Q2 2026 Coursera Inc Earnings Call
Speaker #1: Thank you for standing by, and welcome to Corsair's second-quarter 2026 earnings call. All participants earn a listen-only mode, and this call is being recorded.
Speaker #1: Following the prepared remarks, we will hold a Q&A session. To ask a question, please click the "Raise Hand" button and be prepared to unmute your line when prompted.
Speaker #1: I would now like to turn the call over to Cam Carey, Vice President of Investor Relations. Mr. Carey, you may begin.
Speaker #2: Good afternoon. Thank you for joining us for Corsair's Q2 2026 earnings conference call. Today I am joined by Greg Hart, our President and Chief Executive Officer, and Mike Foley, our Chief Financial Officer.
Speaker #1: Ladies and gentlemen, thank you for standing by, and welcome to Coursera's second quarter 2026 earnings call. All participants earn a listen-only mode and this call is being recorded.
Speaker #2: Today's prepared remarks will also include brief comments from Andrew Ng, CEO of LearnVector, and Chairman and Co-Founder of Corsair. Following the prepared remarks, we will open the call for questions with Greg and Mike.
Speaker #1: Following the prepared remarks, we will hold a Q&A session. To ask a question, please click the "Raise Hand" button and be prepared to unmute your line when prompted.
Speaker #2: Our earnings press release was issued after market close. It is available on our investor relations website at investor.corsair.com, where this call is being webcast live and where versions of today's materials, including our quarterly shareholder letter, have been posted.
Speaker #1: I would now like to turn the call over to Cam Carey, Vice President of Investor Relations, Mr. Carey, you may begin.
Speaker #2: Good afternoon. Thank you for joining us for Coursera's Q2 2026 earnings conference call. Today I am joined by Greg Hart, our President and Chief Executive Officer, and Mike Foley, our Chief Financial Officer.
Speaker #2: During this call, we will present both gap and non-gap financial measures, a reconciliation of non-gap measures to the most directly comparable gap measure can be found in today's materials.
Speaker #2: Today's prepared remarks will also include brief comments from Andrew Ng, CEO of LearnVector, and Chairman and Co-Founder of Coursera. Following the prepared remarks, we will open the call for questions with Greg and Mike.
Speaker #2: Unless otherwise specified, all growth percentages refer to year-over-year change and all financial results discussed today are presented on an as-reported basis. As-reported financial results include Udemy only for the period following the transaction close on May 11.
Speaker #2: Our earnings press release was issued after market close. It is available on our investor relations website at investor.coursera.com, where this call is being webcast live and where versions of today's materials, including our quarterly shareholder letter, have been posted.
Speaker #2: illustrative. Modality, all statements made during this call relating to future results and events are forward-looking statements based on current expectations and beliefs. Actual results and events could differ materially due to a number of risks and uncertainties, including those discussed in our earnings release, shareholder letter, and SEC filings.
Speaker #2: During this call, we will present both gap and non-gap financial measures. A reconciliation of non-gap measures to the most directly comparable gap measure can be found in today's materials.
Speaker #2: Unless otherwise specified, all growth percentages refer to year-over-year change in all financial results discussed today are presented on an as-reported basis. As-reported financial results include Udemy only for the period following the transaction close on May 11.
Speaker #2: References to normalized performance include Udemy's pre-close results, as if the transaction had closed on January 1, and are provided solely for illustrative comparability. All statements made during this call relating to future results and events are forward-looking statements based on current expectations and beliefs.
Speaker #2: Actual results and events could differ materially due to a number of risks and uncertainties, including those discussed in our earnings release, shareholder letter, and SEC filings.
Speaker #2: Please refer to today's earnings press release for more details on our forward-looking statements. And with that, I'll turn it over to Greg.
Speaker #3: Thank you, Cam, and good afternoon, everyone. We appreciate you joining us. Q2 marked an important step in unlocking Coursera's next chapter of growth and value creation.
Speaker #3: On May 11, we completed our transaction with Udemy and began operating as a combined company. When we announced the combination last December, our objective was clear: the goal was never simply to become larger, it was to build a stronger, more capable company with the scale, data, and innovation capacity to create next-generation learning experiences faster than either company could alone.
Speaker #3: With integration efforts well underway, our early results are beginning to show why that stronger foundation matters. First, the composition of our revenue base is improving.
Speaker #3: In Q2, we reported revenue of $299 million. For full year 2026, we are increasing our outlook from June, now expecting to deliver between $1.22 and $1.245 billion of reported revenue.
Speaker #3: Driven by our enterprise segment and consumer subscriptions. Our increasing focus on our subscription business drove an increase of 44% year-over-year in paid subscribers, to more than $1.6 million.
Speaker #3: And now, more than 85% of our total revenue comes from recurring subscriptions streams within our enterprise or consumer segments. Second, our earnings profile is strengthening.
Speaker #3: For full year 2025, Coursera delivered an adjusted EBITDA margin of 8.4%. This year, with the combined impact of our structural gross margin expansion, cost discipline, and accelerated synergy realization, we are confident in increasing our full year adjusted EBITDA margin target by another $100 basis points versus our June outlook.
Speaker #3: To approximately $14%. Compared to Coursera's 2025 results, that target represents more than $550 basis points of margin improvement. And as Mike will discuss in more detail, reflects a 16% adjusted EBITDA margin we expect to deliver in Q4.
Speaker #3: Third, we are executing at a faster pace. Following close, our teams moved immediately from planning to execution. We now expect to achieve at least 85 million dollars of annual run-rate net strategy.
We now expect to achieve at least 85 million of annual run rate, net synergies, by the end of 2026 and our tracking, well, ahead of the original 24-month timeline to deliver the 15 million Synergy goal.
I'm encouraged by these early proof points, but integration is just the starting line.
Speaker #3: Faster, more continuous product innovation. As we integrate, we are executing against a clear market reality. AI is changing work and skills faster than traditional learning models can keep pace.
With an improving financial profile and a leaner, more agile operating model, we are in a stronger position to accelerate the next phase of our strategy.
Faster, more continuous product innovation.
Speaker #3: The pace at which people and workforces build new capabilities must accelerate with it. Learners around the world are asking the same questions. How do I stay relevant?
Speaker #3: What should I learn next? And how do I know it's credible? How do I prove I have the skills that employers actually value? Helping learners and organizations answer those questions and act on them represents one of the defining opportunities of the AI era.
Speaker #3: We believe that opportunity expands as AI makes answers more abundant and puts a greater premium on demonstrated capability. Put simply, AI raises the bar for learning.
Speaker #3: Every major technological shift has created demand for new skills. What makes AI different is its pace. As AI diffuses through the global economy, skill requirements are changing continuously, and basic information is becoming a commodity.
Speaker #3: In this environment, more content is not enough. Consuming content alone does not build skills, and an answer is not an outcome. Learners and organizations need personalized pathways that help them identify the skills that matter, develop them in context, and demonstrate capability in ways employers and institutions trust.
Speaker #3: That is why AI increases the need for continuous skills development, clear proof of mastery, and workforce transformation at scale. We are building a trusted platform for skills, one that connects skills, learning, proof, and outcomes and ensures that human development has a platform designed to keep pace with technology.
Speaker #3: That is the opportunity we are positioning Coursera to lead, and we are moving on two fronts to get there faster. The first is our unified platform.
Speaker #3: We are bringing together the data, skills intelligence, and product capabilities of Coursera, and Udemy on a modern architecture. And the second is Learn Vector.
Speaker #3: Yesterday, we announced a $100 million strategic investment in Learn Vector, a newly formed AI-native learning company founded and led by Andrew Ng. As the co-founder of Coursera, and one of the world's foremost experts in AI, Andrew needs no introduction.
Speaker #3: His vision for Learn Vector is to fundamentally transform what learning can become. A trusted, one-to-one experience designed to adapt to the personal goals of every individual learner.
Speaker #3: As Andrew accelerates the design, testing, and development of AI-native learning experiences, we are exploring opportunities to connect and scale Learn Vector's advancements in agentic AI with the unified platform we are building to power one of the world's largest and most trusted learning ecosystems.
Speaker #3: I'm pleased to have him join us today and share the vision behind Learn Vector. Andrew, over to you.
Speaker #2: Thank you, Greg. It's great to join you today. Conventional wisdom says that AI will replace people. I believe the opposite. That AI will be the greatest force for accelerating human development if we do it right.
Speaker #2: For most of history, great teaching was scarce, limited by cost, geography, and time. But there was not a limitation of learning. It was a limitation of economics.
Speaker #2: And so education scaled through a one-to-many model of teachers, lecturing to large classes. And instructor would create one curriculum and one learning experience, and the same thing was delivered to many learners.
