that we have worked on, AI, SMB with Business+ and now the enterprise business. So it's a super, super exciting time for us. And if you look at our guidance, it actually implies kind of real acceleration through the next few years.

And we feel really confident in that trajectory because we are seeing all -- the nice thing is all of the strategies that we've described are things that we are already seeing traction in our business today.

Sure. Yes. On guidance, you did guide to 2026 GSV growth of 4% to 6%, which is an acceleration from the....

Yes. Yes, that's right. So we just reported in Q3, 2% GSV growth for our business, and that's coming off of about -- actually 5 quarters of negative GSV growth. And so there really is an inflection here. And we've guided to 4% to 6% GSV growth for 2026 and then 7% to 9% for the next 3 years.

And so we feel very confident in that trajectory. And the reason we see that acceleration is because it's both on the marketplace side because of the ongoing acceleration and ramp of AI and also the AI implementation on the platform, it takes time to implement these experiences from a customer experience point of view, inject AI into the platform from a recruiting point of view.

We're just about to launch AI project management. These things take time to kind of build into the experience and then ramp. But every single -- one of the kind of AI experiences that we've launched so far, where we've reduced friction from the kind of historical experience, we've seen an inflection and increase in fill rate and other things on the platform that enable our growth. So we feel really confident of that ramp over time kind of in all 3 of these areas.

Okay. You talked about AI categories. So how do you define what's an AI GSV or not? And then from -- in terms of the guidance, what does it embed in terms of AI growth versus non-AI trajectory, I guess?

Yes. I mean we talk about a lot about AI on the platform because it is such an exciting time and such -- seeing so much acceleration right now. Now we are a very diverse platform, though, I think to your point.

And we see growth across other categories, too. It's a very interesting time in our business because, like I said, we have such a great data set. But categories where I think people thought there was going to be AI disruption like design and creative, logo design, these are things that are accelerating.

And actually, we see -- within our data, we can see categories that are actually getting augmented by AI tools. And so as like tools get better, those categories are accelerating. Video and animation is actually one of those that we -- some of the AI queries on our platform, AI video is kind of one of the highest that we see.

And so we're seeing real acceleration in some of these kind of subcategories as well. So getting to your question on how do we define AI category. It is difficult. Our taxonomy in some ways can't keep up with it because of the use of AI tools. But when we talk about the AI category, the vast majority of that is today, as we characterize it, is what you would think of as like typical AI work.

It's either AI infrastructure implementations, it's prompt engineering, data labeling, things like that, that are kind of underlying that growth. But there are also other -- we do try to identify other kind of AI-enabled job types that are somewhat in that category, although it's difficult for us to always identify them all in real time.

Sure. Do you need the non-AI categories to stabilize to hit your guidance for '26?

I mean many of the non-AI categories are growing nicely, like design, creative, legal, accounting are all actually very nice growers on our platform, sales and marketing.

And so no, I mean, look, we don't need any change in our trajectory to hit our guidance for next year is how I'd characterize it. And I think some of the work that we're doing right now is on top like in terms of further catalyzing the AI categories, assuming some of that work really works, then that would be incremental.

Sure. Any questions from the audience? Okay. So -- and then maybe moving on to take rate. So implicit in your revenue guidance being higher than your GSV guidance is a slight improvement in take rate next year. So what's driving that?

So take rate, we have a tremendous amount of opportunity with take rate. The first most important kind of contextual piece here is that our take rate is actually quite -- still quite low compared to the rest of the industry.

So our take rate all in is about just -- it's about 19.6%, just under 20%. A lot of industry comps are well into the kind of 30% take rate. So we do have room to grow here. The really nice thing about our take rate strategies that we're implementing right now is they're all very much pricing to value on the platform.

So one of the biggest catalysts for us is Business+. It's this SMB-focused product that I described. This is a premium take rate product. So on the client side, our clients pay 5% take rate on our platform. Business+ is 10% on the client side. And it's also aimed at these much larger contract types, as I described.

And so as Business+ grows, it will be a catalyst both to volume and to take rate at the same time, which is a very nice place to be. The other area that's really interesting for us is that we just started to experiment this year on a variable freelancer fee within the platform.

And this is really going subcategory by subcategory and looking at the supply and demand dynamics of the platform. And in some places where we have a surplus of supply, we will increase take rate. And in other places, actually, we've experimented with reducing take rate in kind of lower supply categories in order to catalyze GSV.

And so that's also going to be -- we're very early days. We've only experimented with a couple of categories on the platform. And so this is something that will be a really nice tailwind into 2026.

Okay. Okay. And then kind of going beyond 2026, your 3-year GSV target is 7% to 9%. So that implies a further kind of acceleration from here. So can you talk about what's driving that?

Yes. Look, I mean, first and foremost, the enterprise strategy that I've outlined with our enterprise business is called Lifted. And that strategy -- the game changer there is our legacy enterprise business had a very wide spectrum of contract sizes anywhere from $10 million or so all the way down to a couple of hundred thousand.

And what we really did was, as I described, added these products and services in order to open up the rest of the enterprise kind of contingent labor wallet. Now we're now really exclusively going after kind of Fortune 200 companies on the enterprise side.

So these are contracts that are tens of millions of dollars to up to hundreds of millions of dollars contracts. Now the great thing about that is it actually requires a very small sales force to go after these very large contracts. But the other thing is that the contracting period and negotiation period with these contracts are very long.

So we guided to a back half of the year next year in 2026 ramp of the enterprise business. And that's a realistic time line because of just contracting times. So really, the growth in enterprise in 2026 and inherent in that 4% to 6% GSV growth rate, it's all back half weighted, which means the real ramp is in 2027. And that's one of the things that gives us such high confidence.

We're actually -- we're getting tons of inbounds from our existing enterprise customers asking us to join RFPs and other things for these much larger contract sizes now even before these platforms are integrated. So we have a lot of confidence that this is a strategy that has a lot of legs.

Okay. Maybe touching on margins for a second. Margins have meaningfully improved over the last 2 years, 11% 2 years ago, now just under 29% this year. So could you talk about what's driven the improvement and whether you think the current cost structure is sustainable for where you want to take the business?

Yes, sure. Look, we're super proud of the margin journey. I think we've done a tremendous amount of optimization, both in the core business and like I said, on the enterprise side, I'll just talk first about our core marketplace business.

Look, overall, this is an 80% gross margin business, right? And so -- and there's still actually ongoing optimization we can do on the cost of service line. So this is an inherently profitable business and a super capital-light business as well, right? Our CapEx is $20 million a year or something.

So this is a business that is just inherently profitable. So I think Upwork, as I came into the business in 2023, had a huge growth trajectory during the pandemic as many beneficiaries did kind of invested into that.

But as we looked at the business in 2023 and beyond, we really did a few things. We optimize the marketing investment. There was a lot of brand marketing that we just weren't seeing the revenue yield from. We never touched our performance marketing budget.

We still have not because we get good yield out of that, and we'll continue to kind of optimize that. We focused more on acquiring these higher-quality SMB customers, but getting really good kind of ROI to CAC on that. We very much optimized the sales force, reduced it by kind of 50%.

And we -- the other thing that we did with this kind of Business+ plan launching on the marketplace was we took some of the enterprise kind of lower-end enterprise product features, and we put them on the marketplace in a self-serve way so that we no longer had to have kind of account executives, more expensive kind of cost to serve in our business.

We could just service these kind of smaller end enterprise customers on the marketplace. So we've really optimized the business that way. And then the third way was really narrowing our R&D portfolio to focus on these kind of 3 growth vectors that we've identified that would be game changers for our business.

And so look, I've been in this kind of finance and enterprise for a really long time. And I've seen it over and over again, when you narrow your kind of investment portfolio on the R&D side and just focus it on a few really distinct things, your execution just gets faster and better internally. And I've seen that here. I've seen it in other businesses I've been in, and it's really enabled our execution to be faster while also optimizing our cost base.

Okay. That's encouraging. Maybe touching on the enterprise opportunity because that's something that is newer. Could you talk about what you're competing within the enterprise market? How are you going about the opportunity and how Upwork may be different than some of the other possible solutions that are kind of out there?

Yes. For those who aren't as familiar with, like I said, the contingent labor market, I think it's probably hard to visualize exactly why we're so differentiated, but I'll try and describe it. It's actually quite difficult for any kind of company that offers contingent labor to offer true global kind of labor arbitrage to global businesses.

And that's because most of our kind of staffing competitors are actually kind of they're kind of geo verticalized, whereas we -- because we have this inherent global talent pool of 18 million talent worldwide sitting on our marketplace platform, we are able to, with now these acquisitions that we've done, offer enterprises any contract type in virtually any country in the world.

And that is a truly differentiated kind of offering that no one else has done. Actually, this last quarter, when we launched the Lifted product, we announced it intentionally at the beginning of September because the largest contingent labor conference of the year was in mid-September. And they chose to highlight the Lifted product as in the keynote address, even though without even telling us, and that was because of the differentiation of what we're offering in the industry.

So is super exciting. And we know from kind of the interest we're getting from our existing clients that this is definitely new and different.

So can you frame the 18 million, is that a larger pool than other companies can provide? Is it a low cost pool, it sounds like.

Yes. Look, I mean, the fact is we can offer, like I said, kind of -- because of the global nature of our talent pool. So if you think about our marketplace business today, about 2/3 of our clients are U.S. and about 1/3 international.

The opposite is true of talent, right? About 2/3 of the talent working on our platform is international, about 1/3 U.S. Even greater is this pool of kind of broader 18 million who are registered active bidding on the platform, and available for work.

And that even a greater proportion of that is international. So the access to labor arbitrage for these businesses is very high. We're one of the largest sources of labor arbitrage for SMB, certainly, but then also for large enterprise.

Okay. Okay. Any questions from the audience? All right. Moving on to free cash flow. So could you talk about the sustainability of free cash flow conversion in this 85% of EBITDA range that you've kind of talked about for this year?

Yes. Like I said before, so as you just articulated, our EBITDA converts to free cash flow at kind of 85% plus. So it's a high cash yield business. We're very proud of our margin trajectory. I'm also very confident we have a 35% margin target out there. We just reported 29% last quarter, 35% over the next few years. That's what, I would call it, very confident target for us because we have just inherent leverage in this business as we continue to grow.

And we have continued cost optimization and things that are longer term in nature that we already have line of sight to over the next couple of years.

So we feel really good about that trajectory. And as we continue to see the growth rates that we're starting to see, there's no reason that, that can't go higher over time. So there's just -- there's just a lot of kind of future cash flow growth for this business as we've been, I think, showing very well over the past few years.

Sure, sure. So there's no like working capital draw that....

So there's working capital movement in our business, right, because of just the timing. If you think about how our platform works, the timing of -- we recognize revenue when clients are billed, but then we hold in escrow some of the freelancer payments and then pay them out. So there's working capital movements from quarter-to-quarter, but over -- that just smooth out over time. And over time, like I say, our EBITDA just converts to free cash flow at 85% plus.

Okay. And there's a question...

So how do we control for, say, like for people who can't -- who aren't qualified to do what they say they're going to do or something like that? Yes.

Look, I mean, we offer certain guarantees on the platform, right? And the other thing is that the marketplace dynamic, the supply and demand dynamic of the platform does also self-optimize. I mean, obviously, all marketplaces have very strict and ongoing models, making sure that there's no fraud on the platform and all that kind of stuff.

But in terms of work quality, we make sure that we guarantee the quality of the work on the platform and then also freelancers gain reputation over time, just like any other marketplace business.

[Technical Difficulty]

Not software companies. So we're -- the core business is a kind of self-service, largely self-service marketplace. And the competition is really -- there are other marketplaces, although we are the -- our marketplace is unique in that we specialize in these longer-term, more complex projects.

Most of the other marketplaces are kind of at the lower end of us. And then we compete with the staffing industry, but we are kind of faster, better, cheaper. Our take rates are lower, and we can just fulfill faster because there's -- by and large, there's no human in the loop trying to source and stuff like that.

And then we compete with private verticalized players. So there are lots of kind of companies out there that offer just kind of one industry vertical like software development or like logo design or stuff like that.

But we're really one of the only platforms out there who has hundreds of job types and companies can come and really fulfill any type of work that they want on the knowledge work side of the house.

[Technical Difficulty] Fiverr is out there.

So Fiverr, their -- that's what I was referencing, they're sort of at the lower end. So our average GSV per client is $5,000. Theirs is about $300. So we do -- we absolutely operate in the same industry, but we sort of operate in an adjacency to them.

And word on capital allocation given the strong cash flow.

Yes. Good way to end. Yes, we are very active in terms of our capital allocation strategy. Obviously, continue to do our organic investment and grow our margins. We have been acquisitive on the M&A side. We did the 2 enterprise acquisitions. We also acquired 2 kind of tech and talent acquisitions on the marketplace side.

We'll continue to do that. And then we've been very active buying back stock. We're reducing our share count this year, and we'll -- we've committed to offsetting any kind of stock-based comp through stock buyback, but we'll continue to strategically reduce share count over time, particularly at these prices, I'd say.

Great. Yes. With that, I think we're out of time. Thanks, Erica, for joining us.

All right. Thanks so much, Josh. Thanks, everybody.

Our program is now beginning. Please welcome on stage, Erica Gessert.

Thanks so much. Good morning, everyone, and thank you so much for joining our 2025 Investor Day. I'm Erica Gessert. I'm the CFO of Upwork. For those who don't know me, I think most of you do. We are absolutely delighted to have everyone here with us today. I know I speak for everyone in our company. When I say we are incredibly excited about this time for Upwork. It's such a great time for our customers, for our employees and, of course, for our shareholders.

Over the next 3 hours, we plan to give you an overview of the significant opportunity ahead for Upwork and our strategy to capture that opportunity to create long-term shareholder value. First, of course, before we get started, I want to call your attention to our safe harbor statement. During today's event, we will be making statements related to our business that are forward looking. So please do read the note up here at your leisure. These statements are not guarantees of future performance and are subject to a variety of risks and uncertainties. Our actual results could differ materially, and we will be sharing non-GAAP financial measures today, which have reconciliations in the back of the deck. All right. Let's do it.

We have a fantastic agenda. First, of course, our own Hayden Brown, will be up here, yes, to talk about our journey and strategy. Then we'll have Dave Bottoms, our amazing GM of Marketplace. He's going to talk about the tremendous market opportunity both for AI native marketplace and for the SMB segment on our platform. Peter Sanborn, our VP of Strategy, Corp Dev and Partnerships, will be here leading a customer panel. You'll get to meet some of our customers up here to really see the value that we bring to -- on our platform to our customers every day.

After that, we will have Andrew Rabinovich, our formidable CTO and Head of AI. And the previous CEO of Headroom up here to talk about the emerging Agentic AI opportunity on our platform, then of course, Ernesto, our GM of Enterprise will be up here to talk about the market that we're unlocking with Lifted. I'll wrap up by sharing the financial targets for our business, which I'm sure everyone is eager to hear about. And then we'll have time for Q&A.

So we are incredibly excited. As you all know, at earnings, this is an inflection point for Upwork. We've returned to GSP growth 2 quarters early, and it's really up and to the right from here for our business.

So with that, with no further ado, I would love to invite Hayden Brown up to the stage.

[Presentation]

Good morning, everyone. I am so excited to be here today and to introduce all of you to the new Upwork. We have done a lot of work over the time that I've been at this company. I've been leading this company for 6 years. And the company today is completely different from when I stepped into the role. If you thought you knew Upwork, you are in for a surprise. No changes that we've made to this business are more profound than those that we made in the last 3 years. We have fundamentally transformed this business. We have rebuilt it for speed, for scale and for the new era of human and AI collaboration.

Let me be clear, this is not a refresh. This is a full reinvention of our business on every dimension. It's how we're growing and how we've achieved our accelerated GSV growth that Erica mentioned 2 quarters ahead of schedule. It's how we're achieving record profitability. Today, you'll see what we've done and how we've done it. You'll see how we've reinvented our product, our customer experience and our operations for this next era and this next chapter of our business.

Look around. No one else is making these types of moves. We have taken bold steps to reinvent and reposition this business to win in this next era of work. It's been a lot of work for our team. But today, we are so excited to share it with all of you.

This work is underpinned by a new AI native platform that we have launched across the business, and this is how we have achieved accelerated GSV growth. It's how we're achieving record free cash flow profitability and revenue in Q3. It's how we've achieved margin expansion, including being on track for 6 points of margin expansion this year alone. It's how we are absorbing the cost of high-impact M&A while still being on track for our long-term adjusted EBITDA margin target of 35%. We have built a formidable growth engine with this business, and we have now got the latitude to continue to make high ROI investments that perform for us and pay off for shareholders.

This morning, we'll talk you through what this reinvention has looked like, how we've gotten here and why we're positioned to win in this next exciting chapter of work. This is the most exciting chapter in Upwork's history. Because we've done this fundamental reinvention, we are positioned for this next era. And importantly, we have traction on 3 major growth opportunity areas. These are our building blocks for growth that we've seen already and for so much runway we have ahead. We have a huge opportunity with AI tailwinds, and we'll talk about that growth building block. We have another amazing opportunity with the SMB market, and we'll unpack that. And of course, we know we can expand in the enterprise, and we have a strategy and product to do that as well. This is how we're achieving our accelerated metrics. Already in Q3, as you've seen, and we are poised for more acceleration ahead. This morning, we'll reveal all of this and where we are going next.

Now I want to start by talking about the elephant in the room. Every day, we all read headlines about how AI is changing work. And it's confusing because we read on the one hand that AI is taking jobs. Then we read that AI is disappointing. MIT recently published a study that said 95% of AI pilots have failed. You are probably wondering, it's AI good or bad for Upwork. We ourselves have faced a stock market headwind from those who are not close to our story, speculating about what AI does mean for this business. And I can tell you, AI is definitively positive for us. In fact, it is one of our most exciting and growing tailwinds.

The signals are totally clear. How do I know this? Our platform operates with tremendous scale. I look at the data every day, and we have 60,000 jobs posted a week. That's more than 3 million a year. We get to see in real time how businesses are changing their needs with AI and how talent are responding. We can measure precisely the value that's being created or destroyed by AI, and we see this in our data. Yes, this is a huge, huge opportunity for talent on our platform who are now able to win more work because of AI, and we'll talk all about that.

Let me also be clear. AI substitution is happening. AI is replacing humans in some parts of the labor market as a whole and on some parts of Upwork. We see this on our platform in small jobs in categories like writing and translation. This is why jobs that are $300 or smaller on Upwork have actually gone from 5% of our GSV 5 years ago to now just 3.5% of GSV. There has been some erosion in that part of our business. But this is a tiny fraction of what we do. And this is a tiny fraction -- small jobs make up a tiny part of the huge contingent market that we are going to talk about today.

There is a bigger trend going on, bigger than substitution. And that is the creation of new demand for talent that is expert and highly skilled, specifically because of this exciting AI technology. And that is incredible news for talent on our platform. That is great news for Upwork and our shareholders because our superpower is matching talent with exactly the job that needs to be done and matching clients with exactly the talent they need in real time.

And the demand for that is absolutely growing. I want to unpack these tailwinds a little bit more in terms of AI. There's 2 trends going on under the hood that are creating this tailwind and benefiting our platform. The first one is the net new creation of demand because of AI work. Let me explain this. Many businesses, when they see the power of AI technology, it causes them to embark on projects they were not doing before. Whether it's building a new product using AI or whether it's trying to do something that they didn't even think was possible, but now AI makes possible for them, and they're going to try that thing. That is all net new work they weren't doing before, and their existing team does not have the capacity nor the skills to do this work. So they come on Upwork and they find the talent that has the skills and the ability to help make these new dreams come into reality.

There's another trend going on. Companies that are trying to reinvent their existing workflows with AI are experiencing a fractionalization of full-time jobs. That happens when they look at an existing workflow, they bring in AI automation, there is still a residual amount of work that needs to be done by humans, but they realize this doesn't have the shape of a full-time employee. This work doesn't really need a full-time employee. It looks different. And that is where their demand for contingent and freelance workers is also increasing because they know they need people to complement AI, but those people need to be different and they need to be hired differently.

A great example of this is Grammarly, now known as Superhuman. They've been a customer of ours for years. And with the AI revolution that's going on, they set out to build a new product. They wanted to have an AI writing assistant for their customers. They launched this, and they realized they could only create and deliver value with this product if they also had humans complementing what the AI technology could do. So now they have hundreds of Upwork writers and editors working alongside their AI tool as part of how they programmatically create value and deliver that to their customers.

