The stock is cheap if it can live up to management’s plans for 2026.
Shares of online education company Udemy (UDMY -19.10%) got hammered on Thursday after it delivered financial results for the second quarter. The numbers weren’t bad, but investors are likely more concerned by management lowering its full-year guidance. As of 12:30 p.m. ET today, Udemy stock was down about 18%.
A good quarter with bad guidance
Management had said that it expected second-quarter revenue between $192 million and $195 million. It ultimately generated second-quarter revenue of more than $194 million, which was right on target and up 9% year over year.
Udemy is a two-sided education marketplace: Third-party contributors create courses, and learners can buy a course if accreditation isn’t important to them. Enterprises increasingly subscribe to Udemy Business to provide a catalog of courses to their employees. In the second quarter, Udemy Business accounted for 62% of total revenue and reached annual recurring revenue of $493 million.
These numbers were good. But management said it needs to restructure the business to chase its highest growth opportunities. And it seems that growth is a little ways off. Management only expects 5% top-line growth, at most, in the upcoming third quarter. And it lowered full-year revenue guidance to a range of $776 million to $782 million, compared with previous guidance of $795 million to $805 million.
What should investors do now?
Udemy’s management also said that it expects to report between $130 million and $150 million in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) in 2026. For perspective, it has an enterprise value of roughly $980 million, as of this writing. That’s a really cheap valuation if it achieves its profit goal.
I see reasons for optimism here. Udemy’s customer metrics continue to climb, and it should be able to achieve profitability as previously announced plans to change the payout structure to instructors plays out. As long as the company retains both instructors and buyers, I think the outlook for this stock can improve in coming years.
Jon Quast has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