Speaker #2: When we founded Coursera, we believed we could use technology to expand access. And we have done that. Scaling causes to far more learners than the physical classroom could hold.
Speaker #2: But we did so still by delivering essentially one experience to many learners. Thanks to advances in AI, we can now do better. A learning experience that is custom for each individual.
Speaker #2: And that's why I founded Learn Vector. To transform learning from the traditional one-to-many model to a personalized one-to-one guide for every learner. I'm privileged to have worked on changing education 15 years ago, when Coursera and massive open online courses took off.
Speaker #2: It's now time to change education a new generation of AI-native learning experiences. And good learning experiences will require much more than just a chatbot.
Speaker #2: In fact, research shows that chatbots without guardrails harm learning. They help complete tasks and enable students to do better on homework, but cognitive offloading to a chatbot results in them being less skilled.
Speaker #2: And you also cannot always trust what a chatbot tells you. At Learn Vector, we're building an agentic AI experience that will plan your learning path with you, adapt to how you learn, and patiently stay with you step by step until you've mastered new skills.
Speaker #2: There has been enormous progress in AI, but we're still at the beginning of what AI-native learning will become. At the same time, the need for trusted learning has never been greater.
Speaker #2: People want learning they can trust, material that is accurate, relevant, and worth the effort you put into it. That's why Coursera is a compelling strategic investor.
Speaker #2: Coursera and Udemy have a trusted library of materials from authoritative sources, and it combines global reach with the trust it has earned among learners, universities, instructors, and employers.
Speaker #2: So working with Coursera creates an amazing opportunity to build one-on-one, trustworthy experiences, and bring them to the world at meaningful scale. That's what excites me most about Learn Vector.
Speaker #2: And about what Coursera support can help make possible. The opportunity to transform how we learn again and create a luminous set of opportunities for learners everywhere.
Speaker #2: Thank you, Greg, and the whole Coursera team for your support of Learn Vector. Greg, back to you.
Speaker #3: Thank you, Andrew. Andrew's vision aligns with the next generation platform work already underway. We are building our unified roadmap and accelerating product velocity across the company today, to put new experiences in the hands of learners and customers by early 2027.
Coursera has deep insight into how the world learns. Udemy understands the rapidly changing skills employers value. Most?
By connecting these signals. We are moving from isolated AI features toward an integrated skill system or learning is more personalized. Adaptive and embedded directly in everyday workflows.
The Experience begins with the outcome, a learner, or business leader wants to achieve rather than a catalog. They have to navigate.
It translates that goal into the skills required.
A personalized path of trusted, learning and interactive practice.
And upon completion, credible proof of what someone can do.
Within three weeks of forming a cross-functional team after close, we built an early end-to-end prototype on a new AI-native foundation. We're now expanding that work across our combined product and engineering organization, and engaging select enterprise customers and content creators in the design process.
This quarter's product updates, show some of the building blocks taking shape.
First, we're making learning more active and applied.
Across Udemy and Coursera, we continue to enhance AI-powered role play.
Udemy, introduced greater customization and immersive video, including AI avatars, to make practice more realistic and help, Learners apply skills more effectively at scale.
1 Corsa roleplay is now available in more than 2,300 courses.
The newest experience adds real-time voice simulations, so Learners can practice job relevant scenarios and receive immediate actionable feedback.
This is the important and Powerful shift underway moving from learning about a skill, to demonstrating it in real time.
Second, we are increasing our pace of experimentation.
In June, we introduced Ali, a standalone mobile app for Coursera Plus subscribers, designed around a few minutes of focused learning each day.
Ali began as a small experiment to help people. Build stronger, learning habits and work continuing to learn from how they use it.
More important than the app itself. Is the development model a small AI incubation team. Using AI assisted development tools to shorten the cycle from idea to product to learner feedback.
That's faster more interactive cycle is shaping how we build our next Generation platform.
Third, we are bringing trusted learning into the flow of work.
We're expanding our model context protocol or mCP capabilities across both platforms.
Giving organizations a secure standardized way to connect their own AI assistance and agents with corser and udemy learning experiences.
In June.
We announced the Corsair connector for Claude.
Enterprise Learners can ask a work-related question in Claude received recommendations grounded and relevant content from their organization's catalog on corser.
And moved directly into an interactive roleplay experience to put that knowledge in a practice.
This builds on our work with Chat, CBT, Microsoft 365, Co-Pilot, and other enterprise applications.
But the approach is larger than any one integration.
We're designing Coursera and Udemy to serve as trusted skills infrastructure that can be surfaced, personalized, and measured wherever work and learning happen.
Toward the UniFi platform. We're building.
A system that can understand the goal.
Identify the skills that matter.
Orchestrate the right learning and practice across both ecosystems.
Adapt as needs change.
And verify proof of progress.
That is how we move from catalogs people search to a continuous system for building new skills.
An approach that we believe is more closely connected to Stronger career and business outcomes.
How are unified? Platform will be powered by 1 of the most comprehensive learning ecosystems in the world.
Across Corsair and udemy, we have reached more than 300 million registered, Learners and ended the quarter serving more than 12,000 Enterprise customers.
Serving, that demand is an ecosystem of more than 100,000 instructors. Encompassing ud's expert, practitioners and more than 400 University and Industry partners.
No topic shows the speed of that ecosystem more clearly than generative AI.
Across the 2 platforms. We now offer nearly 10,000 Genai courses, including new offerings for anthropic in May that are designed to build AI fluency.
Learners are now enrolling in GenAI content at a combined rate of more than 45 enrollments per minute in 2026, up from 25 per minute last year.
That speed must be matched by trust, which is why demand for these emerging skills also extends to our micro-credentials.
Our micro credentials combined role specific training with industry recognized proof of capability.
In Q2, we announced 10 new microcredentials from Google, DeepMind, Meta, Microsoft, Dartmouth, the University of Michigan, and other leading partners.
We also published our 2026 micro credentials impact report.
In our latest Global survey of more than 3,500 Learners, employers and higher, education leaders.
92% of employers said that entry-level hires with micro credentials performed better in their first year, in the job.
And 87% of graduates with micro-credentials reported securing a role aligned with their field within 12 months.
That is the flywheel. We are building.
The expanded ecosystem provides trusted expertise and real-time demand signals. The platform turns those skilling insights into personalized pathways, interactive practice, and verified proof of mastery. Each interaction improves the context needed to make the next experience more powerful, relevant, and effective at delivering stronger career and business outcomes.
As we look to the second half of the year, our priorities are clear.
First integrate with speed and discipline while maintaining continuity for our Learners customers instructors and partners.
We are well on track to deliver at least 85 million dollars of annual run rate, net synergies by year end.
Second, translate the capabilities of our expanded ecosystem into a unified platform and faster product development cycles.
And third, accelerate the pace of AI-native innovation through both our unified roadmap and our investment in Learn Vector.
succeeding on each of these priorities enables the next
Integration and synergy execution create capacity.
That capacity enables faster innovation.
faster, Innovation drives differentiation
And stronger differentiation is what delivers more durable growth and long-term value creation.
We believe AI makes Coursera's role more important and the opportunity more significant—and meeting that moment.
Has required our platform and Pace to evolve.
Over the past year, we've strengthened our operating foundation. Through Udemy, we expanded our ecosystem and our capacity.
Now, we are accelerating the product innovation required to lead in the next era of learning.
With that, I'll turn it over to Mike to discuss our financial performance and Outlook in more detail. Mike, please go ahead.
Thank you, Greg and good afternoon everyone.
Q2 was our first quarter reporting as a combined company.
Lished in our June modeling call.
Results were consistent with that framework.
And in several areas, they reflect faster execution against our integration plans.
We reported total revenue of $299 million.
Up 60% year-over-year.
By the inclusion of UDM results, beginning May 11th.
On a normalized basis, revenue declined 1% year over year.
Price performance was broadly in line with our expectations.
And while consumer subscriptions, continue to grow.
It was offset by pressure in our transactional offerings and the more disciplined approach to paid marketing.
For the remainder of my remarks, I will discuss our non-gaap financial measures unless otherwise noted
gross profit was 186 million up 77% year-over-year.
Growth, margin of 62%.
And expansion of 620 basis points. Year-over-year as reported and approximately 200 basis points on a normalized basis. Primarily driven by rate improvements,
Both companies entered the transaction, having independently expanded gross margins over the past year through deliberate actions to improve content, economics.
At Cera that included the introduction of our platform fee and greater engagement with Cera produced content.
Udemy had also made significant progress through changes to instructor economics, operating leverage, and a continued shift towards subscription revenue.