Upwork as a platform is benefiting as a result of these trends. We have seen our project sizes increase significantly. They're up 12% year-over-year just last quarter. We're seeing spend per client also increase because they're doing bigger, harder, more complex projects on our platform because of AI. And probably most exciting is the fact that we are seeing 50% growth in the number of clients on our platform that are engaging in AI projects. And clients that are doing AI work spend 3x as much as clients that are not doing AI work. So this is a huge benefit for us that is just early. The momentum is still just building. We are early in this AI era, and so many businesses are still just starting to figure out how they transform or invent new things with this powerful technology. So all the evidence is we're on track to unlock something substantial.

When we talk to existing customers and prospects in the market, this is reaffirmed. 77% of hiring decision-makers tell us that putting AI into their businesses is going to increase their demand for fractional and freelance workers. This is great news. And we see it in the data, we see it building, and we are, again, early in this extremely exciting revolution.

So others have been debating what does AI mean? What will it impact be? We have been building, building an entirely new category, the human and AI work marketplace that brings together people and technology in new ways to create new value for customers. Our marketplace is predicated on this new transformation of becoming a human and AI work marketplace. This is the heart of our business. It is the core of what we do. It's the foundation of our success, and it's how we create sustaining durable competitive advantage in the market. This is why we've been able to deliver our strong Q3 results and why we're set up for further acceleration ahead. Dave Bottoms, our team of Marketplace will unpack this a lot more, but I want to pause and tell you a little bit more about this powerful flywheel that is really at the center of our business and creating so much value for us.

Our flywheel starts in the first part with our work delivery platform. This is the technology layer that we have built that enables clients and talent to work together online and takes out the risk for them. It basically derisks hiring for clients and derisk work for freelancers. It's tremendously valuable, and it's a closed ecosystem that goes end to end, from higher to management, payment, reputation signals, all of that powers what we could do with this technology.

Furthermore, it has been tuned for complex work, long-term engagements, not throwaway projects. We do the big stuff, the serious stuff. And that is really how customers show up and do big, long engagements with us that are getting bigger and longer with now the AI trends we're seeing. We also rebuilt this product to be fully AI native. That has been the transformation over the last few years, and we'll talk more about that today.

Because we have this powerful platform, it in turn attracts an incredible stable of clients to Upwork. We have 800,000 clients annually working on our platform. Everyone from Microsoft and Cloudflare to content creators and your local business, they can all come and experience the value of Upwork. Over the last few quarters, we have chosen to focus on client quality over quantity. We want clients with bigger budgets, more spend, better retention, work across categories, and as we've done that, we have been very successful increasing the client quantity of kind of bigger, more successful clients that have real budgets and doing less with kind of in and out folks who are just going to be tire kickers.

Our metrics reflect this, this progress on getting upmarket in the SMB space. We see client spend increasing. We see clients that are spending $1,000 or more right out of the gate increasing rapidly. Because we have such an exceptional pool of clients, that attracts talent to our platform. It's a huge talent magnet. We get talent from all over the world, and we now today operate the largest and most liquid talent pool on the planet. This is a talent pool of highly skilled workers, people with advanced degrees, PhDs, masters degrees, who are so relevant in the era, helping train models review outputs. I mean there is so much work for these folks to do. They're highly skilled, they're using AI, themselves and their workflows at a very high rate and our talent pool is expanding in a different way. We are now adding AI agents to both the talent supply and the demand side of our equation.

Let me explain this. On the demand side, we already see large language models and AI agents hitting our website. They've been asked to complete a task by a client. They can't do it on their own, so they come to Upwork and they're trying to hire someone to actually get the work done. This is a new and growing demand opportunity that's very nascent, but very exciting and a signal for how much human work is still required even as AI is proliferating. So AI agents will soon be a new dimensional that's much more relevant in our platform, and we've rebuilt Upwork to accommodate that.

And there's a supply side. Of course, our talent are already using agents to complete and execute work, but we're taking it a step further. We have rebuilt Upwork to include AI agents as part of the work delivery flow. This year, we launched a test experience, putting AI agents into experience where they could help complete work with clients. We learned a lot from that. Andrew Rabinovich, our CTO and Head of AI and ML will unpack some of those fascinating insights. But that work this year is what is the precursor to a launch in 2026 of AI agents broadly available to all clients in our marketplace. This is huge. We rebuilt the platform to accommodate this, and we are on the tipping point of launching those exciting experiences next year.

Now let me finish talking about the flywheel. We've got our demand. We've got our supply. Because we have all of these incredibly skilled individuals, that fosters tremendous category breadth on our platform. More than 130 categories of work, more than 10,000 skill areas, growing all the time. Our clients use us holistically across their business, we become their operational backbone. We hear this time and again from them. Because they're able to not just do one use case, but to spread out across multiple parts of their business. This is great for businesses. It's also great for Upwork.

We have superior economics as a result. We can pay more for high-value clients, profitably acquiring them and delivering still against incredible ROI thresholds, because we can expand spend and serve businesses across many more categories than any of our competitors. So this gives us an advantage versus vertical players and point solutions because we're horizontal, we have better economics, better client stickiness, better retention.

Finally, all of this powers an incredible data asset. We all know in the era of AI data is king. And at Upwork, we have a data asset no one else has. No one's got this. We have data on every step of work across 130 categories of work, how it's conceived, how it's delivered, what good looks like, what bad looks like. We're using this proprietary data asset, which is so valuable and which is growing every single day to unlock the power of our platform with our AI tools like our work agent Uma. We'll talk a lot more about Uma and what Uma is, but do not overlook the power of this data asset that we are putting to work, putting in the pockets of our customers with our powerful AI technology so they get the benefit of all of the insights from our platform every step of their journey.

Now our customers experience Upworks value and the flywheel in a very particular way, we see time and again, we call it the aha moment. Customers come into Upwork and they have a mindset of scarcity. They feel like "I can't get it done. I don't have the resources, I can't compete. I can't get the talent." They feel limited. Then they come into Upwork. They get to a mindset of abundance, abundance. They realize they can do it. They have the talent access. They can move at the pace of their ambitions. This is a huge unlock and this is the beginning of how customers then start to use Upwork more and more because they realize there's so much that they could do. They didn't even dream they had access to.

No one says it better than the customer. So let's hear from one of our customers about the value of Upwork.

[Presentation]

Kanetha said it so well. This is the type of power that we provide every day for our customers, large and small. And we know we can reach more of them. There are so many more SMBs and enterprise businesses that have yet to discover the power of Upwork and have that aha moment. And our strategy is designed precisely to do that, to unlock more value with SMBs and to grow more in the enterprise. Ernesto, our GM of Enterprise will be up later talking about the enterprise strategy specifically.

One of the things I love the most about this business is that at Upwork, we make things possible that are not possible anywhere else. Customers can't replicate their experience and the power of our platform anywhere. Duolingo is a great example of this. Duolingo has been a customer of ours since their early days as a start-up. And we've all watched their eyes. They have expanded languages. They've added new courses like chess and math and music. This has required massive workforce adaptation for them. For each news, of course, they launch, they need different people building and training and deploying those solutions. Upwork is a solution for that.

We have given them that adaptability and flexibility that their business model fundamentally requires. And we know they can't get that anywhere else.

Another great example of this is Atlas. Atlas is a small business customer in our marketplace. They're building a financial services product that is focused on helping consumers avoid high interest debt and have financial health. Atlas has built a team of over 150 CX and operation specialists on our platform, spanning many different functions, and they've told us. They've said, we could not build this solution anywhere else. We've rebuilt our business to provide this type of value for these customers. We have been laser focused on amplifying these strengths. And I want to talk to you about what this rebuild has looked like because it's been major. We have done a major business transformation in the last 3 years, revealing it for the first time today. So get ready.

There have been 3 major pieces to this. We reinvented the business on our product layer, on our customer focus and on our operations. And we did it all at the same time, which has been huge. We're already seeing this reinvention working. It shows up in our Q3 numbers, and it shows up in our outlook we're going to share more about today. We began by reinventing our product. Early in 2023, we knew AI game changer. We knew we had to reimagine what Upwork looked like on the foundation of this powerful technology. As our AI vision crystallized, we executed 2 high-impact acquisitions that accelerate our road map, and that pushed us to having so many of the AI-powered and Uma features and functionality today. This is already benefiting us, $100 million of incremental GSV this year is coming from the work that we've done, rebuilding with AI and improving our customer experiences specifically through this strategy.

It was not enough though. We needed to do more. So at the same time, we set out to reinvent who we were serving and serve them better because we know there are big markets out there that we could grow even faster in. Specifically, we knew SMB and Enterprise were big opportunities for us. We set out to serve them with new high-value products specifically built for those customer types. At the end of last year, we launched Business Plus, which is an SMB-focused product specifically engineered to deliver on what those businesses need. Dave will talk more about that shortly.

We also realized in the Enterprise, we could go further and compete better and bigger. So we made our biggest moves in the company's history on Enterprise, buying 2 companies this past year, relaunching our Enterprise business as lifted in August. And the reception has been amazing. We've already heard from so many customers who are excited to use us in new and different ways and inviting us for bigger and better RFPs than what we were able to compete with before. The strategy is clearly working. We're seeing Business Plus, it's grown 33% on GSV quarter-on-quarter in Q3. So it's already got tremendous traction.

This was also not enough though, we also wanted to go further. We reinvented our operational layer, fully went deep. We reduced our team size in 2024 by 21%. We brought AI into our workflows across the business. We created small nimble teams that can move fast towards our huge ambitions. And this is working for us as well. We're moving at the speed of a startup and the scale of a market leader. This is a formidable combination.

Why did we do this? We did this in pursuit of our giant market opportunity. I'm so excited to share these numbers with you because our market is huge, and we have just scratched the surface. We're seeing a $1.3 trillion amount of spend in 2028 on global digital knowledge work. It's a massive number. Specifically, the SMB market is $530 billion of that and we are poised to open up that market with our Business Plus offering. Enterprise, another huge opportunity, $650 billion of spend. We have engineered our lifted subsidiary and our product directly to go after that huge market.

And then, of course, there's some new stuff happening with AI agents. Estimates are for $120 billion of spend with AI agents by 2028. We are positioning to leave here too. We know we have incredible assets, incredible insights based on the work we've already done, testing agents in our ecosystem, and we're building on that with the rollout of agents in the marketplace in 2026. Andrew will talk more about that solution, but make no mistake, we are positioning to pioneer that specific part of the market.

We're opening up this $1.3 trillion market with a very specific strategy that has 3 building blocks. The first building block is AI. The second is SMBs and the third is Enterprise. I want to unpack these a little bit. I'm going to start with AI because it's one of our biggest and most exciting tailwinds. Specifically within AI, we have multiple opportunities, and there's 3 that we're focused on. Expanding our AI-powered workflows is making our product more effective and AI-powered to drive throughput and attract the right businesses into Upwork. Second is accelerating our AI categories of growth where on our platform, customers are coming in and hiring more and more AI talent. And then, of course, there's AI agents.

Let me unpack the first one here, the AI-powered workflows. We have come so far with our AI agent that we call Uma. Let me rewind the clock. In 2024, we launched Uma. And I'd say at that time, Uma improved our product and our service kind of like moving from a manual to an automatic transmission in your car. 2025, this past year, we expanded Uma's capabilities more. At this point, I'd say it's like fully self-driving mode in your Tesla. Can do a lot, but you want to have your hands kind of close to the wheel. 2026, where is Uma going? Uma will be driving the experience while you relax in the passenger seat. That's our vision for Uma.

Uma will take your goals as a client, turn them into job requirements, turn them into posting recruiting plans, recruit on your behalf and project manage, so you get an amazing outcome. And all of this is powered by our data asset. That's how we're able to build such an incredible and differentiated tool. Our data gives us the ability to train an agent on so many types of work and so many steps in the work process that no one else has visibility into.

This is a strategy that's already having that incremental $100 million of impact on our GSV this year, and that's only calculated based on features we launched in the first half. Features we launched in Q3 and those that are already coming out of Q4 are not even counted into this number. So we know we have a ton of runway here. Andrew and Dave will both talk more about this in their presentations.

Let's talk about the second AI opportunity. AI category growth. I'm excited to share that today on Upwork, we already see $300 million of GSV coming from AI categories. That's a big number, and it's growing at more than 50% year-over-year. This is evidence of how much businesses are relying on Upwork for the key talent they need in this AI era. We are leaning in hard here. We are amplifying this opportunity. In 2026, you'll see us do more with talent curation, with product that is tuned for these AI categories and with marketing, there's a lot we can do to even press the gas further on this tailwind we are benefiting from today. This is a sustaining and durable opportunity because we are still in the early innings.

And let's talk about the third opportunity we have in AI. I've got to say, in my 6 years leading this business, I'm not sure there's been anything I have been so excited about as this strategy right here. We have built the human and AI agent marketplace in a way that no one else is doing. Frankly, no one else can do what we're doing here. It's a tremendously exciting opportunity. Others are building agent marketplaces at best. Candidly, those fall short. Agent marketplaces lack the human involvement that both creates customer trust, to use the service and creates quality in the outcomes. And we know that because we've done a lot of testing iteration here.

We're taking a different approach. We are building the human and AI work marketplace where humans and agents work together, co-creating outcomes that are better, faster than anything else that they could do individually as agents or even that humans could do individually. This year, we did launch a test experience with clients working with agents in our ecosystem. And next year, we will be rolling that out broadly to all customers. No one else is doing this.

Let's zoom out. That was our AI building block. There's a lot there. Our second huge building block as a business is SMB, $530 billion of spend up until a year ago, we did not have a tailored product just for these customers. We launched the first version in Q4 of 2024, and this year have expanded Business Plus and its capabilities substantially.

We have heard loud and clear from customers who are using this product that this is now an indispensable growth engine for them. They can't do without it. We see tons of traction. Actually, in Q3, 36% quarter-on-quarter increase in clients joining Business Plus. And this is a product that we have only put into the experience without marketing it, just letting people self-discover, so we are early. Customers are flocking into it, and that is before we even press gas on marketing. We just started a new marketing campaign in October, and this is the first time we're really bringing new customers actively into this product, even though they've been discovering and joining it on their own.

So we can see we have real traction here. It is paying off, the metrics support it. Dave will talk a lot more about Business Plus today. You'll get to see more of what that entails.

Our third building block, enterprise, massive opportunity that we have been serving for more than a decade. We know these customers. We also realized that our prior solution was coming up short, and we made significant changes. We knew we could retool and change our product to actually meet the customer needs, which we deeply understand after years of working with these folks. We made this huge move with 2 acquisitions of Ascen and Bubty into our Lifted business, which is now fully dedicated to opening up this giant market opportunity.

This solution has never existed before. What we brought to market is completely unique in the ecosystem, and we're hearing incredible feedback from customers as a result. They've essentially been asking us, begging us, please do something like this. And now that we've done it, they're like, yes, let's go.

So we know we have a lot of runway here. It's extremely exciting. We're seeing what the pipeline looks like, and we are excited about how this is really going to perform starting in the back half of 2026 and just continue to take off from there.

These building blocks are specifically why we feel so confident in sharing new long-term targets with you all today. We are expecting GSV, 7% to 9% CAGR over the next 3 years, which is awesome. We are seeing the acceleration now and we know it can go further. On revenue, we have confidence in 13% to 15% CAGR in the next 3 years. We know this is possible based on everything we're seeing and doing right now. And margin expansion, we are phenomenal at this. We operate a business with incredible discipline, incredible focus. We know we can achieve 20% margin expansion CAGR over the next 3 years as well. All of this will be detailed in more with Erica, our CFO in a few minutes. She will unpack these numbers why we're so confident in our ability to reach them.

It's clear. Upwork is a different company today than it was just a few years ago. We have rebuilt it to win in the AI era. We are accelerating the business through amplifying our huge AI tailwinds, which are here today and are growing. We are also running down the runway of SMB and enterprise expansion. We see the traction. We know the market is there, and we are ready and we're executing. We also have the financial prowess to continue to drive top and bottom line performance with our strategies. We know we can do this. It's already started in Q3 and will continue to accelerate.

This is the most exciting chapter in Upwork's history. We've rebuilt for this moment with new capabilities and new products. We're positioned to take advantage of our incredible unique assets to continue to win and share in the market. We are poised to deliver incredible financial returns, and we know we can win. This is the time. We are building a generation-defining business and we are really excited that you're here joining us on that journey. Thank you.

I now invite my amazing colleague, Dave Bottoms up here, who runs our Marketplace.

Thank you, Hayden, and good morning, everyone. I'm Dave Bottoms. The GM of the world's largest human and AI-powered marketplace. A little background on me. I've spent 25 years in Silicon Valley, leading product and growth teams at some iconic companies behind major technology shifts, Netscape, Yahoo, Dropbox and Meta. And the next one is Upwork. I joined the company in 2022 because I deeply believe in what Upwork stands for, creating economic opportunities through technology, connecting businesses and people at global scale and shaping the future of work.

Today, I'll share some highlights from our journey and where we see Upwork going in the AI era. First, I'll take you on a tour of how we've transformed our platform into an AI native experience has Hayden teed up. How this is also transforming our core business. Then I'll share a little bit more about why we believe we're uniquely positioned to grow reach among SMBs.

First, let's get grounded in the numbers, the breadth and the depth of our marketplace. We're already the world's largest human and AI marketplace, with 18 million active professionals for more than 180 countries. We offer 10,000 skills across 130 categories of work. And we have more than 250,000 AI experts on the platform with skills ranging from software development, to data science, to prompt engineering, to traditional categories like design and marketing and customer support. The diversity of work that's happening on our platform has given us a front row seat to every major technology shift. And right now, that shift is in demand for AI savvy talent across these categories that I just mentioned.

Professionals are not just learning new tools. They're applying AI to real-world work that's happening across industry verticals and concrete use cases. This is helping businesses of all sizes, scale in real time.

Today, Upwork is a very vibrant platform that has weathered post-pandemic economic cycles. We've had the foresight to make critical product and technology investments to drive durable long-term growth. And we have essentially rebuilt, not retrofitted almost every critical workflow and every meaningful customer touch point on the platform. This is from discovery at the top of our funnel through to work delivery. AI has changed how our customers post jobs, find talent, and collaborate together to deliver high-impact work. This reinvention of our core product experience cannot be overstated. I'll say that again. This cannot be overstated. This is a massive amount of work over the last 3 years, and I'm super proud of the teams that have built it.

By the end of the first half of 2026, virtually every step of the customer journey will be enhanced or orchestrated by Uma, Upwork's mindful AI. Let's take a look at what that transformation feels like for our customers.

[Presentation]

I could watch that video another 20 times, and I still get excited, because of all the things that we put into the marketplace in this transformation. What you just saw really quickly highlights just a few of the features and capabilities that are transforming our marketplace into an AI-native experience. We are systematically removing friction between clients and talent so they can get on with the really important stuff, which is getting work done efficiently and easily.

Today, we introduced Uma across every step of the end-to-end customer journey from the top of the funnel starting on our home page through to new client and talent onboarding. We've reimagined job post. And we have one of the -- actually, one of the interesting things about job post that I wanted to mention, 70% of job posts are now being powered by Uma on our platform, 70%. And Uma now guides talent through writing proposals and submitting proposals. Our Uma companion facilitates messaging between clients and talent and outlines project milestones. Uma can even draft and send job offers on a client's behalf.

And one notable release that I'm extremely proud of, AI generated work summaries, which help clients compare freelancers based on their work history on the platform. We've introduced Uma-led video interviews and we're automating project milestone tracking and our work diary. We've introduced video collaboration, real-time video collaboration, powered by the tech from our headroom acquisition, and we've dramatically improved the relevance of our AI-powered search, modernized the entire tech stack and accelerated through our acquisition of objective.

As showcased in the video, we just started beta testing, one of our most ambitious product upgrades to date, conversational search powered by Uma, where clients simply expressed their desired outcome and Uma bypasses the job flow to recommend a best match of candidates to compare, again, reducing friction and accelerating time to hire.

