Upwork’s Q3 2025: The legacy hiring platform successfully navigating Gen AI
Last March I argued Gen AI would unbundle Upwork. The growing capabilities of Gen AI plus Upwork’s stagnant GSV led me to think this. Eighteen months later, GSV is growing again and management clearly attributes this to Generative AI’s growth.
Upwork has executed much better than I expected.
Upwork was formed by merging two old freelance platforms into one, run by hired executives. I thought Upwork would try to move up market to higher order values, but I thought they would run into stronger competition. Instead, it seems Upwork is executing well on product and M&A, and competition is not eating into Upwork.
Upwork executed well on product + M&A
While many legacy talent platforms debated AI, Upwork quickly did three things:
1. Launched simple wins like, Gen AI categories
After ChatGPT launched, Upwork created Gen AI-specific skill categories. This was a low cost way to test the Gen AI waters, and stake a claim to the space. Some of the categories, like Prompt Engineering, are growing exceptionally well. Prompt engineering grew 71% year-over-year, with 23% quarter-over-quarter acceleration in Q3 2025.
2. Built a Gen AI product that drives incremental GSV
Upwork launched ‘Upwork’s Mindful Assistant’ (UMA) to act as a chat interface, helping to improve liquidity in the marketplace. CFO Erica Gessert said this about Uma:
The version [of Uma] that we launched to help clients really submit high-quality proposals, that is then translating into better matching experiences, more hiring. And overall, we see that Uma itself is being adopted by -- on the client side as an all-time high in Q3 and that Uma is increasing the likelihood that clients spend as well as increasing how much they spend. So it’s kind of all of these types of Uma-related interventions that are really accelerating our flywheel in the marketplace. They’re contributing to that $100 million in incremental GSV that we see for this year.
Upwork is able to build these products successfully because of successful M&A.
3. Upwork successfully acquired and integrated AI talent
Upwork has acquired (and integrated) two AI related startups. One, in particular, has been put to good use. In early 2024, Upwork acquired Objective AI1, a company building AI-powered talent matching. Upwork, as a freelance talent platform, has data from proposal to hiring to actual work done and reviews. This is the data job boards want, but have to go through Applicant Tracking Systems to get it. This higher fidelity data, plus shorter cycle times from proposal to review, means Upwork is well placed to use AI to improve its matching algorithm.
This is using AI to improve the overall experience, not just using AI as a product.
Re-accelerating Growth and Raised Guidance
According to Upwork Management Q3 2025 marked an inflection point. Revenue hit $201.7M, crossing $200M quarterly for the first time and putting the company on track for over $800M annually. More importantly, After five consecutive quarters of GSV decline, growth returned to positive territory
Profitability and free cash flow numbers are also good:
Adjusted EBITDA: $59.6M (30% margin)—an all-time high
GAAP Net Income: $29.3M (15% margin)
Free Cash Flow: $68.6M (34% FCF margin)
Upwork has gone from unprofitable to returning cash to shareholders in three years. The AI numbers tell the execution story:
AI-related GSV: $260M in Q3 (25.5% of total platform volume** note: these numbers are estimated by me, could be way off)
AI growth rate: 53% YoY (re-accelerating from 30% in Q2)
AI client growth: 45% YoY
Take rate expansion: 400 basis points (14% → 18%)
Management raised full-year guidance and maintains a target of reaching 35% EBITDA margins long-term
I’m Still Watching
Upwork definitely put to rest my concerns in the present moment. However, Gen AI task complexity and duration continue to improve. In the earnings call, Upwork said they noticed some issues with clients substituting AI for Upwork, but it is in sub $500 projects. These small dollar projects are a small percentage of revenue.
Upwork management called out that AI projects are longer duration and higher value than non-AI projects. As Gen AI continues to improve, businesses will need to turn to Upwork for increasingly complex projects. My main question is whether Upwork can move up market effectively, or if they start competing with consulting firms. Upwork’s management has acquired two companies to help this Enterprise growth story. It’s something I’ll be watching.
Footnotes
Objective AI was acquired in early 2024. The company specialized in using machine learning to improve talent-to-project matching, with technology focused on understanding project requirements and freelancer capabilities at a semantic level. ↩
n growth and raising it’s revenue guidance. The company, led by hired executives, might be one of the only legacy talent platforms that’s getting Gen AI right. Upwork is the rare company that has gotten