Can Udemy Prove Its AI Upskilling Thesis Before Enterprise Budgets Tighten?

Udemy (UDMY) is scheduled to report first-quarter 2026 earnings on May 6, 2026, with the stock trading at $4.74 amid a backdrop of significant strategic transformation. The central question facing investors is whether the company's pivot toward subscription-based revenue and its pending merger with Coursera can offset near-term profitability pressures, as analysts have dramatically revised their 2026 earnings outlook downward. With technical indicators flashing strong sell signals and the stock trading below all major moving averages, this earnings release will test whether UDMY's operational momentum can stabilize investor confidence during a period of strategic uncertainty.

Part 1: Earnings Preview

Udemy operates a leading AI-powered skills acceleration platform serving both enterprise customers through its Udemy Business segment and individual learners through its Consumer segment. The company has been executing a strategic transformation toward subscription-based revenue models while navigating a pending all-stock merger with Coursera announced in December 2025.

Udemy is expected to report first-quarter 2026 results on May 6, 2026. The consensus estimate calls for an EPS loss of $0.02 on revenue expectations that remain unavailable in the current data. The company most recently reported fourth-quarter 2025 results with actual EPS of $0.02, representing a significant beat against the $-0.02 consensus estimate. Comparing to the same quarter last year, the Q1 2025 actual EPS was $0.00, suggesting year-over-year comparisons will be challenging as analysts now project a return to losses.

Three key narrative themes define this earnings story:

Merger Integration Uncertainty: The pending combination with Coursera, expected to close in the second half of 2026, creates strategic ambiguity. Investors will scrutinize management commentary for integration timelines, cost synergy targets, and any regulatory developments. The transaction structure—where Udemy shareholders receive 0.800 shares of Coursera stock—means UDMY's standalone valuation increasingly depends on deal execution rather than independent growth prospects.

Subscription Revenue Momentum: Udemy's strategic pivot toward recurring revenue showed promising results in 2025, with consolidated subscription revenue growing 8% year-over-year to represent 72% of total revenue. The critical question is whether this momentum sustained through Q1 2026, particularly in the Consumer segment where paid subscribers surged 102% year-over-year to 343,000 by year-end 2025. Any deceleration in subscriber additions or retention metrics could signal challenges in the transition away from transactional course sales.

Profitability Trajectory Amid Investment: After delivering its first full year of positive net income in 2025 and expanding Adjusted EBITDA margin by 700 basis points to 12%, the company faces a critical test of whether it can maintain profitability while investing in AI-powered microlearning tools and enterprise expansion. The dramatic downward revision in 2026 EPS estimates—from $0.07 to $-0.01—suggests analysts expect near-term margin pressure, making any guidance on cost discipline and operating leverage essential.

Analyst commentary ahead of the release reflects cautious positioning. While the company demonstrated strong execution in Q4 2025 with $13 million in Net New Annual Recurring Revenue and stabilization of Net Dollar Retention Rates at 97% for Large Customers, the strategic restructuring and merger-related costs have clouded the near-term earnings picture. Analysts will be listening for updates on enterprise customer additions, AI content engagement metrics (which grew 120% year-over-year in 2025), and any refinements to the integration roadmap with Coursera.

Part 2: Historical Earnings Performance

Udemy has established a consistent pattern of exceeding earnings expectations across recent quarters, demonstrating operational execution that has repeatedly surprised to the upside. Over the past four quarters, the company beat consensus estimates in every single report, with surprise percentages ranging from +100% to +300%.

The magnitude of these beats has been substantial. In Q1 2025 (March quarter), UDMY reported $0.00 EPS against a $-0.04 estimate, a 100% beat. The outperformance accelerated through Q2 2025 with $0.04 actual versus $-0.02 estimated (300% beat), followed by Q3's $0.01 against $-0.03 consensus (133% beat), and most recently Q4's $0.02 versus $-0.02 estimate (200% beat). This pattern reveals not only consistent execution but also a tendency for analysts to underestimate the company's ability to control costs and drive profitability during its strategic transformation.

The trend is particularly notable given the company's pivot toward subscription revenue and the operational restructuring undertaken in 2024. Each quarter's beat suggests management has successfully navigated the transition away from transactional course sales while maintaining tighter expense discipline than Wall Street anticipated. However, the current quarter's $-0.02 consensus estimate—representing a return to expected losses after four consecutive profitable quarters—indicates analysts are building in caution around merger-related costs and strategic investments, setting up another potential scenario where UDMY could surprise if operational momentum continues.

Note: These figures reflect diluted GAAP earnings per share, reported before non-recurring items, and may differ from the non-GAAP figures used by some sources.

Part 2.1: Price Behavior Around Earnings

Udemy's earnings timing has varied, with recent reports occurring both before market open and after market close, making Day 0 moves reflect either immediate market reaction or anticipatory trading depending on the specific release schedule.

