RBC Capital kept a ‘Sector Perform’ rating on Upwork while citing pressure from both artificial intelligence trends and changes to Google’s search algorithm.
- RBC Capital noted that Google’s May and June SEO changes have created traffic headwinds that have yet to stabilize heading into the third quarter.
- Upwork CEO Hayden Brown said the AI and macro headwinds persisted into Q3, with accelerating AI automation and continued pressure from Google’s search changes.
- Brown also pointed to growing demand for AI-related work on the platform, saying that clients are seeking talent who can complete or fix projects they started with AI.
Shares of Upwork Inc. (UPWK) were headed for their worst single-day fall in three months, with Wall Street expressing concerns following the company’s second-quarter results.
According to TheFly, analysts at RBC Capital flagged Upwork’s latest quarter as “challenging,” lowering its price target to $8 from $9.
Upwork shares were down nearly 16% in Tuesday’s pre-market trade. UPWK was among the top trending tickers on Stocktwits at the time of writing.
Wall Street Flags Traffic Headwinds
RBC Capital kept a ‘Sector Perform’ rating on Upwork while citing pressure from both artificial intelligence trends and changes to Google’s search algorithm.
The firm described Upwork’s latest results as a “challenging Q2 print,” while noting that Google’s May and June SEO changes have created traffic headwinds that have yet to stabilize heading into the third quarter (Q3).
“On top of known AI secular headwinds, Google’s May/June SEO changes are driving traffic headwinds, which have yet to stabilize into Q3,” the firm said in its note.
Goldman Sachs took a more constructive view of the quarter, maintaining its ‘Buy’ rating despite lowering its price target to $11.5 from $17.5.
The firm said Upwork showed “solid execution despite macro and labor-market pressure,” pointing to accelerating AI-oriented work and Business Plus, higher gross services volume per client supporting margins and enterprise initiatives as potential drivers of longer-term growth.
Upwork CEO Warns AI, SEO Headwinds Persist
Upwork CEO Hayden Brown acknowledged during a post-earnings call that the AI and macro headwinds affecting the business persisted into Q3, with an acceleration in AI-related automation and continued pressure from Google’s search changes.
“Google’s changes to search have dampened new customer acquisition with accelerated negative impact in Q2,” Brown said. She added that while Upwork’s SEO rankings have continued to improve, “the channel overall is smaller.”
The company is responding by diversifying its customer acquisition strategy beyond Google, including through paid search, answer engine optimization and LLM-based referrals. Brown said cost per new contract start improved 22% quarter over quarter, giving Upwork confidence to increase paid acquisition investments for the rest of the year.
At the same time, Brown pointed to growing demand for AI-related work on the platform.
Brown said Upwork is building tools to capture that shift, including its newly announced MCP Server, which allows Upwork talent and jobs to be accessed through AI tools. “These levers give us new paths to acquire customers in this unfolding AI and marketing landscape,” she said.
UPWK’s Guidance Misses Expectations
Upwork’s Q3 forecast missed Wall Street expectations. The company forecast earnings per share (EPS) of $0.31-$0.33 on revenue of $176 million to $184 million, missing an expected EPS of $0.41 on revenue of $193.8 million, according to Fiscal.ai data.
Upwork reported an EPS of $0.41 on revenue of $191.7 million, beating estimates of an EPS of $0.34 on revenue of $190 million.
What Retail Traders Think Of UPWK Stock
Retail sentiment on Stocktwits around Upwork hovered in the ‘extremely bullish’ territory, with message volumes at ‘extremely high’ levels at the time of writing.
UPWK stock is down 50% year-to-date and 25% over the past 12 months. The iShares Core S&P Small-Cap ETF (IJR) is up 34% over the past 12 months, while the iShares Russell 2000 ETF (IWM) is up 36%.
The iShares Russell 2000 Value ETF (IWN) is up 39% during this period, while the Vanguard Morningstar Small-Cap Growth ETF (VBK) is up 29%.
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