What Happened?

Shares of online learning platform Udemy (NASDAQ:UDMY) jumped 32.6% in the afternoon session after the company reported strong fourth-quarter results, which beat across the key metrics we track, including sales, EBITDA, and earnings. It also provided optimistic EBITDA guidance for the next quarter, which outperformed analysts' expectations. Revenue grew year on year, driven by an 18% increase in the Enterprise segment, which offset a decline in the Consumer business. Gross margin expanded significantly given the shift to large enterprise deals, helping adjusted EBITDA beat estimates. EPS benefited from these margin improvements, beating expectations by a noteworthy margin. 

However, while next quarter's EBITDA outlook was ahead of analysts' estimates, revenue guidance for both the next quarter and full year fell short of Wall Street's expectations. Overall, we think this was still a decent quarter with some key metrics above expectations.

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What The Market Is Telling Us

Udemy’s shares are somewhat volatile and have had 10 moves greater than 5% over the last year. But moves this big are rare even for Udemy and indicate this news significantly impacted the market’s perception of the business. 

The biggest move we wrote about over the last year was 7 months ago when the stock dropped 22.9% on the news that the company reported second-quarter earnings results. Udemy not only lowered its full-year revenue guidance but also missed Wall Street's EPS estimates. Sales were impacted by FX headwinds and a decline in consumer revenue. Also, there were challenges with upsells, which took longer than historical trends, and pressured the reported retention rate. Overall, this was a bad quarter for Udemy.

Udemy is up 22.7% since the beginning of the year, but at $10.11 per share, it is still trading 27.8% below its 52-week high of $14.01 from February 2024. Investors who bought $1,000 worth of Udemy’s shares at the IPO in October 2021 would now be looking at an investment worth $367.59.

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