Cera's, margin profile immediately benefits from the contribution of udemy results.
As well as the pre-close structural improvements of each company.
Providing us with a stronger starting point before we begin to recognize the full impact of our cost-saving initiatives.
Q2 operating expenses totaled, $150 million or 50% of Revenue largely in line with the prior year period.
Net income was $40 million, or 13.5% of revenue, and adjusted EBITDA was nearly $43 million, or 14.3% of revenue.
Together these results provide early evidence of the stronger earnings profile outlined in June.
Higher gross, margins disciplined execution, and the initial benefits of our integration and Synergy actions.
Speaker #2: Please refer to today's earnings press release for more details on our forward-looking statements. And with that, I'll turn it over to Greg. Thank you, Kim.
Speaker #2: And good afternoon, everyone. We appreciate you joining us. Q2 marked an important step in unlocking Coursera's next chapter of growth and value creation. On May 11, we completed our transaction with Udemy and began operating as a combined company.
While only a portion of that benefit is reflected in today's results. We made substantial progress in the pre-close planning phase and have taken meaningful steps since closing including an action in early July to simplify the combined company and reduce duplication across functions.
We've also started aligning global account coverage and integrating our go-to-market organization.
With customer support and continuity an essential focus.
Speaker #2: When we announced the combination last December, our objective was clear. The goal was never simply to become larger. It was to build a stronger, more capable company with the scale, data, and innovation capacity to create next-generation learning experiences faster than either company could alone.
As a result of these actions, we're increasing our expectation for 2026 cost savings. And now, expect to achieve at least 85 million of annual run rate, net synergies, by the end of 2026 up until the 800 million outlined in June and are well on track to delivering the full 150 million Target.
turning to Cache performance and capital allocation,
Speaker #2: With integration efforts well underway, our early results are beginning to show why that stronger foundation matters. First, the composition of our revenue base is improving.
In Q2 free, cash flow was a use of 33 million.
Speaker #2: In Q2, we reported revenue of $299 million. For full year 2026, we are increasing our outlook from June, now expecting to deliver between $1.22 and $1.245 billion of reported revenue.
This included approximately 39 million of merger and integration related costs and 18 million of other merger related payments consistent with the 1-time cash cost contemplated in June.
Excluding those payments, free cash flow would have been approximately $25 million.
Speaker #2: Driven by our enterprise segment and consumer subscriptions. Our increasing focus on our subscription business drove an increase of 44% year over year in paid subscribers, to more than $1.6 million.
Trailing adjusted ibida, primarily due to working capital timing expected to largely normalize next quarter.
Over time, we expect free cash flow will begin to rebound as our one-time costs subside and the benefits of integration, synergy realization, and margin expansion build.
Speaker #2: And now, more than 85% of our total revenue comes from recurring subscriptions streams within our enterprise or consumer segments. Second, our earnings profile is strengthening.
We ended the quarter with approximately $982 million of unrestricted cash, cash equivalents, and marketable securities, and no debt.
Providing substantial flexibility to execute our capital allocation strategy.
Speaker #2: For full year 2025, Coursera delivered an adjusted EBITDA margin of 8.4%. This year, with the combined impact of our structural gross margin expansion, cost discipline, and accelerated synergy realization, we are confident in increasing our full year adjusted EBITDA margin target by another $100 basis points versus our June outlook.
Our priorities remain consistent.
Execute the integration and strengthen future, cash generation.
Invest in our unified platform and long-term product strategy, and opportunistically return capital to drive shareholder value.
Speaker #2: To approximately $14%. Compared to Coursera's 2025 results, that target represents more than $550 basis points of margin improvement. And as Mike will discuss in more detail, reflects a 16% adjusted EBITDA margin we expect to deliver in Q4.
As Greg and Andrew discussed, our $100 million strategic investment in Learn Vector reflects our desire to accelerate innovation. It does not change our priorities around integration execution, margin expansion, or the goal of driving greater returns for our shareholders.
As part of that goal, we repurchased approximately 90 million of shares through the end of June at an average price of 5 dollars per share.
Speaker #2: Third, we are executing at a faster pace. Following close, our teams moved immediately from planning to execution. We now expect to achieve at least 85 million dollars of annual run-rate net synergies by the end of 2026.
To date, total repurchases under our $500 million authorization have now reached approximately $140 million.
Speaker #2: And our tracking well ahead of the original 24-month timeline to deliver the $115 million synergy goal. I'm encouraged by these early proof points. But integration is just the starting line.
We view this as an important use of capital and one of several actions. In addition to our efforts to manage dilution, they demonstrate the value we place on shareholder equity.
Now, turning to our operating segments,
As outlined in June, we report the combined business through two segments: Enterprise and Consumer.
Speaker #2: With an improving financial profile and a leaner, more agile operating model, we are in a stronger position to accelerate the next phase of our strategy.
We have aligned the underlying definitions and provided historical combined metrics in today's shareholder letter for a comparability.
Speaker #2: Faster, more continuous product innovation. As we integrate, we are executing against a clear market reality. AI is changing work and skills faster than traditional learning models can keep pace.
Starting with Enterprise, Q2 revenue was $140 million, up 118% year-over-year as reported and up 3% on a normalized basis.
Speaker #2: The pace at which people and workforces build new capabilities must accelerate with it. Learners around the world are asking the same questions. How do I stay relevant?
Performance was consistent with the trends, discussed in June reflecting, a mixed demand environment with variability across customer segments, regions, and use cases.
NRR was 91%, and we ended the quarter with 1,217 Enterprise customers.
Speaker #2: What should I learn next? And how do I know it's credible? How do I prove I have the skills that employers actually value? Helping learners and organizations answer those questions and act on them represents one of the defining opportunities of the AI era.
As a reminder this combined figure excludes web enabled, self-service accounts to focus on the larger organizations that drive our Enterprise performance.
Segment gross profit was 111 million and segment. Gross margin was 79%.
Up 960 basis, points year-over-year.
Speaker #2: We believe that opportunity expands as AI makes answers more abundant and puts a greater premium on demonstrated capability. Put simply, AI raises the bar for learning.
Increase primarily reflected ud's contribution, while the normalized margin rate also benefited from the stronger content, economics established prior to closing.
Speaker #2: Every major technological shift has created demand for new skills. What makes AI different is its pace. As AI diffuses through the global economy, skill requirements are changing continuously, and basic information is becoming a commodity.
As we focus on driving improvements in retention, and ultimately our growth profile, we have been encouraged by the early operational programs at Coursera since the start of the year.
Speaker #2: In this environment, more content is not enough. Consuming content alone does not build skills, and an answer is not an outcome. Learners and organizations need personalized pathways that help them identify the skills that matter develop them in context, and demonstrate capability in ways employers and institutions trust.
Speaker #2: valuable, unified enterprise offering. One that helps our customers navigate rapidly changing skills landscape, and address their broader workforce transformation needs. Turning to consumer. In Q2, consumer revenue was $159 million.
Our second half priorities are straightforward: prioritize customer continuity, integrate and align our global account coverage, and begin bringing the capabilities of Coursera and Udemy together into a more valuable, unified enterprise offering.
Speaker #2: Up 29% from a year ago as reported, and down 5% on a normalized basis. Consumer gross profit was $103 million. And segment gross margin was 65%, an increase of 380 basis points year over year.
Speaker #2: That is why AI increases the need for continuous skills development, clear proof of mastery, and workforce transformation at scale. We are building a trusted platform for skills, one that connects skills, learning, proof, and outcomes and ensures that human development has a platform designed to keep pace with technology.
Speaker #2: The expansion reflected the stronger content economics and subscription mix both companies have been building, prior to the transaction. As Greg mentioned, we ended the quarter with more than 1.65 million paid subscribers, up 44% year over year.
Speaker #2: That is the opportunity we are positioning Coursera to lead. And we are moving on two fronts to get there faster. The first is our unified platform.
Speaker #2: Consumer subscription revenue was approximately $122 million, representing more than 75% of segment revenue. This includes Coursera Plus, which continued to deliver strong performance, across both monthly and annual offerings.
Speaker #2: We are bringing together the data, skills intelligence, and product capabilities of Coursera and Udemy on a modern architecture. And the second is Learn Vector.
Speaker #2: Stepping back the consumer trends are clear. Core subscriptions are the growth engine, while subscriptions to individual programs and Udemy's transactional offerings remain under pressure.
Speaker #2: Yesterday, we announced a $100 million strategic investment in Learn Vector, a newly formed AI-native learning company founded and led by Andrew Ng. As the co-founder of Coursera, and one of the world's foremost experts in AI, Andrew needs no introduction.