Udemy's post-earnings price behavior shows significant volatility, with an average absolute Day +1 move of 9.96% and an average Day +1 range of 14.77%—indicating substantial two-way price action in the session following results. The most dramatic reaction occurred after the February 2025 report, which saw a +28.01% Day +1 move with a 30.82% range, likely reflecting market enthusiasm for the company's first full year of profitability and subscription revenue momentum.

The Day 0 moves have been more muted, averaging 2.32% with a 4.43% range, suggesting initial market reactions are often tempered before the full implications of results and guidance are digested. However, the October 2025 earnings demonstrated how quickly sentiment can shift, with a modest -6.86% Day 0 decline expanding to an -11.76% Day +1 move as investors processed the strategic implications.

Investors should prepare for double-digit percentage swings in the session following this release. The historical pattern suggests the market takes time to fully price in UDMY's results, with Day +1 consistently showing larger moves than Day 0. Given the current strategic uncertainty around the Coursera merger and the return to expected losses in Q1 2026, volatility could be elevated even by UDMY's historical standards.

Part 2.2: Options Market Expected Move

The options market is pricing an expected move of 1.79% through the May 15 expiration, which is dramatically lower than UDMY's historical average Day +1 move of 9.96%. This substantial disconnect suggests either options traders are underpricing earnings volatility or the market expects an unusually muted reaction to this particular release, possibly due to the pending merger reducing standalone trading significance.

Part 3: What Analysts Are Saying

Analysts maintain a cautious stance on Udemy with an average recommendation of 3.43 (between Hold and Buy), reflecting measured optimism tempered by near-term uncertainty. The consensus is based on 7 analysts, with 1 Strong Buy, 1 Moderate Buy, and 5 Hold ratings—no analysts currently rate the stock a sell. The average price target of $8.00 implies 69% upside from the current price of $4.74, with estimates ranging from a low of $6.00 (27% upside) to a high of $10.00 (111% upside).

The wide dispersion in price targets—spanning $4.00 from low to high—reflects divergent views on how to value UDMY in the context of its pending Coursera merger and standalone growth prospects. The most bullish analysts appear to be pricing in successful merger execution and accelerated market share gains in enterprise learning, while more conservative views likely factor in integration risks and near-term profitability pressures.

Analyst sentiment has remained unchanged over the past month, with the rating distribution and average recommendation holding steady at 3.43. This stability suggests the analyst community is in wait-and-see mode, likely deferring major rating changes until the Q1 results provide clarity on subscription momentum, enterprise customer additions, and management's updated perspective on the Coursera integration timeline. The lack of any sell ratings indicates analysts see limited downside risk at current levels, even as they acknowledge the strategic transition creates near-term earnings volatility.

Part 4: Technical Picture

Udemy's technical setup heading into earnings is decidedly bearish, with the Barchart Technical Opinion registering an 88% Sell signal—a significant deterioration from 72% Sell a month ago and 48% Sell a week ago. This rapid weakening in technical sentiment reflects mounting selling pressure as the stock has failed to hold key support levels.

The stock is trading at $4.74, positioned below all major moving averages: the 5-day ($4.79), 10-day ($4.76), 20-day ($4.78), 50-day ($4.78), 100-day ($5.02), and 200-day ($5.74). This complete breakdown below short-, intermediate-, and long-term trend indicators signals pervasive technical weakness across all timeframes. The 200-day moving average at $5.74 represents 21% overhead resistance, illustrating the magnitude of the downtrend from prior levels.

Timeframe Analysis:

• Short-term (75% Sell): Strong sell signal indicates near-term momentum is negative, with the stock unable to reclaim even the shortest-duration moving averages
• Medium-term (100% Sell): Extreme sell reading suggests intermediate-term trend has completely broken down, with no technical support visible
• Long-term (100% Sell): Maximum bearish signal reflects severe deterioration in the longer-term trend structure, indicating a sustained downtrend

Trend Characteristics: The technical environment is characterized by Average strength in a Weakening direction, suggesting the downtrend remains intact but may be approaching oversold conditions where selling pressure could temporarily exhaust.

The technical picture is highly cautionary heading into earnings. With the stock trading below all moving averages and technical indicators flashing maximum sell signals across medium- and long-term timeframes, UDMY lacks any meaningful technical support. The nearest resistance sits at the 5-day moving average of $4.79, just 1% above current levels, while more substantial overhead resistance clusters around the 50-day average at $4.78 and extends to the 100-day at $5.02. Any positive earnings surprise would need to be substantial to overcome this technical headwind and trigger a sustained reversal. Conversely, a disappointing report could accelerate the existing downtrend, with limited technical support visible until the stock establishes a new base. The weakening trend direction suggests momentum remains to the downside, making this a technically vulnerable setup where earnings execution will need to significantly exceed expectations to shift the bearish technical narrative.