Upwork Beats Estimates But Shares Plunge 22% on Disappointing Outlook

Upwork delivered solid fourth-quarter results that topped Wall Street expectations, but investors are punishing the stock after hours following weak guidance for the first quarter and full year 2026.

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Upwork Inc. (UPWK) reported its fourth-quarter 2025 earnings Monday after the closing bell, delivering results that beat Wall Street's targets. The problem? Investors aren't thrilled about what's coming next.

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The freelance platform posted fourth-quarter revenue of $198.41 million, edging past analyst estimates of $197.52 million. Adjusted earnings came in at 36 cents per share, comfortably ahead of the 31-cent consensus estimate. Not bad on the surface.

Digging into the details, total revenue climbed 4% year-over-year. Upwork ended the quarter with 785,000 active clients, and gross services volume per active client hit $5,129, up 7% from the prior year. The company generated $63.7 million in cash from operations and $57.3 million in free cash flow during the period.

"2025 marked the year we rebuilt Upwork for the age of human-plus-AI collaboration, turning global change into a definitive tailwind, all while demonstrating strong financial performance," said Hayden Brown, president and CEO.

"We enter 2026 as the leader of a new category, serving as the operational backbone for businesses navigating this new AI era of work."

On the capital allocation front, Upwork repurchased two million shares for $34 million in the fourth quarter. The company has $64 million remaining on its buyback authorization and closed the period with $294.36 million in cash and equivalents.

Here's where things get uncomfortable for shareholders. Upwork expects first-quarter revenue between $192 million and $197 million, significantly below the $200.83 million analysts were anticipating. Even more concerning, the company projects first-quarter adjusted earnings of just 26 to 28 cents per share versus the Street's 34-cent estimate.

For the full year 2026, Upwork sees revenue landing between $835 million and $850 million, roughly in line with consensus of $836.15 million. The company expects full-year adjusted earnings of $1.43 to $1.48 per share, slightly above the $1.42 analyst estimate.

That soft first-quarter outlook appears to be what's really spooking investors. Management is scheduled to discuss the results further on an earnings call at 5 p.m. ET.

Upwork shares were trading down 22.35% at $14.59 in extended trading following the announcement, according to market data. It's a classic case of "beat and retreat" where solid quarterly performance gets overshadowed by concerns about what lies ahead.

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