Speaker #2: We expect those trends to continue, as we evolve towards a subscription-first model across both platforms and maintain paid marketing discipline, focused on profitable growth.
Speaker #2: His vision for Learn Vector is to fundamentally transform what learning can become. A trusted, one-to-one experience designed to adapt to the personal goals of every individual learner.
Speaker #2: Over time, we believe a more unified platform can strengthen the value of our subscriptions across more roles, skills, and stages of the learner journey.
Speaker #2: Now, moving to our financial outlook. With the June modeling framework in place, we're returning to a more standard quarterly guidance practice. As a reminder, our guidance is provided on an as-reported basis, and includes Udemy results from the May 11th close.
Speaker #2: As Andrew accelerates the design, testing, and development of AI-native learning experiences, we are exploring opportunities to connect and scale Learn Vector's advancements in agentic AI with the unified platform we are building to power one of the world's largest and most trusted learning ecosystems.
Speaker #2: For the third quarter, we expect revenue of $364 to $372 million. For adjusted EBITDA, we expect to deliver between $52 and $56 million reflecting continued operating discipline and the early contribution from our integration and synergy activities.
Speaker #2: I'm pleased to have him join us today and share the vision behind Learn Vector. Andrew, over to you.
Speaker #3: Thank you, Greg. It's great to join you today. Conventional wisdom says that AI will replace people. I believe the opposite. That AI will be the greatest force for accelerating human development if we do it right.
Speaker #2: For the full year 2026, we're raising and narrowing our revenue outlook to a range of $1.22 to $1.245 billion. And as Greg highlighted, we're now targeting a full year adjusted EBITDA margin of approximately 14%.
Speaker #3: For most of history, great teaching was scarce, limited by cost, geography, and time. But there was not a limitation of learning. It was a limitation of economics.
Speaker #3: And so education skill through a one-to-many model of teachers, lecturing to large classes, and instructor would create one curriculum and one learning experience, and the same thing was delivered to many learners.
Speaker #2: This is an increase of 100 basis points from the 13% target in June, and reflects our Q2 performance and the faster pace of synergy realization.
Speaker #3: When we founded Coursera, we believed we could use technology to expand access. And we have done that. Scaling courses to far more learners than a physical classroom could hold.
Speaker #2: Importantly, our full year margin outlook only captures the recognized portion of the run rate synergies benefit we intend to deliver. For that reason, Q4 remains the better indicator of our margin profile exiting the year.
Speaker #3: But we did so still by delivering essentially one experience to many learners. Thanks to advances in AI, we can now do better. A learning experience that is custom for each individual.
Speaker #2: Now anticipating an adjusted EBITDA margin of more than 16%, as we make meaningful progress towards a fundamentally stronger earnings profile. Updated modeling considerations are available in the Outlook section of today's shareholder letter, including the purchase accounting benefit expected to moderate in future years.
Speaker #3: And that's why I founded Learn Vector. To transform learning from the traditional one-to-many model to a personalized, one-to-one guide for every learner. I'm privileged to have worked on changing education 15 years ago, when Coursera and massive open online courses took off.
Speaker #2: One-time cash expenses related to transaction and integration activities and share account expectations. Let me close by returning to the framework we established in June, and the priorities we're focused on to measure progress.
Speaker #3: It's now time to change education again. And I look forward to building a new generation of AI-native learning experiences. And good learning experiences will require much more than just a chatbot.
Speaker #2: First, execution. Protecting customer continuity, integrating with speed and discipline, and delivering at least 85 million dollars of annual runway net synergies by year end.
Speaker #3: In fact, research shows that chatbots without guardrail harm learning. They help complete tasks and enable students to do better on homework. But cognitive offloading to a chatbot results in them being less skilled.
Speaker #2: With more to come in 2027. Second, translating that execution into higher margins and stronger cash flow. These are the two priorities investors should expect us to deliver in the near term, and we're confident in our execution plan.
Speaker #3: And you also cannot always trust what a chatbot tells you. At Learn Vector, we're building an agentic AI experience that will plan your learning path with you, adapt to how you learn, and patiently stay with you step by step until you've mastered new skills.
Speaker #2: The third, and most important, is the future platform that execution enables. We've made deliberate strategic decisions to increase our innovation capacity, and move with greater speed.
Speaker #2: Bringing Coursera and Udemy together gives us greater scale, data, and reach, along with significantly more resources to build a unified, next-generation platform for the AI era.
Speaker #3: There has been enormous progress in AI, but we're still at the beginning of what AI-native learning will become. At the same time, the need for trusted learning has never been greater.
Speaker #3: People want learning they can trust, material that is accurate, relevant, and worth the effort you put into it. That's why Coursera is a compelling strategic investor.
Speaker #2: Our strategic investment in Learn Vector adds agile AI-native innovation capacity to this stronger foundation. A potential accelerant for our roadmap and the global scaling opportunity we intend to lead.
Speaker #3: Coursera and Udemy have a trusted library of materials from authoritative sources, and it combines global reach with the trust it has earned among learners, universities, instructors, and employers.
Speaker #2: With that, let's open the call for questions.
Speaker #1: In the reminder, if you would like to ask a question, please click on the Raise Hand button at the bottom of your screen. Once prompted, please unmute your line and ask your question.
Speaker #3: So working with Coursera creates an amazing opportunity to build one-on-one trustworthy experiences and bring them to the world at meaningful scale. That's what excites me most about Learn Vector.
Speaker #1: We will now take our first question from the line of Stephen Sheldon with William and Blair. Please unmute your line and ask your question.
Speaker #3: And about what Coursera's support can help make possible. The opportunity to transform how we learn again and create a luminous set of opportunities for learners everywhere.
Speaker #3: Hey, thanks. First of all, just wanted to ask how the integration of the two enterprise sales teams is progressing. Is there anything to call out going either better or worse than you would have expected, especially in terms of the retention of key members of those sales teams?
Speaker #3: Thank you, Greg, and the whole Coursera team for your support of Learn Vector. Greg, back to you.
Speaker #3: And is the combined team moving past any distractions from the merger and focusing mainly on selling in the back half, or could there still be some distraction factors as we think about enterprise sales rep productivity?
Speaker #2: Thank you, Andrew. Andrew's vision aligns with the next generation platform work already underway. We are building our unified roadmap and accelerating product velocity across the company today.
Speaker #2: Thanks, Stephen, for the question. So for the period up to about three weeks ago, those teams on the Coursera and Udemy side were still operating separately.
Speaker #2: To put new experiences in the hands of learners and customers by early 2027. Combining with Udemy has provided the shared scale, data, talent, and investment capacity to turn these ideas into reality faster.
Speaker #2: And three weeks ago, with the action that Mike mentioned in the scripted remarks, we took the first step to combine those teams. We're very confident in the leadership of those teams, and on how now that we've made this step, we get to sort of single books of business for reps across the organization.
Speaker #2: At its core, is a skills and career graph informed by more than 2 million data points, mapping the relationships among jobs, skills, and learning content.
Speaker #2: Coursera has deep insight into how the world learns. Udemy understands the rapidly changing skills employers value most. By connecting these signals, we are moving from isolated AI features toward an integrated skills system where learning is more personalized, adaptive, and embedded directly in everyday workflows.
Speaker #2: And their ability to have the potential to sell, either platform, while also bringing people along on the new platform that we're creating. So we've seen really good progress on the Coursera side over the first half of the year under Anthony's leadership, and I'm really excited about seeing how that plays out across the combined organization over the back half of the year.
Speaker #2: The experience begins with the outcome a learner or business leader wants to achieve. Rather than a catalog they have to navigate. It translates that goal into the skills required, a personalized path of trusted learning and interactive practice, and upon completion, credible proof of what someone can do.
Speaker #3: That's helpful. And then as a follow-up on the Learn Vector investment, can you just talk about the decision to invest $100 million there versus using that capital for additional share repurchases?
Speaker #3: And are kind of backing Learn Vector? Is this going to be a fully owned, kind of subsidiary of Coursera where their financials are also incorporated into your total financials?
Speaker #2: Within three weeks of forming a cross-functional team after close, we built an early end-to-end prototype on a new AI-native foundation. We're now expanding that work across our combined product and engineering organization and engaging select enterprise customers and content creators in the design process.
Speaker #3: Just maybe detail on those fronts.
Speaker #2: All of Mike's speak to the detail piece, but no, we are not a majority investor. We invested and own a third of Learn Vector, roughly.
Speaker #2: This quarter's product updates show some of the building blocks taking shape. First, we're making learning more active, and applied. Across Udemy and Coursera, we continue to enhance AI-powered role play.