Today, direct hiring such as through conversational search happens through a combination of search and messaging. It makes up nearly 40% of hiring on the platform, and it yields higher fill rate than the traditional job post flow. We expect the adoption of this beta of conversational search will actually increase as we roll out next-generation conversational search experience. And looking a little further out into 2026, as Hayden alluded, we'll continue transforming the post-match experience, introducing the Uma Project Manager to orchestrate delivery of more high-value complex work and keeping cross-functional teams aligned and on track.

Today, our AI native marketplace is faster, more intelligent and resonates with both sides of the marketplace, clients and talent. Many of these capabilities are still early, and the combination is already starting to bend the curve of our business. I'm incredibly proud to say that these innovations are estimated to unlock over $100 million in incremental GSV in 2025, and we're really just getting started.

We're investing in these AI native experiences because the core product experience is one of the key drivers behind the new Upwork.

All right. Let's zoom out a little bit. Hayden introduced this concept that AI is a tailwind. And as she teed up in her part of the talk, I'm going to provide a few more details. First, there are net new categories of AI work that are emerging on the platform, creating strong demand signal for our platform today. And second, full-time work is being fractionalized. As tools from AI workflows and Agentic workflows are embraced, parts of people's jobs may be getting automated. But there's still need for humans in the loop to guide delivery and ensure quality output. Demand for human expertise is fueling both of these scenarios and driving both of these tailwinds.

I love this chart. We're going to unpack this. These trends are starting to unfold right before our eyes. Net new work is one of the fast -- net new AI work is one of the fastest-growing categories on Upwork. We're seeing real sustained job creation happening across industries and job types. And as Hayden mentioned, GSV from work on the marketplace grew more than 50% year-over-year in Q3. This work spans technical categories like software development, prompt engineering, data science, but also other traditional categories like marketing and design as well as many subcategories like AI applications and machine learning. So what you see in this chart is a long time horizon, 40 quarters, right? 40 quarters, and we're seeing a traditional category like AI and machine learning. It's been around about 10 years, accelerating over the last 10 quarters. So that's interesting.

But what's even more interesting is net new AI categories like AI apps and integration, only about 8 to 10 quarters has existed on the platform. And we're already seeing it outpace some of our traditional categories of work that have emerged over time. This chart also illustrates why we're uniquely positioned to capitalize on early trends body. We have more of this historical data on work demand than any other platform on the planet.

All right. Now that we've touched on net new AI work, let's dive into the second of the emerging categories, fractionalization. As companies integrate AI into their operations, entire workflows are being redefined. Some tasks can be automated, but new ones are emerging that require human oversight, expertise and interpretation. In fact, to support AI implementations, there was that stat that you saw earlier, 77% of companies expect demand for fractional labor to increase, 77%. So what happens when parts of full-time jobs get automated, the remaining human work becomes more specialized, think designing prompts or training models or validating work output.

Full-time employees don't always have the requisite skills, but automation still requires skilled experts who can validate the work outputs. In the human and AI world, work is becoming more modular, more distributed and outcome driven, fully aligned with the fractional operating model that Upwork has pioneered.

Our marketplace already supports flexible project-based collaboration at global scale. And as AI accelerates the fractionalization of work, businesses will increasingly turn to Upwork to fill these specialized roles reliably and quickly.

Unlike businesses that are large that may have capacity to absorb and support AI-driven workflows, chances our SMBs don't have a lot of this expertise in-house. They may not have the specialized talent that they need for this era of AI work. They increasingly are turning to Upwork to access on-demand fractional expertise from software engineers and data scientists to marketers and designers, allowing them to scale capabilities and stay competitive without adding full-time head count. This is why demand for net new AI work, combined with the 250,000 AI talent that we have on the platform make Upwork the premier destination for AI talent and a catalyst for growth of our marketplace.

So let's further unpack this SMB opportunity. Today, SMBs account for nearly half of global GDP and the majority of job creation. Over the next 3 years, the market opportunity for contingent digital knowledge work, that's a mouthful, contingent digital knowledge work is expected to reach $530 billion by 2028. As the backbone of the global economy, SMBs already represent a major economic driver on Upwork today. They come to our marketplace to find fractional expertise to do this high-value work. And they spend more. The average GSV spend per client is $12,000. They hire more often and across more categories, the average of 5 contracts across multiple categories, and they have higher Net Promoter Scores. This is a trend that we've seen continue in Q3, which leads to stronger client retention and repeat spend on the platform.

As Hayden shared, we believe that expanding our reach to serve larger, higher spending SMBs is one of the key drivers to unlock growth. We are being very intentional about moving up the value chain to expand our SMB footprint and our strategy starts with a very simple mantra, know by customer. We have gotten to know SMB customers over many, many years. They've been on our platform. Recently, we've done many, many rounds of qualitative and quantitative research and customer roundtables, and we've built a very deep understanding of this segment and what their top pain points are. They want access to high-quality talent with reputation that is earned on the platform. They want to hire and centrally manage multiple people to create virtual teams. They want -- they want their hiring teams to be able to share pipelines and share tools so that the process becomes easier and faster. And they want flexibility to manage their budgets to preserve working capital of their business.

Our directive is very clear at Upwork. If we help small businesses solve their problems and stay competitive in today's market, we will grow in the segment. That's why we've developed Business Plus. It's a premium offering that was designed to super-serve growing SMBs. These are businesses that need advanced tools and capabilities to allow them to hire faster, collaborate more effectively and scale with confidence.

At the end of October, we introduced an exciting new bundle of features in Business Plus, each directly mapped to what SMBs need to be successful in today's environment. Business Plus gives SMBs access to the top 1% of talent, expert vetted through human review and AI performance data to ensure it's the highest quality. Uma Recruiter, this is a new capability we built just for Business Plus. It's exclusively an AI-powered sourcing and shortlisting agent that analyzes millions of successful engagements and recommends the best match for each role. This reduces median shortlisting time by 5x and increases satisfaction with the match.

And because, as I alluded, hiring is often a team sport. We've enabled team-based hiring. This allows for shared access, role-based permissions and team-oriented workflows to allow multiple stakeholders across teams and functions to evaluate candidates and make hiring decisions faster together.

Another highlight is payment protection in Net 30 payment terms. This reduces risk and offers flexible payment terms so businesses can manage their cash flow. And that's not all. Business Plus has weekly work summaries, more advanced reporting, 24/7 customer support, even access to our APIs. This premium offering moves SMBs from searching for the right talent to actually delivering on their business goals faster. As these SMBs build confidence to execute higher value, more complex work, Upwork allows them to efficiently and cost effectively scale their business, along with their ambitions. Let's throw some numbers.

Since the initial MVP or minimum viable product, as we call it in Silicon Valley was introduced in Q3 of last year. Business Plus has shown strong signs of product market fit. This is largely driven by organic demand and an efficient product-led growth upgrade motion for existing SMBs on the platform. In Q3, we saw total active Business Plus clients rise 36% quarter-over-quarter. What's more, Business Plus clients hire 15% faster, Business Plus clients spend 2.5x more than the average marketplace client and new Business Plus clients retain at a higher rate. The result is 33% quarter-over-quarter GSV growth of Business Plus. That is what durable, predictable growth looks like.

We have a massive serviceable market opportunity. We have a discrete customer segment that we know and understand very well. We have a differentiated product that will address their needs, and we have a compounding upsell and retain motion that scales efficiently over time. Now that we've demonstrated product market fit with existing SMBs on the platform, we're dialing up our go-to-market plans for Business Plus, designed to amplify what's already working with our product-led growth motion.

We've launched a new acquisition campaign at the end of October that calls on small business leaders to stop doing everything. We're acknowledging that many small business owners are wearing many hats, and they can come to Upwork to find the help and the talent that they need. We will help them grow. It's designed to meet our customers where they are. The campaign connects their existing pain points directly with the needs that we solve with Business Plus. If marketing's job is really to drive top-of-funnel awareness and conversion, our revamped client onboarding experience is working harder to convert and register and activate and retain these users. In short, our marketing and our product are working together in concert. And we're really just getting started in marketing Business Plus to small business customers.

Now I'm excited to share one of our actual Business Plus customers, Brent Chuck, who's the Director of Marketing at Demco on how we're supporting the growth of their business.

[Presentation]

Thank you, Brent. As I said at the outset, 2025 has been a truly transformational year for the marketplace. Our efforts to reimagine our product experience have started to drive real business impact expected to unlock more than $100 million in incremental GSV in 2025. And next year, we'll continue the transformation with a focus on post-match work delivery. With Uma continuing to evolve into project management and matching talented experts with agents, more to come on that from Andrew shortly, we will also continue trend buddy, looking for new or emerging categories of work on the platform, new and emerging AI categories to ensure that when we see the demand that we know how to capture it.

Looking a little further out into 2026 -- in 2027, Uma will become even more advanced in orchestrating work delivery, moving from a companion to an orchestration agent. We'll continue packing value-added services into premium tiers like Business Plus, solving more complex work problems from larger customers seeking economies of scale. In short, there's a lot to be excited about, about the marketplace business. I know I'm excited. I'm also excited about the panel that we have coming up.

So I'll quickly summarize. If you get just 3 main things out of my talk this morning, this is it. First, we've already reimagined the marketplace as AI native. We've rebuilt and relooked at the end-to-end customer journey and it is now powered by Uma. Much of the experience has already been transformed and we will finish the swing in the first half of next year. Second, we are uniquely positioned behind 2 AI tailwinds. The demand for net new work and fractionalization as full-time work gives way to AI-powered automation with humans in the loop. And third, make no mistake, we are being explicit and intentional about super serving our small business customers. We will expand our footprint and meet the market with Business Plus, the product has been purpose-built to help our customers transform and grow their business.

I trust this gives you a bit of a sense of where we are in the marketplace and where we're headed. But no presentation and no video will beat hearing from our customers, the ones that we aim directly to serve. I'm very excited about this next segment. We've invited 3 Upwork customers to join us on stage in a panel that's moderated by Peter Sanborn, our VP of Corporate Development, Strategy and Partnerships. Did I miss anything? No. Okay. Peter, please join us up here for the panel.

I'm Peter Sanborn, and I lead Strategy, Corporate Development and Partnerships here at Upwork. You've just heard from Dave and Hayden how the new Upwork is rebuilt for the human and AI era and how SMBs are driving that transformation. But there's nothing like hearing firsthand from real clients doing real work on the Upwork platform. I'm joined here by 3 SMB leaders across the biotechnology, the financial services and the tech sector, and they're all using Upwork to accelerate innovation, tackle complex challenges and unlock new capabilities for their businesses. These 3 leaders, they're also using AI to grow faster, to scale flexibly, and they're choosing Upwork as the critical infrastructure to do so. So with that, let's get to know them.

Gabe, there are 2 things that fascinate me about your business. First is just the problem that you're tackling. And the second is how you've built a startup from the ground up with flexible talent. Tell us a little bit about Omic.

Absolutely. I'm the Founder and CEO of Omic, and we're building biological super intelligence to end disease. Our platform completely reimagines how we think about diseases and how we engineer therapies to make them better. We typically tackle problems that are too challenging or even impossible for traditional biotech and pharma.

From the beginning, we knew that the traditional VC model, raising tens of millions and hiring a big in-house team wasn't going to work for us. And without Upwork, Omic wouldn't be possible. It's how we've been able to attract world-class talent from genomic scientists to chemists to bioinformaticists to even our Chief Scientific Officer that we were able to attract from Upwork. Today, we have 15 contractors with Upwork, and they've become a core part of our research and development workflow.

Awesome. Phil, you operate in the highly regulated financial services industry. You've also been working with Upwork for over a decade across many areas of work. Tell us a little bit about MCT and what you're up to?

Yes. So MCT is not as noble as Gabe's business, ending the diseases. But yes, we operate in a niche of mortgage capital markets where we hedge interest rate risk for banks and mortgage companies. We started with Upwork in 2010, almost 16 years ago now. And back then, I had 5 or 6 employees, it was essential because we were running a business, growing a business. And I couldn't work with software developers during the day. I needed to kind of follow the sun. And so that -- it was essential back then. And then it's been essential all the way up. Now we have about 115 employees, and we keep 25 to 30 Upwork contractors, including a core group of 15 developers out in Europe that are very important to our software development process.

Software with AI. Tell us a little bit about CoreStory and where Upwork fits in?

Yes, I'm Cory, the VP of Product and Research at CoreStory. And so what we do is we build large models that are able to understand huge legacy code bases that enterprises use to either modernize or maintain or migrate. And for us, we are a smaller fish in a huge market, which AI is today. And so being able to leverage Upwork for like scale and like bringing in really acute talent for certain problems has been huge.

So let's zoom out a little bit. Let's talk about flexible talent, flexible work. Is it really that important to you versus full-time hiring. Does it actually move the needle? Gabe, maybe let's start with you.

Sure. For us, it completely transformed the way that we do business. It removed the entire barrier to experimentation for us. So I'll give you an example. I had a crazy idea that we could reengineer a part of our platform.

Where in traditional drug discovery, it takes hundreds of thousands of dollars and weeks running on supercomputers. And I thought there was a chance we could do that in just a few minutes at near zero cost.

But I had 2 problems. I wasn't sure that it was going to work at all. And it required a developer or developers with very specialized skill sets. And so I went on Upwork and I hired a PhD level CUDA developer and just threw the problem at him and said, "I want you to tackle this." And with a lot of work he actually was able to solve it. And so now this wild idea that I had that I wasn't sure was going to work has become a core part of our platform today. And as that process has repeated itself, I've found myself turning more and more to Upwork for really specialized, differentiated talent.

So are these short-term one-off projects? Are they longer term? Tell me about that?

These are almost exclusively long-term projects. For our type of business, takes a lot of time for people to get up to speed and understand what it is even we're doing. And so we almost exclusively work on long-term contracts with Upwork.

And Phil, you've been working with Upwork across all these eras of work. I'm curious AI. How is it transforming in your mind, how is that evolving this flexible talent need?

Well, I feel pretty strongly about this, that this is the future for 2 reasons. I mean, number one, being a small business owner in California. I can tell you the return policy on employees, full-time employees is not great, right? So it's -- you need to be able to be flexible to as Gabe and Cory deal with a lot new experiments, start them and turn off that resource if needed. But additionally, something I didn't mention to you, Peter, was on the -- a firm like ours, we don't capitalize a lot of projects. But now we're starting to capitalize more AI projects, right, because these are new projects.

And if you think of my internal development staff, let's say, I've got 15 people, I'd say it's about $2 million a year in cost, my CFO is not going to allow me to just take 40% of that $2 million and capitalize. It doesn't work like that, right? We have audited financials. So it's a lot easier for me to capitalize that contract work and/or vendor work, and if we look at Upwork as a vendor. And so we can capitalize that direct spend, and it's a lot easier from an accounting standpoint.

And so we just heard Dave and Hayden referenced the 77% of business leaders looking to increase flexible talent with the use of AI. Are you seeing that? Do you think kind of this fractionalization point is actually true?

Yes. I think that's going to continue to grow. And I think that you're probably going to see that in the future as David was mentioning that you're going to see that reduction -- potential reduction in full-time staff.

So flexible talent. It's clearly important to all of you, but I'd love to hear why Upwork. We know you have other options. There's other folks out there. Cory, what are your thoughts?

Yes. For us, it's kind of really has been 3 big things. So first of all, is the scale. A lot of times when we're using Upwork, we're looking to run like very high-volume studies quickly, like most recently, we ran a big study of around 300 people. We're able to bring all them on in about a month or so, 1.5 months, which in the academic community that is unheard of speed.

The second is really around like the customer success because during that study, trying to manage 300 people, I mean, you think about it, we got 300 people, but that means that traditionally, you'd have to interview maybe 4x that to try to come down. So the customer success team at Upwork helped us a lot through that. And then finally, like the platform like being kind of product-led, being really extremely easy to use for us is let us scale adoption of using Flex talent, not just within my team, but kind of like within the rest of the business, being able to know, you can just kind of tap in, tap out whatever you would like to do.

Gabe, what about you? Why Upwork?

Sure. For us, it's the breadth and depth of talent. There's a small startup working across a number of different domains, we often need to hire people that have expertise in multiple areas. They need to understand biology and AI or chemistry and physics or deep computing infrastructure and data science. And Upwork is a place where we've been able to consistently find that diverse level of expertise. That's why we keep coming back.

What about you, Phil, why do you keep coming back after decades here?

I'm probably not the best person to ask because it's kind of all I've ever known, right? So that's -- we've always used Upwork been really valuable to us. And I agree that the large talent pool and just what Gabe said about specialized skills, we're starting to see better and better talent on the platform.

So Hayden and Dave also just talked about the new Upwork. What's your take? Is there anything to the platform, the technology? Or is it really just about the talent for you? Gabe, what are your thoughts on this?

Upwork has actually become a core part of our business operations. We have certainly found that we're trying to recruit and manage this diverse set of talent as a small team. And so we need to be able to attract, hire, retain, pay all of these people and manage their time. And for us, that has -- Upwork has been the sort of the backbone for us. In addition, we've seen the platform grow and evolve over time. So more recently, we've used Uma, Uma Recruiter, the Business Plus services that give us access to this whole new level of talent. And so that means that we can take that friction and the time and expense associated with recruiting and hiring and managing these people and reinvest it back into the core of our business, which is solving diseases like their engineering problems.

It's a great insight. Phil, you've been hiring and managing flexible talent internationally. And you have some interesting use cases on how you've been leveraging the platform or bringing others onto the platform. Why don't you tell us about that?

Yes. So in 2011, we hired a core really good guy out in Croatia, and he's been with us ever since, actually have hired his brother and then they, of course, had -- they were all in the good universities out there, and they had a lot of friends. So we kept hiring their friends. So we actually, through this guy, we've hired about 20 contractors. And again, 14 of them have been with us now almost a decade. And so we -- it makes a lot of sense, we've never paid an employee overseas. I don't want to get into that, especially having audited financials. So we just basically just bring them on to the Upwork platform. And I think that really shows the value of the platform to us. Obviously, there's an extra expense than directly paying the employee, but the ease of use is a no-brainer for us.

So finding employees on Upwork, also finding others and then bringing them back onto the platform to manage everything holistically?

Yes, literally, we have to -- we have like basically a sheet of how they start up, whatever you call it, a profile on Upwork, then they'll shoot as a link and we'll get them signed up.

Cory, let's bring it to you, 300 people this research project. How did you get that done in the platform? How did that kind of enable you to move so quickly?

Yes, of course. And like I said before, bringing on 300 people for an academic study and like research study like we did is unheard of. We were under a lot of time pressure because this was a partnership with Microsoft and GitHub to present the paper at our conference and basically reaching out and saying, here's the kind of talent levels that we're looking for because we're looking to measure like the impact of AI coding assistance on engineers. So we needed a wide range of everyone that was kind of novice to beginner, engineers all the way up to super advanced. So we've kind of submitted the profile, submitted what we were looking for. And then the customer success team at Upwork helped us kind of organize and manage and source and onboard and offboard all of them.

And so post the hire, like, I think I've heard you talk about this a little bit, like how long does that actually take?

To find them. Yes, I mean, so the big thing that we've seen a huge benefit in is that whenever we go to look for participants within the Upwork network, it's usually between like 15 and 20 minutes. We'll know like this is probably a good candidate worth of moving forward with. And through traditional hiring means this would be substantially longer. So that like velocity out of the gate is something that lets us be more ambitious with what we look to research and what we look to build.

Yes. I think we've all been there trying to hire that 1 person. It can take months. The fact that you're able to do 300 in such a short time is pretty incredible. So let's zoom out again. Let's talk a little bit about AI. We've all seen the studies about questions on the return on investment, especially for SMBs. Each of you is powering the economy in a different way. I'm curious, is there real tangible value in AI that you're actually seeing? Like is it transforming work? Cory, maybe start with you, you're leading product and research. How do you see product research engineering kind of coming together?

Yes, of course. I mean our big philosophy and hypothesis that we operate on is that every company is moving towards being a research-led company, especially in the age and time of AI, meaning that you need to learn when and where to double down on. And so having a facilitator and it means that if someone within your organization has an idea that you can quickly validate and get data that, that idea has legs, the more competitive that you'll be in the market. And so for us, leveraging Upwork has let us kind of really be that strong research-led example, and we think that's going to continue to kind of proliferate through the rest of the market.

And do you think that means you're kind of commoditizing the traditional engineering led advantages?

