2 Online Educational Platforms Staging a Turnaround

Key Points

• Online learning platforms are becoming increasingly used by companies to assess, reskill, upskill and certify skills for workers and candidates.
• Udemy generates most of its recurring revenue from enterprise clients, including Hewlett Packard Enterprises, Proctor & Gamble, Cisco and Volkswagen.
• Coursera is partnered with Microsoft, Amazon and Google to provide GenAI training and skills certification for entry-level Professional Certificates.

The growth of broadband has made education accessible to anyone with an internet connection. Whether taking courses for personal growth, skills certification, reskilling, or upskilling, online educational platforms have become mainstream. They've been enhanced with artificial intelligence (AI) features to become more personalized and interactive. The costs have also come down dramatically due to competitive forces, making it a win-win for consumers and operators. Here are two learning platforms in the consumer discretionary sector that are in the process of staging turnarounds.

Udemy: Reskill, Upskill, and Certify for Enterprise Clients

The Udemy Inc. NASDAQ: UDMY platform is a marketplace for learning and certifying skills. It's a trusted platform used by more than 16,000 companies, including the Proctor & Gamble Co. NYSE: PG, Hewlett Packard Enterprise Co. NYSE: HPE, Cisco NASDAQ: CSCO and Volkswagen AG OTCMKTS: VWAGY for training and certification preparation. The platform has over 250,000 courses in over 15 languages that can be accessed through subscription plans starting at $20 a month. Udemy's customers range from individuals to corporations.

AI algorithms curate relevant content for users and provide course recommendations based on learning objectives, preferences and user behavior. Udemy provides over 200 industry-recognized certification exams from issuers, including Amazon.com Inc. NASDAQ: AMZN AWS, Alphabet Inc. NASDAQ: GOOGL and Microsoft Co. NASDAQ: MSFT.

Profitability and Growth Resume Driven by Enterprise Clients

Udemy has a deep pocket clientele of corporations in its Enterprise segment, which grew double digits, while its Consumer segment slipped. Enterprise is the growth engine that Udemy is leveraging and winning over.

In its third quarter of 2024, Udemy reported EPS of 7 cents, which bested consensus analyst estimates by 6 cents. Revenues rose 6% YoY to $195.42 million, beating consensus estimates for $192.69 million. Gross margin improved to 64%, up from 60% last year. The Enterprise segment grew its user base by 10% YoY to 16,848 with annual recurring revenue growth of 14% YoY to $504.6 million, which is a new record milestone. The Consumer segment revenue fell 8% YoY to $69.3 million. The company ended the quarter with $358.3 million in cash and cash equivalents.

The company issued in-line guidance for Q4 revenues of $193 million to $196 million versus $195.81 million consensus estimates. The MarketBeat consensus analyst price target is $11.00, representing a 36.8% upside.

Coursera: AI Skills Training and Certification 

A Boston Consulting Group report cited that C-Suite executives predict 46% of the workforce will need to be reskilled in generative AI (GenAI) in the next three years. This will spark a demand surge for reskilling and upskilling AI skills. Coursera Inc. NYSE: COUR has built itself a moat around AI skilling through its strong partnerships. It also added Coursera Coach powered by Google Gemini AI. Coursera Coach provides interactive instruction, enabling instructors to scale in-room teaching methods to students. Coursera Coach also provides career guidance that will help learners discover and explore career paths and identify and receive tailored learning paths toward these career paths and goals.

Consumers Are Driving the Growth

Coursera’s segments include Enterprise, Consumer, and Degrees. In contrast to Udemy, Coursera generates the majority of its revenue from the Consumer segment, which saw a 3% YoY jump to $102.3 million in Q3 2024. Coursera Plus was the driver of recent certificate launches, helping to add 7 million new registered learners to a total of 162 million.

Enterprise revenue grew 10% YoY to $60.4 million, driven by business, campus, and government vertical growth. Paid Enterprise Customers rose 19% YoY to 1,564.

Degrees revenue rose 15% YoY to $13.4 million. The gross margin was 100%, as there is no content cost attributable to this segment. Degrees students rose 29% YoY to 26,400.

Added New Professional Certificates and GenAI Certificates

Coursera announced nine entry-level Professional Certificates from industry partners, including Microsoft, Google, Amazon, Adobe Inc. NASDAQ: ADBE and International Business Machines Co. NYSE: IBM. Coursera also added and upgraded 20 GenAI certificates and specializations from expert instructors, including IBM, Google and Microsoft.

Coursera CEO Jeff Maggioncalda commented, “In the third quarter, we demonstrated strong progress across Coursera's learning ecosystem. We welcomed ten new partners and launched more than a dozen industry micro-credentials, many of which teach emerging skills in generative AI.” The consensus analyst price target is $10.93, with a 57% upside.