Speaker #2: The decision was driven by a special committee of the board, obviously. It's a related party transaction. We are very excited about the opportunity to benefit from one of the world's leading experts on AI in Andrew, who's also deeply passionate and knowledgeable about education and the opportunity to really leverage AI to benefit humanity by creating learning experiences that are far more interactive, engaging, and effective at delivering not just an answer to a question, but learning that delivers a skill and proof of mastery of that skill with trusted credentials.
Speaker #2: Udemy introduced greater customization and immersive video, including AI avatars, to make practice more realistic and help learners apply skills more effectively at scale. On Coursera, role play is now available in more than 2,300 courses.
Speaker #2: The newest experience adds real-time voice simulations, so learners can practice job-relevant scenarios and receive immediate, actionable feedback. This is the important and powerful shift underway.
Speaker #2: So we are looking forward to seeing what that can do to accelerate our progress on the unified platform. And just to on the accounting question, this is not will not be consolidating the financials of Learn Vector.
Speaker #2: Moving from learning about a skill to demonstrating it in real time. Second, we are increasing our pace of experimentation. In June, we introduced Ollie, a standalone mobile app for Coursera Plus subscribers designed around a few minutes of focused learning each day.
Speaker #2: It will sit as an investment on our balance sheet. It'll be marked to market if there's a indicator that we need to do that.
Speaker #2: But generally, it will sit at cost on our balance sheet. It's not a P&L consolidation.
Speaker #2: Ollie began as a small experiment to help people build stronger learning habits. And we're continuing to learn from how they use it. More important than the app itself is the development model, a small AI incubation team using AI-assisted development tools to shorten the cycle from idea to product to learner feedback.
Speaker #3: Thank you.
Speaker #1: The next question comes from the line of Brian Smilek with JPMorgan. Please unmute your line and ask your question.
Speaker #4: Great. Thanks for taking the question. Greg, just curious more on the product roadmap into the back half. Now that we're past the integration, what excites you the most across both the core Udemy platform and the core Coursera platform, and how you can drive content and go-to-market synergies across the subscription platforms?
Speaker #2: That faster, more interactive cycle is shaping how we build our next generation platform. Third, we are bringing trusted learning into the flow of work.
Speaker #4: And then secondarily, can you just talk about the teams and paid marketing that impacted the growth and subscription on the consumer side in QQ?
Speaker #2: We're expanding our model context protocol, or MCP, capabilities across both platforms. Giving organizations a secure, standardized way to connect their own AI assistants and agents with Coursera and Udemy learning experiences.
Speaker #4: Thank you.
Speaker #2: On the platform, the thing that I'm most excited about is a little bit further out than just the back half of this year, which is the new AI-native unified platform that I referenced in my scripted remarks.
Speaker #2: We believe that that's going to do a much better job of serving our customers, whether they're individual consumer learners or enterprise customers, by creating a far more engaging, interactive experience that is personalized to every individual learner.
Speaker #2: In June, we announced the Coursera Connector for Claude. Enterprise learners can ask a work-related question in Claude receive recommendations grounded in relevant content from their organization's catalog on Coursera, and move directly into an interactive role play experience to put that knowledge into practice.
Speaker #2: So it's not one-to-many, but one-to-one. That helps people achieve their objectives maps them to the skills that they need to learn to do that.
Speaker #2: This builds on our work with ChatGPT, Microsoft 365 Copilot, and other enterprise applications. But the approach is larger than any one integration. We're designing Coursera and Udemy to serve as trusted skills infrastructure that can be surfaced, personalized, and measured wherever work and learning happen.
Speaker #2: Delivers those skills in a much more engaging fashion, leading to verifiable proof and mastery that they can then take with a trusted certificate out to the workforce.
Speaker #2: In terms of the things on nearer term, that I'm excited about in the way we're approaching product development over both over Q2 and over the back half of the year, we're really focused on some of the themes that are going to be present in that unified platform.
Speaker #2: Together, these capabilities point toward the unified platform we're building. A system that can understand a goal, identify the skills that matter, orchestrate the right learning and practice across both ecosystems, adapt as needs change, and verify proof of progress.
Speaker #2: So a more interactive and applied learning capabilities. So you saw that reflected in the comments I had in my scripted remarks on the role-play improvements that we've had across both Coursera and Udemy at both platforms are leveraging AI to deliver AI-enhanced role-play.
Speaker #2: That is how we move from catalogs people search to a continuous system for building new skills. An approach that we believe is more closely connected to stronger career, and business outcomes.
Speaker #2: We also have real-time voice practice and immediate feedback on the Udemy side. They've got AI avatars so there's a lot of invention that's happening there.
Speaker #2: I also mentioned the scripted remarks Ollie, which is our AI-native mobile learning app for Coursera Plus subscribers. And we really created that to basically both provide a benefit to our Coursera Plus subscribers, but really also to use that as a learning model.
Speaker #2: Our unified platform will be powered by one of the most comprehensive learning ecosystems in the world. Across Coursera and Udemy, we have reached more than 300 million registered learners, and ended the quarter serving more than 12,000 enterprise customers.
Speaker #2: For us, as we think about the capabilities we need in the new unified platform. And we're leveraging the model that that team used to build Ollie in the approach that we're taking to the unified platform.
Speaker #2: Serving that demand is an ecosystem of more than 100,000 instructors, encompassing Udemy's expert practitioners, and more than 400 university and industry partners. No topic shows the speed of that ecosystem more clearly than generative AI.
Speaker #2: And then finally, delivering learning in the flow of work. So on the Coursera side, we launched our Claude connector with MCP. Obviously, on the Udemy side, they've had MCP integrations with Claude, with chat, with Copilot, and then on the Coursera side, we now have Claude and Copilot.
Speaker #2: Across the two platforms, we now offer nearly 10,000 GenAI courses, including new offerings for Anthropic in May that are designed to build AI fluency.
Speaker #2: And of course, we've had our app integration on OpenAI since the launch of their app ecosystem. All of that really helps us not just with our existing business on the two platforms, which of course is critical, but also with the capabilities that we believe are essential to the new platform that we're creating.
Speaker #2: Learners are now enrolling in GenAI content at a combined rate of more than 45 enrollments per minute in 2026. Up from 25 per minute last year.
Speaker #2: That speed must be matched by trust, which is why demand for these emerging skills also extends to our micro-credentials. Our micro-credentials combine role-specific training with industry-recognized proof of capability.
Speaker #4: Great. Thank you.
Speaker #1: The next question comes from the line of Eric Sheridan with Goldman Sachs. Please unmute your line and ask your question.
Speaker #2: In Q2, we announced 10 new micro-credentials from Google DeepMind, Meta, Microsoft Dartmouth, the University of Michigan, and other leading partners. We also published our 2026 micro-credentials impact report.
Speaker #5: Great. Thank you for taking the questions. Maybe two, if I can. Following up a little bit on Brian's question, when you think about working through the integration of the two businesses on the consumer side of the equation, how should we think about you being more aggressive on marketing over a multi-year time frame to sort of capitalize on the opportunity set that the merger presents you with?
Speaker #2: In our latest global survey of more than 3,500 learners, employers, and higher education leaders, 92% of employers said that entry-level hires with micro-credentials perform better in their first year in the job.
Speaker #5: And how to think about what signal you're watching for to maybe think about moving from synergistic mode into sort of playing offense mode when you think about marketing relative to the growth opportunity?
Speaker #2: And 87% of graduates with micro-credentials reported securing a role aligned with their field within 12 months. That is the flywheel we are building. The expanded ecosystem provides trusted expertise and real-time demand signals.
Speaker #5: That would be number one. And then on Learn Vector, how should we understand the operating relationship? Because in the prepared remarks, it implied there would be aspects of the relationship that would potentially bring more to your platform or amplify growth.
Speaker #2: The platform turns those skilling insights into personalized pathways, interactive practice, and verified proof of mastery. And each interaction improves the context needed to make the next experience more powerful, relevant, and effective at delivering stronger career, and business outcomes.
Speaker #5: So away from the pure equity relationship, can you help us just better understand a little bit how the operating relationship between the two entities might proceed?
Speaker #5: Thank you so much.
Speaker #2: Sure. Maybe I'll start with the second part of your question. So we're working on a commercial relationship, but the high-level approach is basically leverage the innovations that Learn Vector comes up with to improve the platform on Coursera.
Speaker #2: As we look to the second half of the year, our priorities are clear. First, integrate with speed and discipline, while maintaining continuity for our learners, customers, instructors, and partners.