Yes. I mean, like the other big thing that we operate under is that the hypothesis that the cost of code is going to zero, that with AI that the typical barriers of larger businesses or others of high capital expenditure to build to right code was their moat as kind of now disintegrating beneath their feet. So really, what that means next is that like the big differentiator is going to be who has really good ideas and who can execute and gain market share, the fastest will lead you to be market leaders.

And so for us, being able to use Upwork to again to like find an idea, double down, get data that, that idea has legs and then move forward or if it doesn't, then to not move forward with it is extremely important.

So really leveling the playing field and kind of having the research piece be a driver of kind of novel and new ideas.

Exactly. Exactly.

Very cool. Gabe, you talked about AI creating a new breed of founders and you're kind of walking this walk. Tell us a little bit about that.

Yes. For us, we believe that the idea that only great technical innovations can come from a small handful of zip codes is just evaporating. We've certainly found that brilliant people exist everywhere. They can do great things everywhere, and it's not location dependent. And so for our team, we've also seen the power of a great platform combined with AI. So we've seen 1 PhD scientist on the Omic platform, be able to accomplish things that used to take entire teams or departments of people and huge budgets. And so Upwork is enabling just this type of founder to exist. And I'm sure there are millions of others that are just like me with small teams and big ideas taking on really challenging problems.

Phil, you just mentioned AI is increasing the need for flexible and talent. Is this just a phase in your mind? Or are you actually seeing kind of this work unlocking new opportunities for your business?

Yes. Well, going back to what Cory was saying, Cory and I were talking earlier that he's on a little bit more of the frontier of AI development down in the trenches of getting the financial software developers into the new generation of AI development is really like pulling teeth. And so with the Upwork staff has been helpful bringing on -- bringing on new developers quickly that are using new tools like Cursor that are just changing the game of software development. And so it really kind of -- it enables -- you use the term commoditized. It does kind of commoditize that skill set where we can then kind of force our internal developers to say, "Hey, you guys have to step up here. Otherwise, we're going to move on."

Yes. And you're just mentioning to me in the hallway, actually, AI is also creating kind of new challenges or new opportunities for work. And I think you had a problem that came up on the math side and you had to bring someone in, tell us a little bit about that?

Yes. We just -- yes, we had a constrained optimization problem for pooling and we brought in a PhD in mathematics on Upwork. And that's what I mentioned earlier, I do see the talent. I feel like the talent is getting better on the platform. And I think just what we're all seeing in the news that as larger firms are shedding full-time staff. I would imagine just my opinion that Upwork is going to see better talent on the platform.

So with that, let's wrap. This is what the future looks like. Bold ideas, human expertise and AI, all coming together to unlock new possibilities. There's a through line to these stories. Scale, speed, flexibility, access to expert talent. Whether it's reimagining drug discovery, transforming legacy software or transforming the financial services industry. All of these leaders are using Upwork, not just to hire and manage, but to build the future of their businesses. Thanks so much for an incredible discussion. Really enjoyed having you on stage here. We're going to take a quick break, 15 minutes, and then we'll return back to hear from Andrew Rabinovich, our CTO and Head of AI.

[Break]

Hi, everybody. My name is Andrew Rabinovich, and I'm the CTO, and I lead AI at Upwork. Throughout my career, I've been building AI teams and products at Google, Magic Leap and as a co-founder and CEO of Headroom, a video collaboration company that was acquired by Upwork 2 years ago. Today, I lead an exceptional team of world-class scientists and engineers, including 20 PhDs. When I joined Upwork, we formed a new organization called Umami, which is a foundational layer of new Upwork. It combines product, engineering and cutting-edge research to reinvent how humans and machines collaborate.

We came for the largest data reach ecosystem of real work in the world, a place where AI can fundamentally transform the future of digital work. I want to start with what we've accomplished to date. Search and recommendation is the foundation of Upwork. We've entirely rebuilt it to be AI native and multimodal, which was underpinned by objective and headroom acquisitions. We optimized it for query understanding, retrievable, ranking and ad blending. Search and recommendation is the basis for compounding benefits as Upwork reaccelerates its growth, the new S&R engine drives better matching with 5% more clients converting and approximately 20% talent, finding new opportunities in just last year.

But Upworks technology is much more than just intelligent AI-powered search. In partnership with product, we reinvented the entire tech stack behind Upwork's next generation of experiences that spans end-to-end customer journeys and powers Uma. Instead of generic out-of-the-box LLMs that are trained on the entire Internet of data, Uma is custom, fine-tuned on platforms data and optimize for efficiency. Active learning facilitates continuous refinement from the experience itself. Uma's specialized custom models significantly outperform general purpose LLMs across quality with 50% better content accuracy, cost nearly 70% less expensive than off-the-shelf foundation models, better user experience and nearly 20% more proposals. And critically, the velocity of model iterations what used to take 3 months of work now can be done in less than 1 week.

And this is just a start. As Hayden mentioned, our infrastructure powers each part of our flywheel. Our platform is a closed-loop ecosystem, driven by data, workflows become richer, demand gets stronger, which turns -- to turn higher quality talent and it expands categories of expertise, which in turn enriches our data yet again. This continuous loop makes Upwork's ecosystem faster, smarter and more trusted with every project completed. And again, this is all data-driven.

As I mentioned earlier, we attract top AI talent because we operate in one of the most data-rich environments. We have over 10 petabytes of data of how jobs are scoped, priced, evaluated and delivered. We're already -- data is the moat for AGI today. All of AI companies are either trying to buy it or synthesize it. At Upwork, we already have it at scaled, structured and growing exponentially.

At Upwork, data is the connective tissue that powers personalization, matching and learning, yet it is only valuable as a structure of it. We've built a Knowledge Graph connecting clients and tasks, skills and talent, all optimized for successful outcomes. This novel work on Knowledge Graph has been accepted to Neurops, a world's premier AI conference, and will be presented there in December.

Our data advantage is now becoming an execution advantage, powering a generation of agents to deliver work faster and higher value outcomes. Dave spoke a lot about the first 2 components of our AI strategy, AI native marketplace and the AI categories themselves. Now I want to speak -- I want to address how agents will augment human talent to deliver work outcomes. Agents are a new addition to Upwork both at supply and demand, as Hayden mentioned. Upwork is uniquely positioned to combine critical human creativity, insight and judgment with machines scale and speed to enhance work delivery.

We've done extensive research to validate how and where we play in the agentic space on the talent and client side. We know that talent already use AI tools and agent of the platform and to make their work more efficient, we want to bring those tools inside. Our findings indicate that freelancers use AI tools 50% more than full-time employees. By working with talent to bring agents into the marketplace, we believe that we can offer higher quality outcomes at the fraction of time, ultimately delivering much more value to our clients.

Speaking of which, on the client side, we're seeing that human talent will continue to be critical in how businesses adopt AI. 90% of leaders prefer human involvement, either as human in the loop or as expert human evaluation to deliver outcomes. Enabling agents on Upwork platform is natural because both sides wanted. Upwork is uniquely positioned to help navigate agentic adoption like no one else, and this is a huge opportunity.

We estimate that agents will unlock over $120 billion in digital knowledge work by 2028, growing 50% per year. Agents are the fastest-growing opportunity in AI. The trend of narrow AI is expanding to agents. Rather than having a few general purpose agents, hyperspecialized agents will be abundant on Upwork. There aren't any clear leaders in this space yet, but because of our data, talent and AI infrastructure, Upwork is positioned to win.

Let me tell you how Upwork is actually implementing all of this in practice. Over the last 2 years, we've been on a purposeful journey to reinvent Upwork with AI. We created Uma, as Dave discussed, it started as an assistant powered by generic LLMs. It has evolved into an end-to-end companion powered by custom models built in-house. And next, Uma will become a strategic partner for clients and talent with deep context and personalization. Also, over the past year, we've started experimenting with third-party agents and testing their ability to collaborate with humans and complete tasks on the marketplace.

This new collaboration space inside Upwork, our Agentic playground is the testing environment where clients, freelancers and third-party agents collaborate to deliver work outcomes. From the first pilots, we've validated our core thesis that agents alone are not enough. They're extremely fast, but unreliable. The best results from the collaboration emerge where human's creativity, insights and judgment is paired with machines speed and scale. Through reinforcement learning from experience, Upwork is transforming its playground into a live training space where agents can learn by doing, explore complex tasks, receive feedback from humans, and discover novel solutions just like AlphaGo's move 37, where AI discovers strategies that no humans have conceived.

This collaboration model isn't theoretical. It is live in Alpha with customers today with repeat usage across multiple categories, built on Upwork's next-generation infrastructure and design for rapid integration. Third-party agents will be fully available in the Upwork's marketplace next year.

Upwork's reputation demands that only high-quality agents that meet the quality standards are invited to our ecosystem. Everyone is trying to build economically viable agents today, but no one knows how good they are in practice. Last week, we introduced HAPI, human and agent productivity index, a new evaluation system aimed to measure performance of agents with humans at the center.

HAPI differentiates itself in 2 ways. It is not a static and academic data set, but a dynamic set of real-world jobs with economic value associated with them. It captures how agents are actually used with human in the loop, reaffirming augmentation and not automation narrative. Early results validate Upwork's core thesis that the future of collaboration is between humans and AI agents. Our findings show that agents even powered by the best AI models struggle to complete real jobs on their own. This is consistent with findings from other benchmarks, but we've also found that when paired with human guidance, the performance of agents increases by 70% and can achieve results in just a fraction of the time compared to humans operating by themselves.

This work has also been accepted to the Europe's conference, highlighting upward's leadership in the future of work in real AI applications.

Over the next several years, we're building an orchestration layer of work delivery between humans and agents. Uma will evolve from a companion to a partner. It will connect clients to talent and agents. It will be able to qualify, orchestrate and evaluate work and coordinate and optimize workflows. As Hayden suggested, as agents become clients on the platform, Uma will also facilitate agent to agent interactions. And let me show you how this comes to life.

[Presentation]

While this video may seem far into the future, in the customer panel led by Peter, Gabe from Omic, shared that they already use talent from Upwork with AI tools and agents to revolutionize drug discovery. In general, deep tech development is moving to independent talent and Upwork is pioneering this shift.

Ultimately, integrating agents drives value for every constituents of the ecosystem. Clients receive high-quality outcomes trusted by the humans. Human talent with the help of agents will improve productivity, tackle more complex tasks and ultimately earn more. Agents, our new addition, will unlock distribution channels, both on the supply and the demand side, learn from real jobs on the benchmark and benefit from the interaction with human experts.

Lastly, Upwork will have new revenues from agent evaluation, have higher throughput, more demand and higher value work. This can be only done on our platform, the world's leading human and AI-powered marketplace.

Over the last 2 years, we have had tremendous success. We reinvented the technical foundations and developed next-generation AI infrastructure at Upwork. Going forward, Upwork's competitive moat lies in our closed-loop data rich ecosystem, integrating third-party agents verified by the benchmark will unlock value for all participants in a large and growing agentic market opportunity. And all of this is driven by the insight that the future of AI is human.

Now I'd like to invite my friend Ernesto, to talk about Lifted. Thank you.

Thank you, Andrew, and good morning, everybody. The first time that I visited a staffing agency branch was in 2015, and that was back home in Milan, Italy, as you can guess from my accent. What I learned during that branch visit are 2 things. The first is that companies need contingent talent. They just need it. Why? Because it enables growth and efficiency that cannot be otherwise achieved by employees only.

The second thing that I learned during that branch visit was that legacy players, so staffing agencies have not kept the pace with technology innovation. And because of that, they provide their customers with suboptimal user experiences. All of that led me to start Adia, which is a platform where we connect people with temporary jobs. That was a co-creation effort between one of the largest staffing agency in the world and a very large BPO. I have then ran the business as a CEO for about 6 years. Fast forward to 2024, that's when I started to learn about Upwork Enterprise and Upwork in general. And I understood that Upwork is unique in this space.

It is unique because it's the only company that has been able to successfully scale a global multi-category, multi-industry marketplace that runs via platform. And those are the exact same ingredients from which we actually built Lifted. So the question you're all asking what is Lifted?

Lifted is one solution that is specifically built for large enterprise companies, so that they can source, contract, manage and pay any kind of contingent talent. Essentially, it is how we can unify and then elevate an industry, which is incredibly fragmented. What we're going to cover today? Few things. We're going to start with the market. We're going to uncover what are all the needs of those large enterprise companies. And then how Lifted actually means all of those needs. After that, we're going to discuss why Lifted is actually very different from our legacy enterprise offering. And also why it is different from anything else that exists in the market. And now all of this is actually going to unlock a lot of growth for Upwork.

So let's start with the market. The bottom line here is that the market for enterprise contingent talent is just massive. We're looking at $650 billion by 2028. The question you might be thinking is, why is this market so big? What are the needs that those companies have. Which contingent, they get access to talent that they cannot otherwise get access to. Second, they get flexibility; and lastly, efficiency and cost savings. Let me unpack this a little bit with an example.

Just a few weeks ago, one of our large clients came to us with a very hard-to-fill role. A role they actually tried to fill for multiple weeks on their own, unsuccessfully. We actually filled that job within a day. Now think about the impact, massive. It unlocks growth because now they have someone in seat, they can actually get that job done. Because they decided to engage this person with a contingent lever assignment, this means that they retain a lot of flexibility, and they also know exactly how much this project is going to cost them, meaning they are not going to have any unnecessary cost on the side of this.

Not only this market is huge. But there is AI as a major tailwind. Hayden and then Dave already mentioned that 77% of companies expect to increase the utilization of fractional labor. Fractional labor means contingent labor. Question is why is that? It is because AI is doing 2 things. First, it's creating net new jobs. Second is actually fractionalizing jobs that were full time before.

Again, let's dive into an example. Let's say, you are a very large enterprise company, and you implement a new AI billing and collection infrastructure. Well, that activity is really mission-critical. You really wanted to get it right. And because of that, you still need humans to verify the job done by AI. Those jobs are way more likely to be fractional jobs and, therefore, contingent versus being FTEs.

What we are hearing from our customers more and more are quotes like the one that you see on the screen. AI is pushing functional leaders to leverage contingent more than FTEs, all of our expected outcome growth is happening in contingent.

Now let's zoom out for a second. What is it really telling us? It is telling us that the need for flexibility has gone up a lot because of AI. And they understand that contingent is the way to go. Lastly, how does enterprise actually access contingent talent. The first thing to notice is that those companies have established workflows, policies and compliance requirements. That's how they work. And it's very important for anyone that wants to work with those companies to actually meet those requirements. Second, what we see here on the slide are the 5 main contract types that exist within contingent labor. You have independent contractors, agent of record, employer of record, staff augmentation and outcomes.

Now don't worry, we're not going to go into each of the contract types, there is no legal easier. What you need to remember, though, is that there are those 5 main contract types and companies either want or need to use one or more of those in order to get a job done. So how has Upwork been playing in this market until now. We have 300-plus enterprise customers from very large technology companies like Microsoft, to many tech-enabled businesses to a lot of industrial players. What have those customers been buying from us, 3 things, access to talent, speed of delivery and an offering that essentially meets their enterprise-grade requirements. So let's unpack this a little bit.

Think of any job that you can get done by laptop. You can essentially get the job filled by Upwork. That's how big this talent pool is. There are 10,000-plus skill sets, including 250,000-plus AI experts. But the one data point I'm most proud of is that 4.92 out of 5. That is the average rating that our clients are giving to our talents. So the talent quality on Upwork is high.

Not only we provide this talent high quality, but we provide it incredibly fast. What does fast mean? Fast means a couple of things. First, you can get shortlist as fast as within the same day. That's massive. Think of the last time you needed to hire somebody, getting someone on seat fast is essential. Being fast means that the average time to fill a job is less than 3 days with many jobs actually being filled in less than a day. Lastly, the recombination of platform and service offering, we've been providing those companies with a global and compliance solution.

Now throughout those years and conversations with customers, we also learned that we had some limitations. We learned that essentially, we had some barriers to unlock additional growth. And I want to unpack those a little bit. First of all, within contingent labor in the enterprise space, there are 2 buyers. First one, our functional leaders and RM managers. Think of those as your VP of IT or marketing manager. What Upwork Enterprise has been optimized for is to provide those functional leaders and RM managers with direct access to contingent talent. And as we have seen on the prior slides, has actually done a phenomenal job in doing that.

Now there's a second buyer, centralized workforce programs. Those programs are a specific function that typically sit within procurement or HR. And they have 1 job. Their job is to identify provider or contingent labor that meet cost and compliance requirements and then make sure that everyone within their companies actually is using those providers to ensure consistency. Upwork Enterprise was not equipped to sell to those buyers. Why? Because it did not meet their requirements in terms of workflows and distribution channels. So what you need to remember of all of this, 2 buyers, we could only sell to 1.

Second limitation. Within contingent, we said before, there are 5 contract types. Upwork Enterprise has been providing directly 2 of those: the bank contractors, agent of record. For the remaining 1 was dependent on partners, and this led to a suboptimal user experience.

Now let's fast forward. After the acquisitions of Bubty and Ascen, we have filled both of those gaps. So we don't have those gaps anymore. Why is that? The acquisition of Bubty, we are now able to sell to our functional leaders and RM manager, same as before, but now we have a better offering, better product and service for them. But now we can also meet the workflows and the distribution channel requirements of the contingent workforce programs. So bottom line. Before we could sell to one, now we can sell to 2.

With Ascen, we went from being able to provide 2 contract types directly to be able to provide all contract types directly. So let's zoom out of all of this for a second as there is a lot of contract types and legalities in this. I know today is incredibly cold here in New York, but let's assume you will want an ice cream, okay? You walk into an ice cream shop, and they tell you that they produce an amazing vanilla flavor, incredible. But you crave another flavor. And they say, "I only have prepackage ice creams." You walk out. You go down the street, now you enter another ice cream shop. They also make an amazing vanilla flavor, but they also make every other flavor in store, and they all taste as good as the original vanilla flavor. You are way more likely to buy from this shop. In a way, Upwork Enterprise was the first store and Lifted is the second.

So let's summarize all of this. We retained our fast access to high-quality talent. This is what we have been doing for many years. With the acquisitions of Bubty and Ascen, we now essentially can meet the clients where they are. What does it mean? We went from being able to sell to 1 buyer. We can now sell to both, and we can now provide all contract types for them. And with this, we launched Lifted, which again is 1 solution specifically built for large enterprise companies so that they can source, contract, manage and pay any kind of contingent talent.

Now what you might be thinking is, what does this mean for your existing client base? So let's dive into 1 example. One of our clients is a very large pharmaceutical company. They spend $1 billion a year in contingent, that's massive, spend a lot of money in contingent. Out of that, $50 million is for the 2 contract types that we used to provide directly. Actually, within that, we had a very good share of wallet about 20%. However, we did not have access to the $950 million. Why? Again, we couldn't sell to both buyers, and we couldn't provide all contract types.

Now we launch Lifted, what happens? Two things. First thing that happens, the 950 becomes available. Again, why we can sell to both. We can provide all contract types. Second thing that happens is we can actually increase our share of wallet also for the contract types that we were providing before. Why is that? We have a better product and services offering, and now clients have an incentive to consolidate spend with us, and decrease the amount of fragmentation in their own ecosystem. Now you might be thinking, okay, not every company spends $1 billion a year in contingent and you are absolutely right. I wish that was the case, is obviously not the case.

So what's our ICP? Our ICP identified about 5,000 companies that meet our ICP ideal client profile. Think of companies that have thousands of employees and billions of dollars in revenue, so translated very big companies. Those companies spend anywhere between $50 million and $1 billion a year in contingent. So that's our ICP. The next question is, how are we actually going to win those companies? So what's the go-to-market strategy here? The go-to-market strategy is very much straightforward. Let's start with existing customers.

The existing customers, like I just explained in the pharmaceutical example, we have 2 jobs to be done. Job #1 is expanding shadow wallet within the existing contract types. Again, why we have a better product offering and they have an incentive to consolidate with us. Second is about starting to gain share of wallet in the contract types we did not have access to before. And this involves having conversation with both buyers. The one we already know and like us a lot, as we have seen from our ratings and feedbacks and also starting to engage contingent workforce programs, more and more.

Now over the last year or so, we have done a phenomenal job at actually increasing our operational efficiency and decreasing our cost to serve well out. And because of that, we are fully confident that we can actually deliver on this growth strategy within the existing customers with our existing account management and customer success teams.

