What Happened:
Shares of online learning platform Udemy (NASDAQ:UDMY) jumped 7.76% in the morning session after the company reported a "beat and raise" quarter. Third-quarter results surpassed analysts' revenue, gross margin, adjusted EBITDA and EPS expectations. Full-year revenue and adjusted EBITDA guidance came in higher than Wall Street's estimates and was raised following the impressive results. Similarly, revenue guidance for the next quarter came in ahead of expectations.
Udemy also announced a plan to gradually reduce the share of subscription revenue paid to instructors, starting at 20% in 2024 and ultimately reaching 15% by 2026. It is a doubly good signal for the business. One, it shows that it is becoming a standard in the industry and does not need high compensation to retain instructors--they will want to be on the platform since that's where students and learners are. Two, it will result in structurally higher gross margins that give the company a better starting point for operating profits and free cash flow. Zooming out, we think this was a great quarter, showing that the company is not just staying on track but exceeding expectations both near and longer term.
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What is the market telling us:
Udemy's shares are very volatile and over the last year have had 25 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
Udemy is up 16.7% since the beginning of the year, but at $12.40 per share it is still trading 25.1% below its 52-week high of $16.56 from November 2022. Investors who bought $1,000 worth of Udemy's shares at the IPO in October 2021 would now be looking at an investment worth $452.18.
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