Speaker #2: And to deliver more personalized, adaptive learning, that's what Andrew is very focused on with Learn Vector. And so we don't know exactly what those inventions and innovations will look like yet, but I'm highly confident that he is uniquely positioned to come up with things that we wouldn't have come up with on our own, and that can be real force multipliers for our effort.
Speaker #2: We are well on track to deliberate at least 85 million dollars of annual run-rate net synergies by year end. Second, translate the capabilities of our expanded ecosystem into a unified platform and faster product development cycles.
Speaker #2: And importantly, the unified platform is being built in an AI-native way so that not only is it easier for us to build on that platform, it's also easier for us to integrate any potential features from Learn Vector.
Speaker #2: And third, accelerate the pace of AI-native innovation through both our unified roadmap and our investment in learn vector. Succeeding on each of these priorities enables the next.
Speaker #2: And then on the first part of the question, as we roll out that unified platform, which we expect will be over the first half of next year, we think that does create an interesting opportunity to move from what historically has been an effective performance marketing approach that we've taken at Coursera, to think about a broader approach to how we do that.
Speaker #2: Integration and synergy execution create capacity. That capacity enables faster innovation. Faster innovation drives differentiation. And stronger differentiation is what delivers more durable growth and long-term value creation.
Speaker #2: We believe AI makes Coursera's role more important and the opportunity more significant. And meeting that moment has required our platform and pace to evolve.
Speaker #2: My view is that even though conventional wisdom right now in the market seems to be that AI will shrink demand for learning and for the learning that we provide, my perspective is exactly the opposite of that, that AI will expand the demand for learning and that Coursera with this new platform will be uniquely positioned to serve that far better than any other company can.
Speaker #2: Over the past year, we've strengthened our operating foundation. Through Udemy, we expanded our ecosystem and our capacity. Now, we are accelerating the product innovation, required to lead in the next era of learning.
Speaker #2: With that, I'll turn it over to Mike to discuss our financial performance and outlook in more detail. Mike, please go ahead.
Speaker #2: That is a moment to potentially pour some fuel on that fire if we see the right signals from that platform.
Speaker #5: Thank you.
Speaker #3: Thank you, Greg, and good afternoon, everyone. Q2 was our first quarter reporting as a combined company. As well as the first opportunity to measure performance against the framework we established in our June modeling call.
Speaker #1: Another question comes from the line of Ryan McDonald with Nedim and Company. Please unmute your line and ask your question.
Speaker #6: Hi. Thanks for taking my questions. Maybe starting on the enterprise segment and sort of the integrations and sort of the go-to-market strategy here for the back half, now that you have those teams integrated, obviously we've talked in the past about some of the customer overlap here.
Speaker #3: Results were consistent with that framework. And in several areas, they reflect faster execution against our integration plans. We reported total revenue of $299 million up 60% year over year, driven by the inclusion of Udemy's results beginning May 11th.
Speaker #6: Sort of given the fact that we won't have this sort of new AI-native unified platform ready, maybe it sounds like until next year, how are we approaching sort of renewal discussions with the overlapping customers?
Speaker #3: On a normalized basis, revenue declined 1% year over year. Enterprise performance was broadly in line with our expectations. And while consumer subscriptions continue to grow, it was offset by pressure in our transactional offerings, and a more disciplined approach to paid marketing.
Speaker #6: And then just generally, are we leading with more of the Udemy platform approach or the historical Coursera enterprise platform approach? Just how are we kind of sort of strategizing in the go-forward process as we go into the end of the year renewal season here?
Speaker #6: Thanks.
Speaker #5: So since we still have two separate platforms today, that of course have some level of overlap in customers, but roughly 80% of the customers are cross-sell and upsell to that piece of the customer base.
Speaker #3: For the remainder of my remarks, I will discuss our non-GAAP financial measures, unless otherwise noted. Gross profit was $186 million. Up 77% year over year.
Speaker #3: This represented a gross margin of 62%, an expansion of 620 basis points year over year, as reported, and approximately 200 basis points on a normalized basis primarily driven by rate improvements.
Speaker #5: On the overlapping customers, obviously the conversation with them is how do we both ensure that they're getting value out of their existing relationships and how do we expand that value over time?
Speaker #5: Before we get to the unified platform and then certainly once we have that as well. Many of those customers are design partners. And so we've started enlisting design partners for the unified platform enterprise customers who we're exposing them to how we're thinking about it, showing them some of the features, getting their feedback.
Speaker #3: Both companies entered the transaction having independently expanded gross margins over the past year, through deliberate actions to improve content economics. At Coursera, that included the introduction of our platform fee, and greater engagement with Coursera-produced content.
Speaker #5: That's going to be a critical part of that effort. And we really think that will enable us to deliver a platform that's far more responsive to enterprise needs.
Speaker #3: Udemy had also made significant progress through changes to instructor economics, operating leverage, and a continued shift towards subscription revenue. Coursera's margin profile immediately benefits from the contribution of Udemy results, as well as the pre-closed structural improvements of each company.
Speaker #5: I would say over the back half of the year, the things that we're really focused on from a roadmap perspective because of course at the same time, we're also continuing to improve the existing platforms.
Speaker #5: Not just to serve the business, which of course is critical, but also because our customers expect it and they should. And we also want to test out things that are going to be helpful in the unified platform that we're creating as well.
Speaker #3: Providing us with a stronger starting point before we begin to recognize the full impact of our cost-saving initiatives. Q2 operating expenses totaled $150 million.
Speaker #5: And so some of the big themes around that are really AI-enabled learning. I just mentioned some of the MCP work and the AI connectors that we've developed, some of the role-play and custom dialogue or rather AI dialogues and then also hands-on technical applications.
Speaker #3: Or 50% of revenue, largely in line with the prior year period. Net income was $40 million. Or 13.5% of revenue, and adjusted EBITDA was nearly $43 million.
Speaker #3: Or 14.3% of revenue. Together, these results provide early evidence of the stronger earnings profile outlined in June. Higher gross margins, disciplined execution, and the initial benefits of our integration and synergy actions.
Speaker #5: So ProLabs, workspaces, etc. You all and all of our enterprise customers will have a chance to get a much deeper look at what we are building in our forward events, our enterprise-focused sales conferences that are coming up for existing customers and for prospects in September.
Speaker #3: While only a portion of that benefit is reflected in today's results, we made substantial progress in the pre-closed planning phase and have taken meaningful steps since closing.
Speaker #5: And so those are some of the big themes, though, that we are using right now in conversations and also that will be a big part of that event as well.
Speaker #3: Including an action in early July to simplify the combined company and reduce duplication across functions. We've also started aligning global account coverage and integrating our go-to-market organization.
Speaker #6: Really helpful. And then maybe just a follow-up on Learn Vector. As a part of the commercial agreement and the investment, will Andrew and the team be able to sort of train the models that they're building sort of on the Coursera content and Udemy combined content library and I guess on the backside of that as products come to market, will they be available on the Coursera and Udemy websites or are we thinking sort of a different sort of go-to-market motion with this here?
Speaker #3: With customer support and continuity as central focus. As a result of these actions, we're increasing our expectation for 2026 cost savings and now expect to achieve at least 85 million dollars of annual run-rate net synergies by the end of 2026, up from the $8 million outlined in June.
Speaker #6: Thanks.
Speaker #3: And are well on track to delivering the full $150 million target. Turning to cash performance and capital allocation. In Q2, free cash flow was a use of $33 million.
Speaker #2: They'll be available as they are developed. They'll be available on the unified platform. Some of them may be available on one or both of the independent platforms as well.
Speaker #2: We haven't got certainly gotten that far until we understand what some of the products might be. They are not trained on the course content.
Speaker #3: This included approximately $39 million of merger and integration-related costs, and $18 million of other merger-related payments, consistent with the one-time cash cost contemplated in June.
Speaker #2: Obviously, that's the IP of our partners. And so no, there is no training that is done on the course content other than the specific AI features that we have within each individual course.
Speaker #3: Excluding those payments, free cash flow would have been approximately $25 million. Trailing adjusted EBITDA primarily due to working capital timing, expected to largely normalize next quarter.
Speaker #6: Got it. Really helpful. Thanks.
Speaker #1: Next question comes from the line of Rishi Jalluriya with RBC. Please unmute your line and ask your question.
Speaker #3: Over time, we expect free cash flow will begin to ramp, as our one-time costs subside, and the benefits of integration, synergy realization, and margin expansion build.
Speaker #6: Wonderful. Thanks so much for taking my questions. Maybe just two that I would love to hit on. Starting with maybe just both related to Learn Vector.
Speaker #3: We ended the quarter with approximately $982 million of unrestricted cash, cash equivalents, and marketable securities. And no debt. Providing substantial flexibility to execute our capital allocation strategy.