Now let's dive into prospects. Here, we have a 3-step approach, pilot, adoption, expansion. So how can those clients start working with us? Two ways. Option number one, they start by buying 1 contract type or 2 contract types and then they expand from there. So essentially is we make it very easy for them to start and then seamless to scale because it's all within the same solution. Second option, we can work together with them to analyze their total contingent labor spend and assess together how we can drive down the cost of ownership for those contingent labor. And this is where the value proposition of Lifted actually becomes unique. That's something that doesn't exist in the market.

We are truly the only company that provides a contract agnostic, meaning we can do all contract types, country agnostic, which means we can be global solution that is run by a platform. That's why we can do this for those companies. And what we are seeing so far is already positive leading indicators, both with existing clients as well as with prospects.

Let's dive into 2 examples again. Example number one, with an existing client. This company is a large services business that has been working with us for many years. Right after we announced Lifted, they came to us and they invited us to an RFP for a GSV value, which is totally 3x the amount of what we currently do with them. Why? Because this is for contract types we did not do directly before. That's how powerful this is.

Now let's look at an example with the prospect. And this one is one that I personally particularly like. This company, we had conversation with them a couple of months before we announced the acquisitions and before we announced Lifted. And they told us "it's going to be impossible to work together." Why? Because we did not provide the contract types they care about directly. Now fast forward, we launched Lifted, they call us back and they say that they are planning to inviting us to the next RFP, which they will run in 2026 for a contract value of about $10 million of GSV. Obviously, those are just 2 examples of those positive leading indicators that we are seeing both with existing customers and prospects.

Why is all of this happening? All of this is happening because of our value proposition. It all goes back to, first, the fact that we provide companies with high quality talent fast, and we have been doing this for many years as we've discussed upfront. With the acquisitions of Bubty, Ascen and the launch of Lifted, we now can essentially unify and elevate an ecosystem, which is otherwise incredibly fragmented. Translated, we can now sell to both buyers and provide all contract types. And because of this, we can unlock massive cost savings for an estimated rate anywhere between 10% and 30% of total cost of ownership for contingent. All of this is what gives us confidence that we have a clear path to expand in enterprise.

We're going to take a 3-step approach here. From now until the end of the first half of 2026, we're going to drive expansion conversation and land discovery, so with existing customers and prospects. This activity is fundamental. Those companies take time to buy, sales cycles are long. This activity is very important to be done. Second is between the second half of 2026. That's where we need to start expanding with those existing clients and then doing pilots with prospects. And that will lead to 2027, which is where we're going to scale this business.

So let's summarize everything we touched on today because it was a lot of content. So the first thing to remember is that with the launch of Lifted, we have significantly expanded the market that is available to us. The second thing is that we start seeing positive leading indicators, both from our existing customers as well as from our prospects. And then lastly, our plan is to start growing this business in the second half of 2026 and then scale it in 2027. And with this, think it's a great segue to invite back on stage, our CFO, Erica.

I think we're going to take a quick 2-minute break just to adjust a couple of things on the AV. So want to keep your sense of anticipation up for the financials. So give us 2 minutes.

[Break]

Thank you very much, Frisco. I'm here -- once again, I'm Erica Gessert, CFO of Upwork. I'm here to bring it home and to tie everything that you've all heard today into clear financial outcomes.

Just a little bit of my own origin story. I came to Upwork about 2.5 years ago after a career in large enterprise. And I came from PayPal, where I helped to drive transformation across a global fintech business. But I came to Upwork really because I've seen 2 very large outsized opportunities. The first, of course, in enterprise, my background, one of the reasons I'm so excited about the Lifted strategy. PayPal alone was at the higher end of that range that Ernesto just showed you. We spent about $0.5 billion of spend on contingent labor a year. So I knew that the TAM for this opportunity was enormous.

The second was in AI. And when Hayden and I were talking about me coming to Upwork, it was April of 2023 and ChatGPT have been around out for about 7 months. And Hayden talked about this vision of transforming the platform through AI enablement and about the possibilities around human and AI collaboration, and it was incredibly exciting and compelling to me. And today, we are at Upwork, we are realizing that vision, and it's just incredibly exciting.

So we've spent the past 3 years, as we've talked about so much today, reimagining this business for profitable growth and to win in the AI era. And I want to share with you now why we are so confident in the growth outlook that we have produced that we're putting out there today, built on a profitable foundation that is going to produce operating leverage as we grow and with -- in a business that has enormous free cash flow yield, building a strong balance sheet that will give us flexibility as we grow as well.

Now today has been all about showing you all, enabling you to see what we are seeing in our business that we are really on a foundation of accelerated growth for GSV for revenue and adjusted EBITDA. And that we're incredibly well positioned to grow with this profitable base.

So why is Upwork position to win? This is the flywheel that Hayden shared. We've rebuilt our platform to be AI native. Uma is the best tool to help talent and clients find each other seamlessly. Dave talked about the fact that Uma is touching now about 70% of new clients work. That's just the beginning. That's new clients. That's up to the prematch. In 2026, we will be extending Uma into the post-match experience, and it will have an even greater profound impact on our platform. That all leads to natural demand, growth and demand on the platform, nearly 800,000 active clients, drawing that 18 million active talent, active professionals on our platform over 2 million of which have advanced degrees.

Our category reach is incredible. We have over 50 categories on our platform with more than $10 million of GSV in each year. Clients transact across categories, more than 40% of our clients have projects in multiple categories. And this all contributes to our incredibly unique proprietary closed loop data asset. We're the only ones in the industry who have the richness of data that help to train Uma, it helps to drive personalization, and it helps to enable the human plus AI collaboration that we are building. Upwork is the only company in the industry that has strategic advantages across all of these fronts.

So the flywheel is the result of the platform we've built. Our platform attracts larger customers with broader spend. This has been the very clear pattern over the past 4 quarters. 85% of our GSV comes from recurring clients. These are clients coming back again and again to our platform to do work. Our GSV proactive client has grown for 5 consecutive quarters. It's over $5,000 per active client and growing. And this leads to 90% of our GSV coming from high-value work. This is what makes our business model so strong and our economic superior. It's because our relationships with clients and talent are richer and more meaningful. And it means that we can keep investment down as we continue to grow in scale.

Now over the past year, we've been focusing -- we've talked so much about our focus on quality over quantity, and this strategy is working for our business. The number of new clients coming on and spending over $1,000 within the first 3 months of spend, it's up 11% year-over-year. Now that spend in the first 3 months, that is the highest -- it is the highest ever at our company right now. And in 2025, we are set to grow that -- the first 3 months of spend every single quarter throughout the year. That's the first time that's happened in this business. The first time we've driven that since 2021, right in the middle of the pandemic.

Our customer retention is improving and continuing this trend of coming down 170 basis points year-over-year. We're continuing to see that trend continue. And this means that as our customers stay with us, they're stickier, more meaningful relationships. Our retained customers spend 6x what new customers do on the platform, which means we'll be able to keep marketing spend low as we retain these customers and they build their relationships with us.

Now over the past 3 years, as we've been rebuilding this business, we have had an incredible track record of inorganic and organic investments on the platform that has truly transformed Upwork. That's what we've been talking about so much today, the new Upwork. First with Bubty -- or sorry, first with headroom and objective, we built out our AI talent bench, brought Andrew and an incredible objective team on board over the past couple of years, now with Bubty and Ascen to unlock the enterprise opportunity.

On the organic side, we've injected AI into the customer experience. We've introduced tiering on the platform, a profoundly important strategy for our business. And we've also built the foundation for human plus AI collaboration that's coming. We've also expanded our monetization strategies, which I'll get to in a minute, with very high confidence levers that will grow both GSV and revenue for our business. Together, all of these moves have created an engine to accelerate Upwork's next phase of growth.

So we've also consistently outperformed the market over the past few years. We're taking share in periods of macro growth and also in periods of slower growth within the broader market environment. Over the past few years, we've significantly outpaced staffing but also the broader online marketplaces. And this just shows the durability of our model. And with the strategies we've put in place, we are set to accelerate this growth and this lead regardless of the macro backdrop.

So actually, our performance is actually the easiest to see when you look against the broader market indicators. So this is job growth. And in very strong cyclical periods, Upwork performance is lifted by the market. Now in periods of slower growth over the past 3 years, like we've all been experiencing, Upwork has significantly outpaced job-related indicators. So with the growth drivers we've now put in place, Upwork is positioned to grow untethered from the macro environment. We're incredibly confident about this. And we will only benefit once, if and when macro tailwinds return.

So we are now poised to drive growth again and even more meaningfully in this business because of the foundation that we've built. We're entering a period of durable compounding expansion. And this is on top of a stronger base, a broader opportunity and growing demand across every segment we serve.

As we've talked about so much today, we have traction in 3 enormous growth areas: SMB, Enterprise, AI. Our current penetration in each of these areas is actually quite small, which makes the opportunity enormous. This is also why we can confidently say that we're going to grow regardless of the macro environment. It's because we have very, very, very clear traction with initiatives across each one of these opportunities. So our growth plan is based on the building blocks right here, transforming human and AI work, accelerating SMB growth and unlocking the enterprise expansion. I'll walk you through the traction in each of these areas.

First, the AI opportunity. As you've heard today, the AI opportunity is not one opportunity, it's two high traction, very near-term opportunities and one longer term -- longer horizon one. First, on the AI native marketplace. We've embedded Uma across, as I said, the pre-match experience on our platform. So job post creation, search, match, job proposal writing, but that's just the beginning. This $100 million that we're experiencing on the platform this year, this is really from experiences that we've launched in the first half of 2025. Things like AI interviewer, things like Uma Recruiter, they're not even showing up in our results yet. So as we continue, we see this accelerating because we have new experiences launching on the platform every day that are going to drive this growth. And next year, as we expand Uma into the post-match experience, we expect that to accelerate.

The second, of course, within AI is the AI category itself. The annualized AI-related GSV on the platform is now set to surpass $300 million by the end of the year. And this, the tailwinds behind this are huge in the marketplace.

Now further down the road and a catalyst in 2027 and beyond is AI agentic work on the platform. We're already seeing demand for this work. The requests for talent using agentic AI on the platform are up 12x what we saw a year ago. It's also up 20% quarter-over-quarter in Q3. As Andrew talked about today, we are already testing and experimenting with AI agents on the platform to benchmark them and to collaborate with humans to get real work done, a true differentiator from any other benchmark that's out there. And while it's early, we expect to monetize this work at take rates above the rest of the platform because of the productivity and speed to market that this kind of work produces, and we're getting feedback from clients on this. We're already getting significant ecosystem interest from larger partners out there, other AI companies to partner with us on human-in-the-loop solutions. Upwork is the only company in the industry that is poised to take benefit in all 3 of these areas from this new technology.

All right. Next is our traction with SMBs. Business Plus is leading the way to greater penetration with mid-market customers. This is a very important segment for us, and we are moving upmarket. The average GSV you heard about is 2.5 what our core platform is. Our growth in Business Plus grew 33% quarter-over-quarter in Q3 and continuing to increase. And we hadn't even started marketing this product yet when we produced this result. Now Business Plus importantly also drove 20 basis points of take rate accretion in the quarter, in Q3. And we only had in the low single-digit penetration on our platform that drove this take rate accretion. So this is a strategy that will drive both GSV and take rate.

Now the tiering of the marketplace, as I said, it is a profoundly important game-changing strategy for Upwork. It promises to be a structural change for our business. Just looking at current momentum in this, we expect that Business Plus volumes will double next year, and that will only bring us to about 5% of penetration on the platform. So this is going to be a multiyear growth lever for this business.

And finally, of course, close to my heart, Enterprise is our largest growth opportunity. The work we've done over the past 2 years has completely reshaped our ability to access this $650 billion market. We have an incredible base, as we've talked about, of marquee customers already with Upwork that are eager to expand their relationships with us, Microsoft, Lime, Scale AI, Cloudflare to name a few. We're competing for much larger contracts. What Ernesto talked about with the client that's on the platform who will have 3x the spend with us, that is a small comparison. We are easily going after contracts that are 10x the size of our legacy base. And this momentum positions us now to drive a minimum of 25% growth in GSV next year. We think this is a small growth rate. Remember, this is going to scale at the end of next year in 2026. So this is actually small compared to what we expect in 2027 and 2028 and beyond.

All right. The GSV growth levers are very clear. I just walked through them. AI from the fastest-growing work category to the enablement of the platform through AI-enabled experiences. We are just at the beginning of the tailwinds from this technology. More deeply serving SMBs with the momentum on Business Plus. Enterprise, of course, a huge opportunity now fully open to us with Lifted, also promising to be a multiyear growth opportunity for us. And of course, finally, ads and pricing. The new strategies, well-tested strategies on our platform that we are launching in the middle of expanding. These are strategies that will grow both GSV and revenue on the platform.

All right. On top of those GSV growth strategies, we do have multiple high confidence take rate strategies. Now the use of Connects continues to grow, continues to be a driver of take rate on our platform. Connect grew 18% -- Connects revenue grew 18% in Q3. And that's really driven by increased use of ads and bids as we dynamically price to the size of contracts on our platform, and that's continuing to drive that use of Connects. Freelancer Plus revenue was up 24%. There's still opportunity to add new tiering to that offer and the subscriptions. And then, of course, the experimentation that we've been doing with the variable freelancer fee.

This is nascent on our platform. Again, an early strategy that we've only expanded to a few categories. And now in 2026, we are set to expand further and drive take rate and GSV as we actually dial it down in places in order to drive demand.

Now looking beyond 2026, we also expect, as we grow into broader relationships with SMBs through Business Plus, we have the opportunity to launch additional value-added services, and this will be a catalyst in 2027, 2028 and beyond.

So with these drivers, we expect to expand take rate to the low to mid-20% range by 2028. And as in pricing, like I said, that is just one driver of take rate. Agentic AI work on the platform, Business Plus with SMB growth, Enterprise expansion, these are all drivers of take rate on the platform as well as GSV. So we're expanding take rate by adding value, and these are well-tested strategies that we're executing on. Of course, we also have very clear room to grow our take rate. Even at 20% today, we are well below industry averages.

So together, these GSV and take rate drivers, they create a very strong diversified path to both GSV and revenue growth. For revenue, we expect that we will drive 13% to 15% revenue growth CAGR through 2028 because of the combination of these strategies.

Now while we've been rebuilding our growth engine, we, of course, have also done a phenomenal job. It's been a team effort, optimizing our cost base. We've created a disciplined growth engine that will create operating leverage as we grow. Our track record on this is incredibly solid. It shows up in our results. We're going to post about 28% adjusted EBITDA margin in 2025. This is an average nearly -- of a nearly 10 percentage points a year of adjusted EBITDA margin accretion every year for the past 3 years.

Now we've done this through targeted optimization across nearly every part of our business. First in sales. We have lowered both our cost to acquire and our cost to serve in sales. Since 2022, we reduced our total sales expense by 35%. We reduced our cost to acquire by 40% and our cost to serve by 20%. Now we will make some incremental investments in 2029 -- no, in 2026 to invest in the Lifted strategy. But beyond 2026, we expect to grow sales expense at a very small fraction of the revenue growth coming from this business. So this business is going to scale extremely nicely as we go after these very large contracts.

In marketing, an even more impressive result coming from marketing. So over the past 3 years, we have reduced our marketing expense by 55%. We have increased the GSV yield from marketing by nearly 25% at the same time. So we're getting more yield out of lower dollars. Marketing-led contracts that we are achieving from marketing are -- the GSV per contract is up over 100% over the last 3 years. So our growing focus on these high-quality lasting customers is working very well for us. It's showing up in our GSV per active. It's showing up in our marketing yields. This means that we will be able to keep marketing costs low as we grow because we're getting such a high yield out of every incremental marketing dollar.

Lastly, in R&D, we have produced an incredible pace of productivity through optimizing our R&D spend. We've embarked on a comprehensive program to implement AI internally across different functions, but the place that's showing up best right now is in engineering productivity. In any 1 month in Upwork today, about 25% to 35% of our code is AI-assisted, and that's resulted in a 32% reduction in the cost per line of code produced and a 16% increase in code going into production. So this means more improved customer experiences coming to our customers faster every day, and that is what's behind the pace of our execution today.

So we will plan to slow our margin expansion in 2026 because of all of the outsized opportunities we see for growth in this business. But we still have many more levers to pull from a cost point of view in this business, and we have clear line of sight to the 35% margin target that we've set and incredible confidence that we will get there.

One of the best things about this business, this is what we talked about when we talked about superior economics in this business. Our profitability converts incredibly efficiently into cash. We are a very low capital business. About 85% of our EBITDA converts to free cash flow. This gives us the flexibility to invest, to acquire and to return capital as we go. We are projected to produce over -- well over $200 million of free cash flow in 2025, which will be up over 50% from 2024. And this will give us an incredibly strong balance sheet to continue to drive the growth that we're talking about.

All right. Our capital allocation strategy has been very consistent. It's very clear. We are focused on a discrete set of organic investments, narrow big bets that we talked about with AI, SMB, Enterprise, while always maintaining a relentless focus on margin accretion. We will also continue our track record of high ROI M&A, consistent with the track record with objective, headroom, Bubty, Ascen, we will continue to use our balance sheet to enable our product road map and our growth. And then, of course, we will consistently return capital to shareholders. At a minimum, we will offset stock-based compensation, but we will also strategically and opportunistically reduce our share count as we go. We've had an incredible track record over the past 3 years of capital return to our shareholders. We plan to continue that well into the future, particularly as we see these low valuations out there in the market.

All right. This brings us to our 2026 guidance. 2025, Q3 of 2025 was about the return to GSV growth. 2026 is all about accelerating that growth. Our GSV growth rate in 2026 will accelerate to 4% to 6%. And we're very confident about this based on all of the traction that I described to you. Our revenue growth rate will go up to 6% to 8% next year. And our adjusted EBITDA margin will expand by 1 point while also absorbing a couple of points from the investments in these high-growth strategies that I've talked about.

All right. And this all rolls into our 3-year outlook. Our exit ramp for 2025 is up and to the right, and we are very confident about our 2026 outlook. With the Lifted strategy, marketplace tiering, the agentic opportunity and so much more, we also feel very confident that we see very clear growth levers for 2027, 2028 and beyond. So that's why today, we have released our new 3-year growth outlook. GSV CAGR of 7% to 9%, revenue CAGR of 13% to 15% and adjusted EBITDA CAGR, that operating leverage I talked about of 20% over the next 3 years. We are executing from a position of strength, scaling growth, expanding profitability and building sustained shareholder value for years to come.

In closing, this is the new Upwork, and there has never been a more exciting time to be at this company. I know I speak for all of us on this. We've fundamentally rebuilt this business across our platform, our targeted customer focus, our operations to be at the center of growth in the AI era. We've got growing traction in these 3 massive, massive opportunities, and we're poised for accelerating growth and profitability.

Many thanks to all of you for your time and attention, and I'm now delighted to invite Hayden up to join me for Q&A.

All right. I think we have some mic runners and we you may have some questions from the webcast as well. All right. Let's do it. It looks like Bernie has a question here.

Great. Great job in the presentation. It was great to learn about the new Upwork. Maybe I think it would be just helpful, you provided that really helpful bridge in terms of GSV growth and how it's going to accelerate. Can you just talk about some of those, the puts and takes from the 4% to 6% GSV growth in 2026 and how we get to, I think, double digits in '28?

Yes, sure. As I was kind of going through here at the end, many of the growth catalysts that we have on the platform, Lifted first and foremost, right, it's ramping up towards the end of 2026. So we will -- we expect that 25% GSV growth from Enterprise that we're expecting next year is really a back half event for us because of the length of contract times. And obviously, we're going through platform integration right now. So that gives us very, very strong confidence in even stronger growth just coming from Enterprise in 2027 and beyond.

Now I'd -- make no mistake, the growth drivers are both on the marketplace and on the enterprise. These are -- we are seeing growth catalysts across both of these businesses right now. And so similarly, with Business Plus, while we expect to ramp through 2026, we expect that to be a multiyear growth catalyst as well. So expect kind of ongoing acceleration as we continue to build out that product. And then there are further opportunities for marketplace tiering just beyond Business Plus and other things on the marketplace.

My first one is just on the 25% growth for the Enterprise in 2026. I think that would imply for just the core Marketplace business, more modest pace of acceleration in 2026. Can you just talk about just what are the key inputs to the Marketplace? And like can AI drive some sort of growth on top of that low single-digit growth I think that's implied?

