Upwork's stock dropped on Friday following the company's latest quarterly report and an accompanying reduction in its revenue outlook that led to downgrades from analysts at Citizens and UBS.
For the first quarter, Upwork reported revenue of $195.5 million, which matched consensus estimates, while adjusted earnings per share came in at $0.35, beating expectations by $0.08. Despite those results, the company lowered its revenue outlook for the full year by approximately 8%.
Guidance for the second quarter was set at $187 million to $193 million, noticeably below the Street consensus of $204 million. At the midpoint of that range, the guidance implies year-on-year revenue decline. Management issued a full-year revenue range of $760 million to $790 million, also short of the consensus forecast of $842 million.
Citizens analyst Matthew Condon moved his rating to Market Perform, pointing to persistent headwinds from artificial intelligence. Condon wrote that "AI-induced headwinds are likely to persist as model capabilities continue to advance and become capable of completing increasingly complex tasks." He noted that while AI-related engagements on the platform are growing quickly and have surpassed $300 million in annualized gross services value, it will "take considerable time before AI-native tasks represent a meaningful majority of platform activity."
UBS analyst Joshua Chan lowered his rating on Upwork to Neutral and cut his price target to $10 from $20. Chan cited the return to negative gross services value, or GSV, growth after a brief recovery in the second half of 2025 as a key concern. He wrote that "the return to negative GSV growth is likely to put AI disintermediation back at the forefront." Chan now models a 4% year-on-year decline in GSV for 2026.
Analysts acknowledged that measures taken by the company - including a cost restructuring that eliminated 24% of Upwork's workforce and share repurchases - offer some protection against downside risk. However, they judged those actions insufficient to fully offset the revenue shortfall and the negative narrative tied to AI disintermediation.
Context and market reaction
The dislocation between near-term operating results and the weaker-forward guidance appears to be the primary driver of the share move. First-quarter operating performance broadly met market expectations, but the reduced guidance for both the second quarter and full year refocused attention on demand trends and structural pressures related to AI.
What remains uncertain
Key open questions include the pace at which AI-related tooling will replace or augment freelance tasks on the platform and how quickly revenue growth can resume once AI adoption dynamics stabilize. Analysts cited in the note flagged continued AI capability improvements as a mechanism that could further erode certain categories of freelance demand.
Investors will likely watch subsequent quarters for evidence that gross services value and revenue can recover, and for clarity on the net effect of cost reductions and buybacks versus the top-line headwinds.