Speaker #6: Number one, I'll ask the tough question that we're all getting asked, which is just around this. Being a related party transaction around I know we've got Andrew with us, right?
Speaker #3: Our priorities remain consistent. Execute the integration and strengthen future cash generation, invest in our unified platform, and long-term product strategy, and opportunistically return capital to drive shareholder value.
Speaker #6: Being the chairman of the board of Coursera, now the combined Coursera Udemy business as well as kind of founding this net new business and the strategic investment.
Speaker #6: Just help us understand kind of the pieces here and help us as we're talking to investors who may be worrying about a potential conflict of interest.
Speaker #3: We've moved quickly against those priorities. As Greg and Andrew discussed, our $100 million strategic investment in LearnVector reflects our desire to accelerate innovation, it does not change our priorities around integration execution, margin expansion, or the goal of driving greater returns for our shareholders.
Speaker #6: Just kind of how that plays out. And then maybe related to that, I know the question was asked earlier about share buybacks. Maybe beyond that, if I think about the capital that you're putting here, I guess is this not something that you feel like given the partnerships you have, given the talent you have, given the kind of flywheel of innovation, that it's not something that you would be able to kind of build out yourself internally and this kind of requires that external investment and relationship?
Speaker #3: As part of that goal, we repurchased approximately $90 million of shares through the end of June, at an average price of $5.45 per share.
Speaker #3: To date, total repurchases under our $500 million authorization have now reached approximately $140 million. We view this as an important use of capital and one of several actions in addition to our efforts to manage dilution, that demonstrate the value we place on shareholder equity.
Speaker #6: Thanks.
Speaker #2: I view this as an and, not an or. So we are absolutely building a suite of AI-native features to enhance the learning experience. And our team is going to continue to do that.
Speaker #2: I also believe that it's going to be tremendously helpful and an accelerant to have one of the world's foremost experts on AI. Andrew is literally the only person that both Sam Altman and Dario Amodei have worked for.
Speaker #3: Now turning to our operating segments. As outlined in June, we report the combined business through two segments, enterprise and consumer. We have aligned the underlying definitions and provided historical combined metrics in today's shareholder letter for comparability.
Speaker #2: And so he's going to come up with things that nobody else can come up with. So the opportunity to be able to leverage that within the platform, to me, is a huge force multiplier.
Speaker #3: Starting with enterprise, Q2 revenue was $140 million up $118% year over year as reported, and up 3% on a normalized basis. Performance was consistent with the trends discussed in June, reflecting a mixed demand environment, with variability across customer segments, regions, and use cases.
Speaker #2: In terms of the investment, the board created a special committee that negotiated the terms of the investment, set the valuation, etc. And so it was handled the appropriate way given the fact that it is a related party transaction.
Speaker #2: All that Mike speak to some of the cash thinking and the cash flow perspective?
Speaker #3: NRR was 91%, and we ended the quarter with $12,107 enterprise customers. As a reminder, this combined figure excludes web-enabled self-service accounts, to focus on the larger organizations that drive our enterprise performance.
Speaker #5: Yeah, I just one thing I'd add on that is we Greg and I consider the most important area for us to invest in terms of capital allocation is the next generation AI-native platform.
Speaker #5: And we are doing that internally the guidance that you see in the financials you see already incorporate the investment we're making. So the teams are already in place.
Speaker #3: Segment gross profit was $111 million. And segment gross margin was 79%, up $960 basis points year over year. This increase primarily reflected Udemy's contribution while the normalized margin rate also benefited from the stronger content economics established prior to closing.
Speaker #5: They're building the platform. This gives us the opportunity to kind of force multiply and move faster. With frankly, someone who may be able to hire people that very few companies in the world could hire in terms of AI talent.
Speaker #3: As we focus on driving improvements in retention and ultimately our growth profile, I've been encouraged by the early operational progress at Coursera since the start of the year.
Speaker #5: So it's sort of two irons in the fire gets us there faster is the idea. And so the other factor, of course, is that as we move towards higher EBITDA margin, much higher free cash flow into next year, we're going to be a very cash generative business on the current platform.
Speaker #3: Our second half priorities are straightforward. Prioritize customer continuity, integrate and align our global account coverage, and begin bringing the capabilities of Coursera and Udemy together into a more valuable, unified enterprise offering.
Speaker #5: And that's just another factor as we think about deploying capital overall.
Speaker #3: One that helps our customers navigate a rapidly changing skills landscape, and address their broader workforce transformation needs. Turning to consumer. In Q2, consumer revenue was $159 million.
Speaker #6: Understood. Thank you so much. Appreciate it.
Speaker #1: Your final question will come from the line of Nafisa Gupta with Bank of America. Please unmute your line and ask your question.
Speaker #7: Hi. Thanks for taking my question. So one is kind of a follow-up to the earlier question, but with both internal AI initiatives and the Learn Vector partnership now, where do you think the largest opportunity is for AI to improve monetization?
Speaker #3: Up 29% from a year ago as reported, and down 5% on a normalized basis. Consumer gross profit was $103 million. And segment gross margin was 65%, an increase of 380 basis points year over year.
Speaker #7: Is it learner conversion? Is it enterprise adoption? Is it content? Could there be pricing changes in the future? How should we think about monetization?
Speaker #3: The expansion reflected the stronger content economics and subscription mix both companies have been building, prior to the transaction. As Greg mentioned, we ended the quarter with more than 1.65 million paid subscribers, up 44% year over year.
Speaker #2: Well, we're doing a lot of work right now on pricing and packaging across both the consumer and enterprise segments because obviously we have two different platforms today that have historically taken different approaches to pricing.
Speaker #2: And so not only do we need to do that work as part of bringing the two companies together, but we think it's also an opportunity to think really strategically and long-term about the monetization model that we want to create and how we can help that be as effective as possible at delivering a platform that creates value for our individual consumer learners and for our enterprise customers and then also does the right value creation from a shareholder perspective.
Speaker #3: Consumer subscription revenue was approximately $122 million, representing more than 75% of segment revenue. This includes Coursera Plus, which continued to deliver strong performance, across both monthly and annual offerings.
Speaker #3: Stepping back the consumer trends are clear. Core subscriptions are the growth engine, while subscriptions to individual programs and Udemy's transactional offerings remain under pressure.
Speaker #2: In terms of how we're going to apply AI, it literally is applied across all areas of the platform. The enterprise components have MCP integrations into the flow of work directly into enterprise systems and then also of course into their integrations with either chat or Claude or Copilot, etc.
Speaker #3: We expect those trends to continue, as we evolve towards a subscription-first model across both platforms and maintain paid marketing discipline, focused on profitable growth.
Speaker #3: Over time, we believe a more unified platform can strengthen the value of our subscriptions across more roles, skills, and stages of the learner journey.
Speaker #2: And then also into third-party systems that they use, whether those are HIRSs or other systems. And then on the consumer side, the main thing that we think our learning experience needs to deliver, which our unified platform is very focused on doing, is a much more personalized approach that shifts learning from one to many to one-to-one.
Speaker #3: Now, moving to our financial outlook. With the June modeling framework in place, we're returning to a more standard quarterly guidance practice. As a reminder, our guidance is provided on an as-reported basis, and includes Udemy results, from the May 11th close.
Speaker #2: So understanding the objective, that somebody has when they arrive, at the platform, the skills that they have that are relevant to that objective, the gap that they have from where they are today to where they need to go to achieve that objective.
Speaker #3: For the third quarter, we expect revenue of $364 to $372 million. For adjusted EBITDA, we expect to deliver between $52 and $56 million, reflecting continued operating discipline and the early contribution from our integration and synergy activities.
Speaker #2: The learning experience that helps deliver that gap and bring them on that journey in a far more effective engaging way that is personalized to them, proof of their ability to close that gap, demonstrate that skill that they have just mastery, not just knowledge of it, and that the knowledge and the mastery stick with them.
Speaker #3: For the full year 2026, we're raising and narrowing our revenue outlook to a range of $1.22 to $1.245 billion. And as Greg highlighted, we're now targeting a full year adjusted EBITDA margin of approximately 14%.
Speaker #2: So it doesn't just get them to enable them to pass a certification, but actually sticks with them in practice and then ensconcing all of that within a verified, trusted, certificate employer, to a prospective employer.
Speaker #3: This is an increase of 100 basis points from the 13% target in June, and reflects our Q2 performance and the faster pace of synergy realization.
Speaker #3: Importantly, our full year margin outlook only captures the recognized portion of the run-rate synergies benefit we intend to deliver. For that reason, Q4 remains the better indicator of our margin profile exiting the year, now anticipating an adjusted EBITDA margin of more than 16%, as we make meaningful progress towards a fundamentally stronger earnings profile.