Yes. I think that it should imply sort of an even GSV kind of driver, growth driver for both Marketplace and Enterprise. So it should be relatively even. But aside from that, I would say the growth drivers on marketplace are kind of as I articulated, I would say marketplace tiering. The AI category itself, of course, that category is accelerating right now. And we are going to -- we are doing kind of focused work in order to drive strategies that will harness that growth. So we certainly expect that to also be a driver in 2026.

Yes. And I'd just add, we certainly have been cautious about modeling in a lot of expansion from things like AI agents, which are such a new opportunity. So that is part of our outlook, and that could be even bigger than we expect. But right now, we can see the traction with Business Plus, with AI categories, and I think those are like big building blocks for us on the marketplace side. Other things could happen sooner or further out, and we're not reliant on them to hit our targets.

Maybe two, if I could. One, in terms of the 3 buckets of growth you laid out, can you talk a little bit about your go-to-market strategy in SMB, Enterprise and AI, and how much they're already built out today versus these elements of still putting in place go-to-market strategies over the long term as opposed to just executing against the opportunities?

And then the follow-up would just be on the marketing. There was some interesting data there in terms of the efficiency on the marketing side. How should we be thinking about continued levels of efficiency at those -- at that rate of change going forward?

Eric, so we have the building blocks of that go-to-market already in place. I'd say on the Enterprise side, Ernesto has done a fantastic job really retooling how we go to market there with a smaller, more nimble team that is going after these big contracts, and that work will continue into 2026. But a lot of the kind of foundation for that is already set. And Erica shared some of those sales efficiency metrics, which speak to how we're set up for this new kind of different profile of Enterprise go-to-market.

On the Marketplace side, we have done a lot to tune our engine already for AI and AI workloads, but there's scaling of that, that we can definitely do across channels and kind of optimizing our channel strategy and overlaying that with our SMB focus. So I'd say those are things where on the SMB Business Plus side, we're definitely earlier in terms of marketing that. Dave shared the campaign that we just launched in October. There's more coming, and we know how to do great digital marketing as a business and use that as a lever. But doing that with SMB and then layering on AI, I think, is going to be a great kind of compounding opportunity that we're just building into.

Yes. I'd just say just on the marketing efficiency, it takes time to really turn the dials from a channel point of view and really turn the dials to achieve what we've achieved in terms of attracting these larger, better customers. And obviously, a lot is changing within marketing channels right now, right, with like kind of SEM and SEO changing a lot as the environment changes. And so we're going to continue to turn those dials and make sure that we are achieving these targets of attracting these high, high, high ROI customers. But it will take time to continue to scale that up. And as we see the yields from the business and see the kind of revenue and GSV accretion, certainly, it is possible that we would dial it up more as we really see that ROI, but with always a focus on our margin targets as well.

Great job on these presentations. You talked about monetizing the AI agents because they add so much value. And I was just curious on how we should think about the interplay there because you would think that AI agents would make projects complete a lot faster because of the obvious speed of them. With your hourly contract work, how should we think about that being accretive because you're able to monetize that? Have you kind of considered that in your forecast?

Yes. So a couple of things there. So first and foremost, like some of the things that Andrew showed kind of on the Happy Index and all the work we're doing in the benchmark, what that's really showing is that the future of AI agents on our platform, on any platform is with human-in-the loop. Like we're seeing that very clearly in the data. These agents are -- they're may be completing tasks, but it requires human oversight. And so it's really going to be the combination of the two.

Now we're talking to our customers about this. And to the extent that things can get done faster and productivity is better, they're willing to pay a premium for that work. And so that's how we see it. Now we haven't modeled in like too much kind of take rate accretion from this at this point because it's so new and nascent, but we do see that opportunity, and that's the feedback we're getting.

Yes. And we see in the data that, again, our AI clients that are leaning in the most are also spending the most, and that's even including the fact that these searches and appetite for AI capable talent that are using agents themselves is increasing.

So even as talent are using more agents, even as clients are leaning and looking more for that talent, they're spending more, their contract sizes are going up. What they're having the humans do is not replaceable by the humans, even as the technology gets better because for all of the work, there's setting the goals, setting the kind of concept of what needs to get done, and that's a human task. Agents cannot set goals for themselves. Agents can help execute the work, but then a human needs to come back in and qualify that the work was done correctly. And so even as agents get better at that middle part, there is so much runway where humans need to kind of start and finish projects, and we see that already happening.

Great. And I had a second question. You mentioned more tiering in the marketplace across your different offerings. Just curious, do you see equal opportunities kind of maybe a lower level and an upper level? Or do you think you'll be skewing more just like up more premium products? Or how should we think about that?

I think the future here, look, we're -- right now, we're super focused on optimizing Business Plus. So it's actually -- like I said, it's very low penetration in the marketplace. There's huge runway there. So that's our first and biggest focus right now. But I think the future here is in more premium products on the marketplace. I think we will -- we'll have our basic marketplace offer, but that's why this is such a key strategy for our business because there's really opportunity to continue to cater to larger and larger customers on the marketplace.

My question was just on Business Plus. Could you talk about the key opportunity in terms of the post-match experience? And what gives you confidence that you could double GSV in 2026?

Absolutely. So the post-match experience in Business Plus is really about what Dave shared with Uma helping project manage kind of everything that happens after the hire has been made. And we have this incredible data asset where we alone see what happens to project completion, what makes a good outcome versus a bad outcome. We're using that data to train Uma to be a project manager that's kind of always on and helping the projects stay on track.

That is a huge value add because today, either the customer or the client has to do that or the talent has to do that and maybe they're not even aligned on what that looks like. Now we can come with something in the middle that really helps both sides be successful, incredibly sticky, incredibly valuable. It literally saves hours of work every week from people who are doing it today.

So that's the new experience. That is something that we do view as a premium product as part of this Business Plus expansion. And as we alluded to, with Business Plus, we really just launched that into the ecosystem of our existing customers and existing product. We've been adding new entry points in the product. We haven't yet really done concentrated marketing to educate SMBs about this product and get them in. Organically, we're seeing some of that, but there's a lot still that we can do with our marketing channels to build that. So in addition to expanding the value of Business Plus, we're also expanding kind of access and visibility through our marketing channels, and that's what really drives that 5% GSV goal.

I'd just add, the 33% quarter-over-quarter growth that we saw in Q3, that was pre-marketing, right? And so just the momentum of that product right now is making the projection pretty confident.

A question on the AI GSV. Definitionally, is it very easy for you to discern what is and what isn't AI on the platform? And then I guess, numerically, what's the growth that's baked into the 2026 outlook for the AI portion of it?

Yes, sure. So it's a great question about how easy it is to identify the AI work on the platform. So still the largest subcategories within this AI category are dedicated AI work. So we're talking prompt engineering. We're talking AI infrastructure work, data labeling to a certain extent. So this is like -- this is relatively easily identifiable AI work.

Now that said, there's AI work proliferating cross category. That is harder for us to identify because it doesn't fit into the classic lexicon that we have on the platform. But we do have kind of methods to -- actually, we've trained an LLM to scan our data and identify some of this work and then we kind of back test it. So we are working to identify the cross category, things like in video animation and other things. But it's an ongoing work in progress, I'd say.

And then in terms of the growth of the AI category, we're not providing like a specific projection on it. I would say that growth is accelerating. There are real tailwinds behind it. And so we expect it to continue to be on the rise quite significantly.

Okay. Great. And if I can ask a follow-up on the financial targets. So obviously, there is a gap between GSV CAGR and revenue CAGR. That makes a lot of sense. It seems like that gap increases beyond 2026 into '27, '28. Could you just talk about kind of the driver there?

So again, Business Plus is such a great product because it drives both GSV and take rate. And then obviously, as Enterprise scales, that's also -- Enterprise overall tends to be at an average higher take rate than the marketplace. And so that's another very nice driver for us.

Yes. Just to be clear, our marketplace product today has a 5% take rate on the client side. Business Plus has a 10%. So it's a big step up, and that's what's really a big driver of that.

And then we have these other drivers like the variable freelancer fee, it's super early with that, and we're seeing lots of success there. So there's just -- there are a lot of levers for us.

This is one from the webcast. You mentioned the volume of proprietary data on the platform and how it's enhancing AI-driven work delivery. Can you talk about how meaningful a competitive advantage this is for your platform? And could you help frame how this data advantage feeds into your broader monetization strategy?

This advantage really can't be overstated. It's huge, and we're really early in unlocking it. I mean it's just in the last 1.5 years that we really have Uma features that are taking advantage of this data asset. And as we talked about, we haven't even launched the Uma capabilities that are in the post-hire experience, the project management, the things that happen. We just are launching things like insights for customers where Uma can scan, work diary snapshots coming from their talent and give them insights about how people are working, where there might be issues. So we have a corpus of data that we, ourselves, have not yet fully unlocked and turned into features, but we have a huge road map to do that.

There's also a lot of interest from partners in the ecosystem. Our data is so unique and uniquely at scale. We get a lot of interesting conversations with other folks, foundation model companies, other agent builders, et cetera, who really want to be part of seeing and learning from that data.

What you heard from Andrew was very interesting in terms of us creating an environment where we benefit and our talent benefits, but AI agent builders, foundation model companies can come in and launch AI agents that, once they pass our quality bar, can be operating in the marketplace and using the marketplace experiences they have as a learning kind of modality. And that is new and different. The next phase of AI trade models are really -- they have to have experiential learning. They can't just be trained on static data sets. So we are uniquely creating an environment where that can happen and where all parties can monetize that as a commercial activity, which is huge.

So we are early in really, I think, tapping the value here. We're seeing the data convert into value with that $100 million of GSV from the AI and other feature enhancements we made just in the first half of this year, but there is a long runway here.

Yes. In terms of the monetization, I think underlying that question is probably asking if we're going to sell our data or something like that. The data is too valuable for the work that we can do on the platform and the yield that we're going to get. And so we don't have any plans nor is that included in our guidance.

All right. One more from the webcast. AI GSV annual run rate is $300 million by end of 2025. Is there a way to quantify across all of 2025 GSV or in Q3 as a percentage of GSV? And on AI agents monetization, how is the opportunity different between SMBs and Enterprise?

On the first, I think we've provided the quantum on the go-forward AI category. And I think that's -- and we've provided the growth rate. So I think you can probably take it from there.

Yes. On the second part, I think the quantum at this point, it's really hard for us to forecast exactly what that kind of mix looks like. These are super new technologies and new experiences that in the AI agent case, we have them in testing. There's a lot to do and learn as you roll them out to both types of customers, SMB and Enterprise. So if anything, we just see a lot of upside and runway there, but kind of it's probably too early to give some specifics.

We have one more from the webcast. How can Upwork sustainably grow Enterprise GSV and revenue without simply cannibalizing existing SMB marketplace activity, especially as AI tools change how lower value work is done on the platform?

These 2 products, our Lifted product and our SMB product with Business Plus are going after completely different segments of the market. And we shared the $530 billion on SMB, the $650 billion of spend from enterprise. And when you heard Ernesto talk about our ideal customer profile in the Enterprise, these are very large companies, more than 1,000 employees, huge budgets in the hundreds of millions to billion dollars of spend on contingent. That is really the sweet spot we're going after.

Those companies look totally different from the SMB target with Business Plus. Business Plus Customers are a small to mid-market company. They definitely have programmatic spend that they maybe want to move or make contingent, and we are helping them do that. But I'd say the businesses are very different. So the risk of cannibalization is zero. We're really kind of just going on 2 paths towards 2 different customer types with those products.

We have another one from the webcast. Are the 2028 GSV to revenue targets organic? Or do they include potential M&A?

No, there's no additional M&A included in any of our outlook. We certainly will utilize our balance sheet to enable further growth or/and to accelerate our plans, but there's no incremental M&A in our outlook. Anybody else? All right.

I want to thank everyone. This has been such a fantastic morning. Hopefully, you have all seen what we see in this business that it is a completely reinvented business. The work over the last 3 years on our product, on our customer focus, on our operations is setting us up for incredible performance and acceleration in this next chapter.

We've outlined our 3 major growth building blocks, each one unique, each one significant and each one with traction. We have tailwinds in AI we are capitalizing on. We have tremendous progress with our Business Plus offering for SMBs going after a huge market. And of course, we've launched Lifted, and are seeing great feedback and traction with a new model of serving the Enterprise with something that doesn't exist anywhere else.

We are thrilled that you joined us today, and we'll be sharing more updates and milestones as we go. Thanks, everyone.

Thanks, everybody.

Thank you for being part of our program. Please join us for lunch in the cafe.

Good day, and thank you for standing by. Welcome to the Upwork's Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Tyler Stahl, Senior Corporate and Securities Counsel. Please go ahead.

Thank you, and welcome to Upwork's discussion of its third quarter 2025 financial results. Joining me today are Hayden Brown, Upwork's President and Chief Executive Officer; and Erica Gessert, Upwork's Chief Financial Officer.

Following management's prepared remarks, they will be happy to take your questions. But first, I'll review the safe harbor statement. During this call, we may make statements related to our business that are forward-looking statements under federal securities laws. Forward-looking statements include all statements other than statements of historical fact. These statements are not guarantees of future performance, but rather are subject to a variety of risks, uncertainties and assumptions. Our actual results could differ materially from expectations reflected in any forward-looking statements.

For a discussion of the material risks and other important factors that could affect our actual results, please refer to our SEC filings available on the SEC website and on our Investor Relations website as well as the risks and other important factors discussed in today's earnings press release. Additional information will also be set forth in our quarterly report on Form 10-Q for the quarter ended September 30, 2025, when filed.

In addition, reference will be made to certain non-GAAP financial measures. Information regarding non-GAAP financial measures, including reconciliations to their most directly comparable GAAP financial measures can be found in the press release that was issued this afternoon on our Investor Relations website at investors.upwork.com. Unless otherwise noted, reported figures are rounded, comparisons of the third quarter of 2025 are to the third quarter of 2024. Adjusted EBITDA, adjusted EBITDA margin, non-GAAP operating expense and free cash flow are non-GAAP financial measures, and all other financial measures are GAAP unless cited as non-GAAP.

Now I'll turn the call over to Hayden.

Good afternoon, and welcome to Upwork's Third Quarter 2025 Earnings Call. Q3 marks a turning point for our company. The work we've done over the last 18 months to rewire our business for the AI era came to fruition in the form of GSV growth. After 5 quarters of GSV growth headwinds, the payoffs of our strategy are now visible. In Q3, we delivered 2% year-over-year growth in GSV and expect to see continued positive GSV growth from this point forward, including acceleration in this metric in 2026.

Our record-breaking performance on both revenue and profitability against a still sluggish labor market offers tangible proof points that Upwork is a structural beneficiary in the AI era of work. We exceeded $200 million in quarterly revenue for the first time in company history with $201.7 million in revenue and GAAP net income of $29.3 million in Q3. We delivered all-time highs in adjusted EBITDA at $59.6 million and adjusted EBITDA margin, which came in at 29.6%.

Our strong performance is enabling us to increase our revenue and adjusted EBITDA outlook for the full year. At this time, companies of all sizes are wrestling with the question, how can AI benefit my business? A recent MIT study found that 95% of Gen AI pilots fail and 63% of employers still cite skills gaps as a major hurdle to business transformation according to the World Economic Forum. Upwork demonstrates how embracing AI technology can positively impact both top line and bottom line performance, and our solutions are increasingly essential for other companies looking to realize this potential. As evidence of this, significant contributors to our GSV and revenue growth were targeted AI customer experience and product innovations, AI category growth on our marketplace and robust adoption of Upwork Business Plus.

Let me take a moment to unpack each of these. First, in Q3, we continued our investment in transforming the Upwork marketplace into an AI-native platform. Product enhancements to Uma, Upwork's Mindful AI enabled it to become more embedded across multiple workflows, unlocking the tremendous power of our data for customers. We added highly requested capabilities to Uma's toolkit, including sourcing and interviewing talent on clients' behalf, drafting end-to-end talent proposals and assisting both clients and talent with project management tasks like proposing project milestones and deliverables. Uma is eliminating manual work for clients and talent across our experience. Uma Recruiter drives higher-quality matches, doubling the acceptance rate from talent invited to submit proposals and our upgraded Uma proposal writing feature saw a 15% increase in Uma-generated proposals, saving talent significant time.

While each of these wins is valuable in isolation, we are now starting to see the compounding effects of these enhancements working together as we continue to launch and iterate on Uma-powered features. Beyond improving the customer experience, they've delivered significant business impact with search and recommendation improvements largely driven by AI, expected to contribute a total of $100 million in incremental GSV in 2025. As companies struggle to get AI work done and invest more in AI products and applications, we saw a notable expansion of AI projects and jobs on our platform in Q3. Businesses of all sizes continue to come to Upwork to find the critical skilled talent they need to integrate this technology and drive more immediate ROI.

The number of clients engaging in AI-related projects was up 45% year-over-year in Q3. And as a result, GSV from AI-related work increased 53% year-over-year during the same period, up significantly from 30% year-over-year growth in Q2. The AI-enabled talent base on Upwork is expanding to meet the moment with 41% more professionals engaging in AI projects versus a year ago.

Next, let's turn to our strategy to deepen our reach with SMBs, a segment that is also performing ahead of our plans. In Q3, we enhanced our tailored SMB product, Upwork Business Plus, with additional premium features that streamline the talent sourcing and evaluation process as well as offering more collaborative hiring capabilities for teams. As SMBs try to navigate what AI means for their businesses, they're increasingly relying on Upwork as an AI equalizer, the powerful platform that helps them scale their AI initiatives. As a result, Business Plus adoption from both new and existing clients outperformed our expectations in Q3, with active clients on Business Plus growing 36% quarter-over-quarter.

Turning to our enterprise business. This quarter, we achieved a major milestone in our journey to unlock the $650 billion contingent work market with the launch of our new subsidiary, Lifted. While we have always been best-in-class in offering enterprise clients talent through the independent contractor model, through Lifted, we are now able to provide talent sourcing, contracting and workforce management across every type of contingent work. Not only is this a unique value proposition in the industry, but we are the only player in the market with a comprehensive digitally native solution that's purpose-built for enterprises and integrates seamlessly into their existing systems. We are thrilled with the customer reception of Lifted and are already seeing stronger-than-expected demand for this offering from both new and existing clients.

Our team is working at lightning speed towards our next milestone of onboarding our first customers onto the Lifted platform by early 2026. Anticipation for Lifted's new suite of products is high. While the sales cycle for very large multimillion-dollar enterprise agreements can take up to a year or more, early signals make us optimistic about the growth potential of this strategy. With our return to GSV growth and the launch of Lifted, Q3 was a historic quarter for Upwork. Our AI native platform, AI category growth and tailored offerings for SMBs are delivering tangible results. The momentum is palpable as we write this next exciting growth chapter for Upwork.

With that, I'll turn it over to Erica.

Thanks, Hayden. Q3 2025 was an exceptional quarter for Upwork as we reported GSV and revenue growth and record profit margins. We are executing with tremendous velocity, and we are seeing very strong growth potential across multiple strategies. As a result, we have resumed GSV growth 2 quarters earlier than planned. Third quarter GSV of $1.02 billion grew 2% year-over-year. This growth was driven by both our marketplace and enterprise businesses. Average GSV per active client continued to grow, rising 5% year-over-year and remaining over $5,000. This underscores our success in attracting and retaining high-value relationships on the marketplace.

Once again, GSV per active client grew year-over-year in every major client segment. We continue to invest in features and functionality to attract larger clients and more complex work, and our investments are showing real traction. Overall spend per contract grew for the fourth consecutive quarter, increasing 12% year-over-year in Q3 and once again represented our highest ever average spend per contract over any 12-month period. Hours per contract in Q3 surpassed Q2 as our highest ever. On the client side, we ended the quarter with 794,000 active clients. Our strategy of focusing on quality over quantity is working, resulting in GSV per new client growth of 7% year-over-year. Q2 marked a trough in our year-over-year active client growth as both new client acquisition and churn rate improved. Our churn rate declined over 70 basis points quarter-over-quarter, marking our lowest Q3 churn rate in years. This, along with the enhanced AI-powered customer experience improvements that we have been building over the past few quarters, contributed to Q3 marketplace revenue growth of 4% year-over-year.

