Upskilling And AI Integration Will Open Japan And Global Markets

Key Takeaways

• Growing enterprise demand and strategic international expansion are driving pipeline growth, higher retention, and reducing reliance on mature markets.
  
• Subscription model, AI-powered learning, and new monetization streams are increasing margin stability, customer engagement, and recurring revenue.
  
• Increased dependence on enterprise clients and challenges in content quality and customer retention threaten growth, margin expansion, and long-term market competitiveness.

Catalysts

A learning company, that operates a marketplace platform for learning skills in North America, Europe, the Middle East, Africa, the Asia Pacific, and Latin America.

• Acceleration of global upskilling and workforce reskilling due to the widespread adoption of AI and rapid technological change is increasing enterprise demand for Udemy's training solutions, particularly as organizations look for ongoing and personalized skill development at scale; this is leading to a growing pipeline, higher contract values, and early signs of net new ARR growth, supporting future revenue acceleration.
  
• The shift towards a subscription-based revenue model-now comprising around 70% of overall revenue-provides greater earnings predictability, higher gross margins, and improved bottom-line performance as Udemy Business (B2B) wins larger deals and consumer subscription GMV grows >40% YoY, indicating robust future margin expansion and more stable recurring cash flows.
  
• Strategic expansion in international markets, particularly through local partnerships in high-growth regions (e.g., Latin America, India, Japan) and region-specific market activation, is already producing double-digit ARR growth and higher retention rates in markets like Japan, pointing towards strong long-term revenue diversification and lowered dependence on slower-growing North American markets.
  
• Udemy's deepening integration of AI-powered content creation and learning personalization (e.g., AI assistants, roleplay, skill assessment, and context-driven learning in the workflow) is building a data and technology moat, driving up conversion rates, customer engagement, course completion, and ultimately ARPU-translating into both top-line growth and strengthened enterprise client retention.
  
• Emergent revenue streams, such as programmatic advertising on free courses and new AI-focused enterprise SKUs (e.g., AI readiness packages), along with enhanced merchandising, are unlocking untapped areas of monetization and are poised to materially boost revenue per customer and broaden Udemy's total addressable market, further supporting future revenue growth and operational leverage.

Udemy Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Udemy's revenue will grow by 4.7% annually over the next 3 years.
• Analysts assume that profit margins will increase from -3.9% today to 8.2% in 3 years time.
• Analysts expect earnings to reach $75.1 million (and earnings per share of $0.56) by about September 2028, up from $-30.6 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $87.4 million in earnings, and the most bearish expecting $-64.1 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 27.3x on those 2028 earnings, up from -33.0x today. This future PE is greater than the current PE for the US Consumer Services industry at 20.4x.
• Analysts expect the number of shares outstanding to grow by 3.04% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.08%, as per the Simply Wall St company report.

Udemy Future Earnings Per Share Growth

Risks

• The Consumer segment revenue is expected to decline by approximately 8% year-over-year for 2025, indicating persistent weakness in the direct-to-consumer side of the business despite green shoots; this ongoing softness may put pressure on total revenue growth and limit overall earnings potential.
  
• The company is working through the renewal of large COVID-era contracts, particularly among small and medium business (SMB) customers, which have resulted in higher churn and lower expansions; lack of robust implementation and value alignment in these contracts is causing short-term headwinds for net dollar retention and recurring revenue stability through at least the rest of 2025.
  
• While Udemy emphasizes differentiation through AI-powered offerings and marketplace agility, advances in AI-driven personalized learning from larger tech companies and increasing adoption of enterprise Learning Management Systems (LMS) could erode Udemy's long-term competitive advantage, impacting both market share and margin expansion.
  
• The shift towards enterprise and subscription models generates higher predictability and potential margins, but the current upmarket focus contributes to a decline in SMB customers, naturally shrinking the customer base and increasing dependency on fewer, larger deals-exposing Udemy to concentrated revenue risk if large clients churn or reduce spending.
  
• Heavy reliance on third-party instructors for rapid content creation means that maintaining content quality and consistency will remain challenging as the platform scales; further, the proliferation of free high-quality content and discount-driven pricing strategies could continue exerting downward pressure on average revenue per user (ARPU) and limit near
• to medium-term improvements in net margins.

Valuation

• The analysts have a consensus price target of $10.173 for Udemy based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $12.0, and the most bearish reporting a price target of just $9.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $913.6 million, earnings will come to $75.1 million, and it would be trading on a PE ratio of 27.3x, assuming you use a discount rate of 7.1%.
• Given the current share price of $6.72, the analyst price target of $10.17 is 33.9% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.