As Hayden mentioned, the development of our new enterprise subsidiary, Lifted is progressing well. In the third quarter, enterprise revenue increased 3% year-over-year with a minor contribution from the acquisitions of Bubty and Ascen by Lifted. We continue to expect these acquisitions to contribute to top line growth as they ramp in the back half of 2026, while being somewhat margin dilutive throughout the year as we absorb the cost structures and invest in integration and launch. We expect Lifted to be meaningfully accretive to GSV, revenue and adjusted EBITDA in 2027. Our marketplace take rate was 18.9% in Q3 compared to 18.3% in the third quarter of 2024 as we saw benefit from multiple strategies, including dynamic pricing and Business Plus.

Our marketplace take rate has high potential for ongoing growth. Ongoing product testing has helped us to identify several strategies, which we expect will drive both volume and value in the future. While successful new strategies have led to strength in total take rate this year, we expect a lower total take rate in the fourth quarter due to lower seasonal volumes from managed services customers.

Gross margin was 77.3% in Q3 as we continue to execute disciplined cost management across every part of our business. Non-GAAP operating expense was $101 million in the third quarter or 50% of revenue compared to 57% of revenue in the third quarter of 2024. Adjusted EBITDA was $59.6 million in the third quarter, and once again, we produced a record quarterly adjusted EBITDA margin of 29.6%. We reported GAAP net income of $29.3 million for the third quarter, a 6% increase over Q3 2024. Free cash flow for the third quarter was also a record at $69.4 million. In the quarter, we used $31 million in cash to buy back 2.1 million shares as part of our commitment to driving long-term shareholder value. Cash, cash equivalents and marketable securities were approximately $643 million at the end of the third quarter.

Now turning to guidance. For the fourth quarter of 2025, we expect to generate revenue in the range of $193 million to $198 million. For adjusted EBITDA in the fourth quarter, we are guiding to a range of $49 million to $52 million, which represents an adjusted EBITDA margin in the range of 25% to 26%. Included in this guidance are incremental costs related to the acquisitions of both Ascen and Bubty by Lifted as well as temporary integration costs to support the new Lifted subsidiary. We are pleased with the step-up of our adjusted EBITDA margin outlook for this year even as we absorb incremental costs related to our M&A execution. We are reiterating our long-term adjusted EBITDA margin target of 35%.

As a result of our strong execution and encouraging early impact from our numerous platform enhancements, we are increasing our full year revenue guide to be in the range of $782 million to $787 million. The vast majority of the revenue guidance raise is due to the ongoing strength of our marketplace business. We are also increasing our full year adjusted EBITDA guidance to be in the range of $222 million to $225 million or 28% adjusted EBITDA margin at the midpoint. This represents a more than 6-point margin expansion versus 2024. We expect full year 2025 non-GAAP diluted EPS to be between $1.35 and $1.37, an increase of 30% at the midpoint from 2024 non-GAAP EPS. We have built a solid foundation for accelerated multiyear growth as reflected in our increased 2025 guidance ranges.

In closing, Q3 2025 was a pivotal quarter for Upwork, marking our return to growth mode on a highly profitable foundation. We achieved record revenue and profitability, exceeded guidance on all financial metrics and reached a critical inflection point by returning to GSV growth. Our strategy centered on AI, winning with SMBs and enterprise expansion is delivering results ahead of schedule. We are executing with discipline and speed, positioning Upwork for accelerated multiyear growth starting in 2026. We remain focused on driving operational excellence and increasing long-term shareholder value, and I look forward to seeing you all at our Investor Day in a couple of weeks.

With that, we'd be happy to take your questions.

[Operator Instructions] Our first question comes from Eric Sheridan of Goldman Sachs.

Given that you now have some period of time with integrating the assets you acquired on the enterprise side, can you talk a little bit about the key early learnings of integrating those assets and how investors should be thinking about your enterprise offering in total mixture of both organic and inorganic growth developing as you look out to 2026 and beyond?

Thanks, Eric. So yes, we're really pleased with the progress with these acquisitions. And one thing that's important to note is as we look at our enterprise revenue for Q3 and Q4, that's really a function of our former product, and you know that we stopped selling that product early in the year. So we're really focused on some of these milestones out ahead of us as we integrate the platforms and move customers over to Lifted, which is going to happen in early 2026. So that's the next big milestone. But in the meantime, we're really seeing leading indicators for this business that are incredibly strong.

We're seeing stronger-than-expected top-of-funnel interest. That's from both new and existing customers. We're also being invited for large multimillion dollar RFPs that we were not in contention for in the past. And all of these conversations with customers are really progressing very well. We know that it will take a few quarters to close these types of much bigger multimillion-dollar deals. So we are expecting significant GSV growth impact from the strategy starting to accelerate in the back half of next year and really continuing into 2027.

Yes, Eric, I'd just add, both our enterprise and our core marketplace business grew both revenue and GSV in Q3, and we expect that dynamic to continue and accelerate in 2026. I think while there will be some inorganic contribution next year, the outsized opportunity for this new Lifted business is really in the synergies between the 2 acquisitions and our legacy business. And so the outsized opportunity, as Hayden just articulated, will start in the back half of 2026, and then we really expect an acceleration in 2027.

And our next question comes from Brent Thill of Jefferies.

This is John Byun for Brent Thill. Just 2 questions. Great to see the acceleration on the AI-related GSV. Wondering if you could drill down into what some of the drivers are? Is it just a broader market tailwind? Or is awareness improving? Any specific initiatives there? And then is there any also to quantify the contribution from the 2 acquisitions in the Q3 or the updated guidance?

So the biggest driver of that $100 million incremental GSV that we talked about was really from rebuilding our search and recommendation stack this year and leveraging the tech and talent we gained through the acquisitions of AI companies, headroom and objective to do so. We're also seeing a lot of other features performing for us. That includes Boost Your Profile as an example, which was a feature we ramped up and was particularly impactful in Q3. And that's all in the area of GSV coming from our features and functionality in the platform on AI. There's another category of benefit that we're having as a tailwind, which is really the AI-related category growing at 53% overall in the quarter, and we think there's just a ton of run room there. So lots of goodness coming from both sides of our AI strategy.

Yes. And then, John, just in terms of the inorganic contribution, obviously, Bubty and Ascen are really contributing on the enterprise side of our business. Like I said, Q3, we saw GSV and revenue growth on both sides of the business, marketplace and enterprise. Now that said, the contribution from the Bubty and Ascen assets is very consistent with what I articulated in Q2. It's going to be about $5 million to revenue in the back half of this year. And so our outlook really remains the same there. But from an organic point of view, our marketplace also grew 1% GSV in Q3, 4% revenue. And so we expect that organic marketplace growth also to accelerate from here.

And our next question comes from Matt Condon of Citizens.

My first one is just on the broader macro backdrop. Can we just get an update just on what you're seeing as far as freelancer demand and how that progressed throughout the quarter? And then my second one is just on AI driving meaningful improvement to the liquidity in the marketplace. Just is there an upper limit to how far that can go? Just how much further do you think that these AI improvements can further drive GSV growth as we think about the rest of this year and into 2026?

In terms of the macro, I'd say things have been relatively stable in the course of Q3 with no real change since Q2. And so it's important to emphasize that against that backdrop, our GSV growth really has been driven by initiatives that we've executed, the success of AI, SMB. And maybe that is a good segue to your second part of the question around what's the run room on those. I mean we feel there's a lot more opportunity here. We have integrated Uma into some of the workflows across the product, but not all of them. We're doing some bigger updates in 2026 that really bring together and harness the full power of what Uma can do end-to-end across our customer journey, including the project management side of our offering, which we've done a little bit there, but there's a lot more. So we are very pleased that the early wins that we've had are really delivering, and there's still a lot more we can do, which really bolsters our confidence on GSV growing from here, including having acceleration in GSV in 2026.

And our next question comes from Bernie McTernan of Needham & Company.

The press release mentions using agentic talent sourcing for Business Plus. Is it available for the rest of the marketplace? Or is that something that we should be expecting to be coming later? And then second, for Erica, just wondering if we could get some directional commentary just given the investment in Lifted in '26, should we still expect margins to be up year-over-year, acknowledging that we'll probably get more of this at the Investor Day in a couple of weeks?

So on the first question, Bernie, the agentic sourcing that we have available, there's really a key feature in the Business Plan called Uma Recruiter or AI Recruiting. And that is a Business Plus only feature where our AI agent sources talent on behalf of clients by sending invitations to targeted talent within our ecosystem. It reviews that talent and provides a short list to customers recommending of potentially hundreds or thousands of potential matches, which 3 are the strongest. And so that's the specific feature you're referencing from the press release. We are looking at that and whether there are opportunities to provide different versions of that benefit to our basic customers. But what we've seen is the features we've rolled out for the basic plan are also performing well from an AI perspective, and that's things like AI-related job posting, AI overviews of talent that is in the mix for jobs. And so there's kind of different levels of offering between Basic and Plus, and we feel good about the benefits we're seeing actually for both sets of customers based on these features.

Yes, Bernie. And then just on your question on kind of the margin dilution next year from the Lifted strategy and kind of our overall margin journey. Like I said, look, we've reiterated our commitment to the 35% margin target, but we will slow down the margin journey next year because we see so many multiple very strong organic growth drivers in our business to invest in. The investment in Lifted specifically, we expect to be about 2 percentage points of dilution next year, but we will not take a step back on margins next year at the same time, even while we're absorbing those costs. I think we've shown just even in Q3 and in our outlook for Q4, we're able to very well kind of absorb these integration costs and other costs and still show very strong margins and even increase our outlook. So we feel really good about the balance between investment in growth and our ability to produce very strong profitability going forward.

Our next question comes from the line of Marvin Fong from BTIG.

Erica and Hayden, I would love to just understand better the drivers. I mean 4 quarters in a row, hours per contract [ increased ] 12%. Could you just kind of share with us your thoughts on what's driving that? And in particular, I'm interested, you would think that AI would be sort of an efficiency driver and could actually be a headwind to hour per contract. Are you seeing at all any kind of differential between AI-related growth and non-AI growth and then impact on the hours per contract and that trend?

Marvin, I'm so sorry, we had a little trouble hearing you. You were a little bit garbled. Do you mind? So sorry, could you repeat the question?

Yes, sure. It was just about the hours per contract. Hopefully, you can hear me now. It was up very strong and up for 4 quarters. And I was just curious what you think is driving that on such a sustained basis? And then in particular, is there any difference you're seeing in AI-related work and the hours there and how that's trending, thinking that perhaps AI would actually be sort of a headwind considering it should make freelancers more efficient?

Okay. Yes, I heard you perfectly at that time. Yes. So you're right, hours per contract continues to grow, and there are multiple growth drivers here. This is really, I think, just a proof point to the fact that our focus on quality over quantity in general and also on really kind of driving up the value chain and attracting the larger end of SMB customers with our Business Plus plan and then also actually the AI category of work. These are parts of our business that are attracting customers that are engaging us for very long, much more complex projects. Within the AI category of work, customers, clients who engage us for AI work spend actually more than 3.5x what our typical kind of platform spend is. Similarly on the Business Plus side, it's about 3x. So there are multiple strategies kind of driving these trends, but we see a continuation from here. And in fact, like I said, AI work is actually a growth driver of ours per contract, not a suppressor.

And just adding to that, Marvin, because I think there is this myth out there that AI -- the growth of AI is a headwind for us. It is actually a tailwind for another reason that we haven't talked a lot about. But even though there is substitution of work happening and changes to work happening across the labor market broadly due to AI, within the contingent work ecosystem, which is our space, substitution is only happening on smaller projects. And that includes for us, our business is only about 5% of our GSV coming from sub-$300 tasks or small projects. And that's probably where we have the greatest exposure to AI, kind of changing value in a negative direction for us. And overall, we've seen the levels of substitution and AI impacted categories, even in categories you've talked about like writing and translation plateau in the last couple of quarters.

So the bigger impact for us from AI is actually that AI is causing the fractionalization of traditional full-time work, meaning new opportunities are emerging where businesses no longer need a full-time person because AI is doing part of the work, but they do need someone to help augment that work. And that's driving more value and more demand into the contingent work ecosystem and Upwork specifically. So this is actually a key reason why this quarter, we saw the GSV from AI-related work accelerate to 53% year-over-year growth compared to even 30% year-over-year growth in Q2. And this is also why we see these trends as AI truly being a tailwind for us going forward as more work is fractionalized and more of that demand comes to Upwork.

That's super helpful. And then my follow-up, I think you mentioned being invited to a very large evaluations for the Lifted business. And could you just help us understand in these bids, are you -- who are you competing against? Is it the staffing companies and whatnot? And what are like the key criteria that you're emphasizing to kind of differentiate lifted versus the traditional competitor?

Sure. So what's really exciting here is we are being invited to participate in RFPs and bids for work across different types of contingent work. Previously, we were really just eligible to serve independent contracting and agency of record engagements. Now we are being considered for employment of record, temp staffing, the full suite of contingent work, which is 90% of enterprise spend versus the 10% that goes to independent contracting. So that's a big change, and that's happened just since we made the announcement of Lifted. We don't even have customers live on that product yet, but already the demand from new and existing customers is coming in and people are eager to work with us on this. In terms of the change to our competitive environment, I'd say who we compete with in the enterprise space has not changed. But now our ability to compete and win as well as be a valuable partner within the ecosystem is much greater.

So we've changed our value prop now that it's full stack and we can have this end-to-end solution for enterprises. We've been, again, competing in this space for a long time, but we were not as well equipped to win a bunch of different types of work that now we're winning. And when we look at the landscape, other players tend to be focused on very specific niches like temp staff only or EOR services only or maybe they only have talent in specific geos. They don't have a fully global liquid talent pool like we do or they've been serving SMBs and are trying to retrofit their SMB offering for enterprise. We don't have any of those issues. We literally can ask our clients to have no compromises, no trade-offs and have this winning solution that really does it all for them.

It's also making us a great partner because it's digital and modular. We can work with others in the ecosystem to fill the gaps that they have with their own offerings. So we're excited about this setup. It's going to take some time to unlock because these contracting processes are multi-quarters in length, but we have so much confidence that in 2026, we'll see that acceleration towards the end of the year and into 2027.

And our next question comes from Josh Chan of UBS.

On your kind of future GSV type of comments, I guess, in terms of 2026, what's backing your confidence behind even an accelerating level of GSV growth compared to what we're seeing today? And then also maybe a little bit nearer term in Q4, I guess, depending on what assumptions you make around the guidance, it seems like it may not assume that much GSV growth. I mean, is that accurate? And what's the thinking behind that?

Yes. Sure, Josh. So look, on the future GSV comments, we have multiple growth drivers in our business that are seeing a great deal of success right now. Just to name a few, I mean, Hayden talked about the acceleration of the AI category of work, which continues to actually increase in acceleration quarter-by-quarter. Business Plus it's still relatively low penetration in our base. And we've just launched our first marketing campaign just last week as well as really increasing the features and functionality there. So there's just a lot more runway to go, and we're seeing excellent uptake even before we started to market it to name just a few areas where we really have a lot of optimism for GSV growth on the marketplace side of the business.

In Q4, Q4 is a little bit unique for a couple of reasons. On the top line, look, this is regular seasonality in our business, both on the enterprise and on the marketplace side. I think, as you know, what we usually see in Q4 is that we see clients kind of wrapping up projects well before kind of the end of December because of the holiday season. And so it's just a lighter overall GSV quarter for us as well as the fact that on the marketplace side -- or sorry, on the enterprise side, I think we are expecting some seasonal slowdown -- regular seasonal slowdown on the managed services side.

And as you know, we did stop selling our legacy enterprise solution at the beginning of this year. So the regular kind of coverage on kind of GSV and revenue that we would see on the top line from new accounts is absent this year. But that said, we're very optimistic, as we've talked about, about the growth of the lifted strategy and expect that to really start to impact late 2026.

Great. And then maybe switching to free cash flow, which has been a really good story here. Is the current level of free cash flow generation sustainable? Any kind of unusual items kind of impacting this year? And then you've also been using a portion of the free cash flow every quarter to buy back stock. So is this approach one that will kind of be carried on forward as you routinely buy back a steady amount of stock going forward?

Yes, sure. Just so on free cash flow, look, I mean, there's a little bit of modulation quarter-by-quarter with kind of working capital movement. But overall, I think you can think about our free cash flow as kind of a run rate of around 85% kind of conversion from EBITDA. So we anticipate very strong ongoing free cash flow generation. In terms of kind of our stock buyback, yes, look, we've been very consistent with our capital allocation priorities in general. We're very focused on increasing shareholder value on multiple fronts. Obviously, investing in organic growth, we're seeing, like I said, a lot of green shoots there.

But we are maintaining our 35% margin target and expect to invest in growth, but also continue to show margin accretion over the next several years. Second is the returning capital to shareholders. We announced our second $100 million share repurchase this year in September, and we repurchased another $31 million worth of stock in Q3. And in current levels, we expect to continue to be buyers. So in 2025, we already surpassed our commitment to offset dilution from stock-based compensation with share buybacks. And then lastly, we've had a lot of success with M&A, which has enabled us to return to GSV growth early. And so we'll continue to look for some inorganic opportunities to accelerate our road map and accelerate the growth opportunities we see for this business.

Congrats on the quarter and GSV positive.

Thank you so much.

And our next question comes from Ron Josey of Citi.

I want to ask a little bit more about the variable freelance fee testing. I know it's been a quarter or 2 going live. Any categories in this approach that works better and thoughts here into 2026? And then another question just on the Uma Proposal rider, the 15% uplift in generated proposals. Just talk about the [Technical Difficulty].

We lost you on that last one, Ron, you said -- you asked about Uma Proposal writer. Can you just repeat that question?

Sorry. Hopefully, you can hear me now. Just talking about conversion rates with the Uma Proposal writer just given the 15% uplift.

Okay. I'll take the dynamic pricing question and maybe Hayden can take the proposal. So from dynamic pricing, actually, the take rate contribution from the variable freelancer fee was actually relatively minimal in Q3. We're still very early in this strategy. We've experimented with just a few categories on the platform in changing the fees, as I think people know, based on supply and demand dynamics. We do vary the application of this strategy by category. And so I wouldn't say it's going to be a static strategy. So I won't go into kind of like which categories are kind of having the biggest yield right now because we'll continue to experiment there.

But we're seeing a lot of success in a very early way, driving some incremental revenue. And we do expect as we go into 2026 that we'll launch more broadly into more categories. And we expect this to be very crucially both a revenue and a GSV driver because we modulate the fee both on the upside to drive take rate, but also on the downside to help stimulate demand in certain categories. So we see it really kind of influencing both areas.

On the Uma Proposal writer topic, what we find exciting here is that Uma is really impacting both sides of the marketplace as well as kind of the compounding of both of them getting better. So with the conversion rates that you mentioned and kind of the overall ability of the Uma Proposal writer, the new version that we launched to help clients really submit high-quality proposals, that is then translating into better matching experiences, more hiring. And overall, we see that Uma itself is being adopted by -- on the client side as an all-time high in Q3 and that Uma is increasing the likelihood that clients spend as well as increasing how much they spend. So it's kind of all of these types of Uma-related interventions that are really accelerating our flywheel in the marketplace. They're contributing to that $100 million in incremental GSV that we see for this year. And we can kind of envision based on their success, how they will perform next year and how new features that we are going to be adding to Uma's skill set will also continue to expand impact, again, both for talent and clients.

And our next question comes from Brad Erickson of RBC Capital Markets.

Starting off with just sales and marketing, continuing to get a lot of leverage there coming down as a percentage of revenue. Talk about how you think about balancing the margin expansion along with the product improvement. It would seem like you guys are really sort of hitting the ground running in '26 and could make sense to maybe lean into some spend there, just how you balance that philosophically. And then second, just would be great to get your latest views on ChatGPT and the other chatbots as a customer acquisition channel. Kind of what are you seeing as you start to get a little traffic off of those? What's the strategy as you think about having, I would imagine, a strong -- hoping to have a strong presence on those channels in the future?

Yes, Brad, on the sales and marketing leverage question, look, you're right. I mean we are seeing multiple very good green shoots from a growth point of view from some of the kind of new products and services that we launched on the platform. So I started to talk about this last quarter, but we will, I would say, moderate our margin expansion as we go into 2026 because we just have a lot of opportunity for organic growth, and we want to -- we've built an incredibly profitable base. We do, over time, expect that we will continue to find additional cost optimization opportunities, but we are going to balance that with organic growth opportunity.

Regarding the ChatGPT and chatbot question, what we've already done is change our marketing and customer acquisition approaches to really optimize how and where we show up in LLM answers and so-called search results, both organically and even have done some testing where there are integrated advertising opportunities. I'd say that from this point, the LLM channel is still pretty small relative to other channels. But we do see a lot of promise there. It converts at a higher rate than other channels and the intent signal we see from customers coming through those referrals is really high. So it feels like it's still early days, but we're definitely leaned in on testing different approaches, which do make us optimistic about our ability to capture ongoing and growing demand from these new channels as customer preferences evolve.

[Operator Instructions] And I'm showing no further questions at this time. So this concludes the question-and-answer session and today's conference call. Thank you for participating, and you may now disconnect.

In the interest of time, I think we're going to kick on with our next fireside chat. It's my pleasure to welcome the team from Upwork to the conference and have a fireside chat with Erica Gessert, CFO. Erica, thanks so much for being part of the conference.

Thanks for having us, Eric. Delight to be here.

Okay. So let me do a little bit of background and then we'll get into the conversation. So the first time the safe harbor before we start, Upwork, I would like to remind you that during the fireside chat today. They will make forward-looking statements, which involve risks and uncertainties that may cause actual results to differ materially from those statements. For a discussion of the material risks that could affect the company's actual results, please refer to the Risk Factors section of Upwork's most recent quarterly report on Form 10-Q and other SEC filings. The company will also discuss both GAAP and non-GAAP financial measures. Statements made today are effective only today and will not be updated to reflect subsequent events or circumstances that may arise.

And Erica is the Chief Financial Officer of Upwork, where she oversees Upwork's Global finance team and operations. She has more than 20 years of finance operations, analytics and investor relations experience, supporting technology companies. Prior to joining Upwork, Erica served in a number of senior executive roles for PayPal, most recently Chief Transformation Officer reporting to the CEO, and she held Finance and Investor Relations roles at Sprint and Virgin Mobile USA. There we go.

Okay. Just a follow-up questions on that. We could talk about our career trajectory. That's amazing. Okay. Erica, I would like to start with just giving you the floor a little bit to level set. But for those who are a little bit less familiar with the company or just even coming out of Q2 earnings, how are you framing for investors where the company sits today, and sort of the journey you've been on.

Yes. Well, thanks. Well, for those who don't know Upwork, we are the world's largest AI and human-powered work platform. So companies of all sizes up to Fortune 100 all the way to solo entrepreneurs come to our platform in order to find talent to get work done. We are the largest at-scale company of our kind. And we're unique in that we are a true tech-enabled platform to enable work. We had what I would call a truly breakout quarter in Q2. We've consistently outperformed the rest of the companies in our industry, which is the human capital industry, so staffing companies over the past several years.

We've consistently had our kind of growth rates be 10% to 15% higher than the other staffing agencies in our industry. And in Q2 we really outperformed every single metric financial metric top and bottom line. So it's been a really exciting time for us.

We're building off of that, the company has been dealing with significant macro volatility for quite a long period of time. You have this Q2, you put up these excellent results. Talk a little bit about the momentum building in the business that's within your control as you look out to the second half of the year and 2026. Because there's a lot of things you guys are building as a company that are within your control and then also operating in what continues to be a volatile macro environment.

Yes, look, I think the macro environment isn't doing anyone any favors. And the uncertainty, if anything, is getting stronger, not weaker. And what we've been doing really over the past couple of years is putting ourselves in a position to be macro agnostic. The human capital industry does tend to have impacts from the macro if you look at the BLS data and kind of all the chaos there. The labor market is volatile to say the least. But we've been able to really divide ourselves from that. And over the past few years, our kind of GSV, which is our volume-related metric has been relatively flat compared to, like I said, negative double digits in the rest of the staffing industry. So we've been taking share.

But we have now -- what we're saying is bent the GSV curve. And we are now poised to resume GSV and revenue growth. We actually said at the end of last year that we would enter 2025 and have a relatively flat kind of volume-related year as we kind of retooled and prepared ourselves for growth in 2026. We are now well ahead of that plan. And we are poised to start showing GSV growth now, GSV both revenue and GSV growth now and into 2026.

Okay. With that in mind, one of the things I know we've spoken about on public earnings calls, but striking a balance between top line growth and continue to make progress on the margin. So when you layer out your strategic priorities and we think about the macro environment, and what you just said, what do you remind investors about the priorities between revenue growth and margin trajectory.

Well, thanks for bringing up our margin growth. Over the past couple of years, we've gone from -- when I came into the business, we were relatively flat margins, so really 0% margins. Last quarter, we posted 29.3% adjusted EBITDA margin. So a really fantastic margin trajectory. At the same time, what we did was what we did is -- of course, we've made adjustments to sales and marketing and other things, but we've also narrowed our R&D portfolio and really focused on 3 strategic priorities that has enabled us to both grow margins and prepare ourselves to resume GSV and revenue growth. So we're doing it all.

And the 3 strategic priorities that we have focused on are really focused on expanding our access to relative pockets of TAM. So first and foremost, of course, is the growth of the AI category itself, which is a great tailwind for us. And we think about that in 2 ways. Number 1 is the growth of the AI category itself, which actually recent inflection point for us in Q2 in that the growth rate of that category increased. So in Q1, the AI category, our fastest-growing category in the platform grew 25% and in Q2, it grew 30%. And we actually see that growth rate continuing to accelerate. So that's a real tailwind for us.

The other enabling factor of kind of the AI effication of the overall work industry, is the implementation of AI on our platform. So we have what we call Ooma, which is Upwork's mindful AI companion on our platform. And if you think about the hiring process in general, it is what has been historically friction-filled, right? It's -- people come on to the platform, a client comes on, a business comes on. They write a job description. They post that job. Talent comes on, they have to write job proposals, they post those, the client has to review them, read them all and then interview talent. All of that is now taken care of by AI. So Ooma writes the job post, Ooma writes the job proposals. Ooma can now interview the talent and recommend talent to the client. And coming soon, we will also have Ooma start to create milestones for projects and project managed projects. So all of those things are being completely enabled by AI and reducing friction. What we saw in Q2 is that about $80 million of GSV is now driven by these improvements on the platform, and that is just set to increase.

Okay. So you talked -- and it's been an interesting journey you've been on and you and I have talked about this before, but the initial reaction to AI was quite as a potential negative impact on the company. And I think people have slowly come around to seeing some of the TAM expansion opportunities tied to AI. Has the definition of what you guys are looking at from a broader market opportunity and how you define the future of work changed as a result of what you've learned, especially in the last couple of quarters?

Yes, absolutely. Look, I mean people, I think, especially when I came on a couple of years ago, it's sort of the old Oscar World quote, the rumors of my demise have been greatly exaggerated. I think that people thought of AI as a real threat to work overall. And what we've seen is a very different story. We've seen, #1, the growth of the AI category itself, as I said, has been a real tailwind. We also see AI truly augmenting other categories on the platform that aren't classically thought of as AI categories. The implementation of coding enablement product kind of AI products are actually helping our talent get work done faster and just increasing their portfolio of work.

We're seeing other categories like video and animation, contract law, other things like that, that people thought would actually be disrupted by AI actually start to be accelerated by AI. And so this is a real benefit for us. I think another phenomenon that people need to start to kind of understand better is the fact that as AI starts to enable work, it's not full jobs that are going away, right? It is partial jobs. And human in the loop and the need for people to enable the kind of these AI solutions is going to continue. And what that means is that for companies like us that are offering contingent labor solutions, that can actually be a tailwind for us.

Yes. Okay. Understood. We did touch a little bit earlier on the macro environment overall. And it's been interesting the way you guys have talked about a whole host of demand signals you've seen over the last 6 to 12 months elements of what drives client growth, what drives client spend. Can you just level set on what you're seeing in the macro environment and bringing it back to how it informs client growth, client spend and then differences across types of clients even, which you've talked about before?

Yes, sure. So look, I mean, we have consistently seen the macro environment, as we know, is uneven and will be for some time. And I think, like I said, we have created a set of priorities, and I've only touched on a few of them so far, but a set of priorities that is really enabling us to perform regardless of the macro environment. So we will and are going to resume growth very presently despite the unevenness of macro. What we see from our clients is at the very top of the funnel, we continue to see pressure from kind of new client demand growth. And what we -- at the same time, what we're seeing is that our projects are getting bigger and bigger on the platform. So our customers are coming and trying to -- looking for contingent labor solutions to enable both AI solutions as well as all of the 130 categories of work on our platform.

And the places where we may see sudden substitution of AI is at the very smallest, most transactional types of work. Now that's about 5% of the GSV in our platform. The rest of the GSV in our platform bigger jobs, kind of larger, more complex jobs are simply being AI-enabled and we're seeing kind of wallet growth there.

Okay. Understood. So I do want to get into some of those strategic priorities because this is a technology conference. We'll turn to AI next, sort of contractually obligated, I think to bring that up. You've been at the forefront of trying to push AI into elements of all parts of your platform. Talk about where the AI integration into the freelancer and the business sides of your platform set today and how you think that might scale in the future and what it might mean for growth?

Well, like I said, in Q2, what we saw was the very early kind of implementations of kind of AI enabling platform are driving about $80 million of GSV. And that's just the very beginning. What we see is both on the freelancer side, so freelancers adopting AI tools. And we actually have a subscription product today called Freelancer Plus that offers kind of an upward ChatGPT like product to access to our freelancers. There's an opportunity for us to offer preferred access of AI tools to help freelancers enable their work even -- to an even greater degree in new subscription products, and that's just going to be a growth mechanism for us.

Another very important area of growth for us is a product that we call Business Plus on the marketplace. And that product is it's a premium take rate product. It's in the very early innings of adoption. We actually saw GSV growth of 190% quarter-over-quarter in Q2 and that is at the very early phases. Customers who adopt Business Plus, which is going to have kind of -- it's a [ premium ticketing ] product. So it's double the take rate on the client side of what we normally -- of our normal pricing. And some of our new AI enablement products, Ooma project management, other kind of tools like that, that will help work get done on platform are going to be part of this Business Plus product.

And beyond that, the really interesting future for us is the opportunity for AI-agentic work to happen on the platform. So what we see is a future where freelancers alongside AI agents are getting work done on the platform and for us, we can charge a take rate on the work regardless of whether it's done by a human or machine or both.

Okay. One follow-up question that's been talked a lot about at this conference is how companies are deploying AI internally. I know it's not as much about external and growth and some of the topics we probably will go deeper on. But just are there any examples you can give or ways you want investors to think about the way you're driving productivity gains or efficiency gains in your own company as a result of AI?

Yes, absolutely. I mean I think everyone is implementing kind of AI tools on the back end. Obviously, we've been implementing tools to increase productivity around coding. We've seen about a 25% increase in productivity from our kind of engineering ranks through some of these AI implementations. I'm also seeing some nice benefits within my own organization in terms of starting to implement some of our kind of the LLM models that our teams have built to create natural language search in our own metadata in order to kind of enable more faster and more rapid analytics with internally. So there are lots and lots of opportunities there. And when we see these AI implementations, and I think a lot of CFOs are similar in this way as really productivity improvers, right? I've never been at a tech company where the road map was completely subscribed.

And I think that's similar for everyone, right? We have road maps that we want to execute on and what we are starting to execute faster and seeing faster throughput, but it's really more of a productivity play.

Okay. You mentioned Business Plus, but I want to maybe go further up the funnel and talk about broadly about enterprise. You've seen a lot of good growth out of the enterprise. You're building a lot of enterprise solutions. Talk a little bit about repositioning the company for the larger enterprises over the long-term on the client side?

So we've had some incredibly exciting announcements around our enterprise business just in the past couple of months when we reported earnings in August, we announced 2 acquisitions a company called Bubty, which is a workforce management platform and a company called Ascen, which offers a full suite of kind of workforce solutions, staffing solutions. So this is a true game changer for us. Now if you think about our enterprise business, as it's been an evolution over the past several years, we have always been the expert and the best in the industry at offering IC talent, independent contractor talent. And that's really only about 10% of very large enterprise wallet spend. And we have this tremendous slate of very top-tier marquee enterprise companies in our list of clients. But up to now, because we were largely offering this IC lit contractual labor, we were only able to access about 10% of the spend.

Now with the addition of Bubty and Ascen, we have access to the full suite of contingent labor products across staffing solutions, employer of record, agent of record and really the full slate of contingent labor. And so now the full wallet of enterprise spend is open to us. And I'll tell you, since we announced our new lifted entity just about 3 weeks ago, we're getting a tremendous number of inbounds, not just interest in our -- from our internal customers but actually RFP requests coming in from other companies out there. So it's a super exciting time for our business.

Maybe just following up on that. So you bought the 2 companies, you're integrating them, you're repositioning. How should investors think about the pathway towards the enterprise solutions being built out, deployed and you could see the full impact of it from a growth standpoint?

Yes, absolutely. Look, we are, of course, going after now very large kind of contracts. And these are really tens, if not $100 million contracts that we're working -- that we're going after. And so we've been very thoughtful about making sure people understand that there will be a few quarters of kind of both integration work as well as working through the kind of discussions and negotiations of these contracts. So we expect the major GSV in revenue growth coming from these 2 acquisitions to start to manifest in the back half of 2026. Now that said, we -- like I said, we said at the end of last year that we expect to resume both revenue and GSV growth on both the marketplace and the enterprise as we enter 2026, and we're still well on that track.

Okay. Interesting. Your take rate has continued to move higher and been a tailwind for the company and advertising, in particular, has been a bright spot for the company. Talk a little bit about what you've built that has had an impact on take rate for the business, looking backwards first. And what are your broad messages to investors about how take rate might evolve of the go forward?

Yes. If you look at our take rate compared to the rest of the industry, we are at the low end today. So our take rate on the marketplace is about 18.5%. Our total take rate is around 19.5%. And that really is kind of the lowest if you look across the industry. Staffing industry is going to be around about, call it, 30% kind of others in the industry are closer to the mid- to high 20s. So the bias of our take rate is up. And -- but we are very, very thoughtful about making sure that we are pricing to value as we continue to grow take rates. So people should expect that both GSV and take rate will be growth drivers for us as we enter 2026 and beyond. And we have a number of levers that are pushing that. As you mentioned, our ads products continue to grow. We have a currency called Connects, which is what our freelancers use to bid on jobs. That -- our Connects revenue continues to grow. It grew 20% in Q2 and is continuing on that pathway.

We also have our subscription products, like I said, Freelancer Plus. We've also started to just recently, in May of this year, we announced or kind of revised our Ts and Cs on the freelancer side to have a variable fee on the freelancer side, anywhere from 0 to 15%, where it had been a 10% flat fee. Now the purpose of doing that is really to use the supply and demand dynamics on the platform to drive both take rate and GSV. So if you think about the way that our kind of categories work, we have some categories with very, very large supply where we can increase take rate. Other categories with lower supply where we made decreased take rate to grow GSV. We started experimenting with that in May with very, very nice successful results and we're really in the first inning of that work. And so we see that as a major driver, both of take rate and the GSV going into 2026.

And then lastly, of course, is our Business Plus product which is very early days. We see higher spend from the customers who adopt that product and actually about 35% of Business Plus users are new to the platform, and we haven't even started to market it yet. So a lot of exciting things to come there from a take rate driver point of view.

And one question I do get from investors from time to time is there's an acknowledgment of that gap in take rate. How do you think about a take rate that's lower than the industry being a competitive advantage to some degree as opposed to closing a gap where you feel there's some economic value that's being added from a platform standpoint that should be realized. How do you think about that gap? Where do you talked about that as a team.

Yes. No. I mean I think it's an interesting question. That's why we're so focused on pricing the value. I mean the reality is that as we build out the value prop, if you look at the Business Plus product, what we offer there is access to the top talent on the platform, curation of talent, net 30 billing and we're actually offering even -- building even more feature sets, the ability to build teams more easily and gather kind of groups of freelancers in order to execute on bigger products. So this is opening up more of the kind of medium business TAM for us. And so as long as we continue kind of on that pathway to pricing to value, we see no reason that it can't continue to be both a competitive advantage and a growth driver for us.

Okay. You've talked about it a little bit, but beyond core marketplace, I think the other area that's increasingly getting some focus is what you can build and scale on the value-added services side on a multiyear view. So just thematically bring together how the company thinks about value-added services and sort of what that might do to the platform over the next 3 to 5 years?

Yes. Sure. I mean, look, I think there's a tremendous amount of opportunity on the value-added services side that we are just at -- in the very early phases of thinking through and tapping into. We've already started. We launched a micro lending product for freelancers. We can do the same on the client side. And there's really a lot more to come there that we're honestly just at the beginning of our journey on.

Okay. Understood. We talked a little bit earlier about the progress you've made on margins. Just one last one here on the cost side. Anything to highlight about the way which you anchor investors to think about long-term margin potential for the business relative to where you are today?

Yes. I mean we've made tremendous strides on our margin journey. And this year, I think we're going to increase our adjusted EBITDA margin 6 points year-over-year. And so we're incredibly proud of that. We've also been able to do that while investing to resume growth in our business. So I kind of feel like we've been able to do it all. Now most of our growth investments that we've really kind of initiated over the past couple of years are really showing green shoots right now. Business Plus, our ads and monetization strategies, our enterprise business, all showing growth potential. And so you will see it start to slow our margin journey because we do want to both grow our margins, continue on that journey, but also grow our top line.

So you'll see us as we go into 2026 continue to increase margin, but probably at a slower rate. And we reiterated our kind of longer-term goal of 35% adjusted EBITDA margin. No change there. We see that very much within our grasp while also growing top line.

Okay. Building on the margin dynamic, and you talked about it either growth investments or M&A or some of the choices you face as a management team. What are the priorities for capital allocation within the company. And what might change or how have they changed over the last 12, 18 months?

Yes. I mean I don't know that they've changed all that much. We have a very kind of focused set of organic growth investments that we are making, and they are the AI investments that I articulated, the growth of enterprise and then our ads and monetization strategies. And then beyond that, we've had a very successful M&A track record, right? We've done 4 acquisitions in the last 3 years, 2 of which were AI tech and talent acquisitions, first Headroom and Objective AI, both of which have been really the drivers behind our successes of our AI implementations on the platform and now most recently, our 2 enterprise acquisitions of Ascen and Bubty. So we're super pleased. These have been inexpensive. Ascen and Bubty cost us about 1/4 of free cash flow to acquire those 2 businesses, and they're going to really be huge growth drivers for our business.

So we will continue to look at opportunities for smart high-yield M&A. And then beyond that, we'll continue to buy back stock and return capital to shareholders as we've been doing. We just, last week, announced our third $100 million stock buyback in 2 years. And so we're going to continue with that portfolio.

I know we only have a few minutes left together, but just bring it all together in terms of -- we've talked a lot during this conversation about the strategic priorities, the growth initiatives, elements of margin and capital. If you had to frame what the 2 or 3 biggest priorities for the company on the execution side and the road map are going forward, what are you guys most focused about? What are you most excited about as a team?

I mean I think I've sort of said it all. The opportunities with ongoing implementation of AI on the platform are enormous for us. And the fact that we're seeing this inflection of that category and the growth rate starting to just accelerate is super exciting for us. And -- but that's really only the beginning. The continuing to evolve Ooma to become more and more agentic and really help to execute work on the platform and seeing humans and AI side-by-side executing work is really the future. And to be honest, we're really one of the only platforms out there who are poised to be able to take advantage of this because our DNA is technology. If you think about all the other kind of contingent labor staffing solutions out there, these are very, very old tech stacks that simply don't have the capability to ingest this kind of technology that we do.

So this is enormous for us. And then, of course, the enterprise TAM, our GSV in enterprise is about $300 million today. The TAM of that enterprise contingent labor business is $650 billion. So accessing that is huge. And then third and final, I guess, is our ads and monetization business and Business Plus, which is really our entry into kind of the TAM and the medium business segment. So lots of exciting things to come. And I think we're really -- we are in an inflection point in this business, and I hope people keep watching.

Yes. Well, really interesting stuff. I know we'll talk in the interim, but hopefully, you'll come back next year and we'll have this conversation all over again, and we'll check in on all these things that you're building and -- inside the company. Erica, thanks so much for coming to the conference. Please join me in thanking Upwork for being part of the conference this year.

Thanks, Eric.