Speaker #2: And so that's what we are focused on building with the unified platform and the consumer side. And obviously, elements of that learning experience that I just talked about will be highly applicable to the enterprise side of the business as well as they look to upskill and reskill their employees.
Speaker #7: Got it. Thanks. And if I can ask another one. So given the broader content catalog now, are you seeing any early evidence of enterprise customers opting for larger D sizes or improved win rates in the enterprise side since the acquisition closed?
Speaker #3: Updated modeling considerations are available in the Outlook section of today's shareholder letter, including the purchase accounting benefit expected to moderate in future years. One-time cash expenses related to transaction and integration activities and share account expectations.
Speaker #2: I would say broadly, the business hasn't changed substantially versus pre-close. On the enterprise side, and we haven't delivered a new platform also. So it's the same those conversations are happening against the backdrop of the same two businesses and platforms that we have had historically.
Speaker #3: Let me close by returning to the framework we established in June and the priorities we're focused on to measure progress. First, execution. Protecting customer continuity, integrating with speed and discipline, and delivering at least 85 million dollars of annual run-rate net synergies by year-end.
Speaker #2: And I would expect that to broadly be the case until we deliver the new platform. As I mentioned, we're starting design partnerships with enterprise customers now.
Speaker #3: With more to come in 2027. Second, translating that execution into higher. And stronger cash flow. These are the two priorities investors should expect us to deliver in the near term, and we're confident in our execution plan.
Speaker #2: We'll be increasing that over the back half of the year. And we're looking to roll this out in stages starting the first half of next year.
Speaker #7: Got it. Thank you.
Speaker #1: We have one final question coming from the line of Devin Al with KeyBank Capital Markets. Please unmute your line and ask your question.
Speaker #3: The third, and most important, is the future platform VAT execution enables. We've made deliberate strategic decisions to increase our innovation capacity and move with greater speed.
Speaker #6: Great. Yeah. Thanks for squeezing me in. Could you maybe unpack the NRR downtake with an enterprise? I believe that number stepped down by four points year over year.
Speaker #3: Bringing Coursera and Udemy together gives us greater scale, data, and reach, along with significantly more resources to build a unified, next-generation platform for the AI era.
Speaker #6: Anything to call out either on the Coursera or the Unity business specifically? Any color on maybe how churn has trended across both businesses and maybe how would you think about the near-term trend line of that metric?
Speaker #3: Our strategic investment in Learn Vector adds agile AI-native innovation capacity to this stronger foundation. A potential accelerant for our roadmap and the global scaling opportunity we intend to lead.
Speaker #6: As you guys go through integration.
Speaker #2: Yeah. Thanks for the question. This is Mike. Yeah. So for NRR, I think it's been a reasonably consistent picture for a while there. Across our three main business segments, obviously our largest segment is business.
Speaker #3: With that, let's open the call for questions.
Speaker #1: A reminder, if you would like to ask a question, please click on the raise hand button at the bottom of your screen. Once prompted, please unmute your line and ask your question.
Speaker #2: And we continue to have to be cautious there about the environment. We see pressure on L&D budgets. And that's been a relatively consistent theme for a while now.
Speaker #1: We will now take our first question from the line of Stephen Sheldon with William and Blair. Please unmute your line and ask your question.
Speaker #2: Our campus business and our government business are actually quite strong. The campus business overall is quite differentiated for us. And we continue to see pretty solid customer retention there.
Speaker #2: Hey, thanks. First of all, I just wanted to ask how the integration of the two enterprise sales teams has progressed. Is there anything to call out going either better or worse than you would have expected, especially in terms of the retention of key members of those sales teams?
Speaker #2: And then in the government side, as I've said, a few calls now, it's just kind of a lumpy business. Some quarters we have really strong retention, but at the end of the day, they're generally annual customers because they're governments.
Speaker #2: And is the combined team moving past any distractions from the merger and focusing mainly on selling in the back half, or could there still be some distraction factors as we think about enterprise sales rep productivity?
Speaker #2: And they don't commit to more than a year. So it can be a little bit more lumpy. I would say really what we're seeing overall is just a consistent environment that not significantly different from last quarter or the quarter below.
Speaker #3: Thanks, Stephen, for the question. So for the period up to about three weeks ago, those teams on the Coursera and Udemy side were still operating separately.
Speaker #3: And three weeks ago, with the action that Mike mentioned in the scripted remarks, we took the first step to combine those teams. We're very confident in the leadership of those teams, and on how now that we've made this step, we get to sort of single books of business for reps across the organization.
Speaker #2: We are as Greg said earlier, seeing I think pretty solid execution with the teams, fully integrated the two enterprise go-to-market teams just a few weeks ago as Greg said.
Speaker #2: So we hope to see continued progress on the execution side on the enterprise business through the next couple of quarters. It does obviously take a while for progress to show up as revenue.
Speaker #3: And their ability to have the potential to sell, either platform, while also bringing people along on the new platform that we're creating. So we've seen really good progress on the Coursera side over the first half of the year under Anthony's leadership, and I'm really excited about seeing how that plays out across the combined organization over the back half of the year.
Speaker #2: In that business. So positive signs on the execution side, by the end of the day, the business environment remains consistent.
Speaker #6: Got it. Got it. And then maybe my second question. I wanted to ask about your integration plan with an enterprise as well. Maybe specifically on the partner side.
Speaker #2: That's helpful. And then. Follow-up on the Learn Vector investment. Can you just talk about the decision to invest $100 million there versus using that capital for additional share repurchases?
Speaker #6: I believe Udemy has some pretty extensive relationship on the APAC region. I would love to just get some more color on how you guys kind of view that relationship going forward as you guys combine both Coursera and Udemy.
Speaker #2: And are there other investors that are kind of backing Learn Vector? Is this going to be a fully owned, kind of subsidiary of Coursera where their financials are also incorporated into your total financials?
Speaker #2: Yeah. I mean, you're referring to Udemy's business in Japan and the partnership that Udemy has with Benese. To drive that business, it's very unique partnership.
Speaker #2: Just maybe detail on those fronts.
Speaker #3: I'll have Mike speak to the detail piece, but no, we are not a majority investor. We invested, and own a third of Learn Vector, roughly.
Speaker #2: As you note, we're very happy with it. They are very happy with it as well. I was in Japan within two weeks of closing the deal in May to spend time with the team there, get to know the business a little bit deeper, and get to know the Benese leadership.
Speaker #3: The decision was driven by a special committee of the board, obviously. It's a related party transaction. We are very excited about the opportunity to benefit from one of the world's leading experts on AI in Andrew, who's also deeply passionate and knowledgeable about education and the opportunity to really leverage AI to benefit humanity by creating learning experiences that are far more interactive, engaging, and effective at delivering not just an answer to a question, but learning that delivers a skill and proof of mastery of that skill with trusted credentials.
Speaker #2: Really pleased with what we're seeing overall there and think there's opportunity for that business as well. On a go-forward basis.
Speaker #5: All right. Thank you, Devin. And thanks, everyone, for joining today's call. A replay will be available shortly on our Investor Relations website. We appreciate you joining us.
Speaker #5: Take care.
Speaker #3: So we are looking forward to seeing what that can do to accelerate our progress on the unified platform.
Speaker #4: And just to on the accounting question, this is not will not be consolidating the financials of Learn Vector. It will sit as an investment on our balance sheet.
Speaker #4: It'll be marked to market if there's a indicator that we need to do that. But generally, it will sit at cost on our balance sheet.
Speaker #4: It's not a P&L consolidation.
Speaker #2: Thank ank you.
Speaker #1: The next question comes from the line of Brian Smilek with JP Morgan. Please unmute your line and ask your question.
Speaker #5: Great. Thanks for taking the question. Greg, just hear us more on the product roadmap into the back half. Now that we're past the integration, what excites you the most across both the core Udemy platform and the core Coursera platform, and how you can drive content and go-to-market synergies across the subscription platforms?
Speaker #5: And then secondarily, can you just talk about the teams and paid marketing that impacted the growth and subscription on the consumer side in 2Q?
Speaker #5: Thank you.
Speaker #3: On the platform, the thing that I'm most excited about is a little bit further out than just the back half of this year, which is the new AI-native unified platform that I referenced in my scripted remarks.
Speaker #3: We believe that that's going to do a much better job of serving our customers, whether they're individual consumer learners or enterprise customers, by creating a far more engaging, interactive experience that is personalized to every individual learner.
Speaker #3: So it's not one to many, but one to one. That helps people achieve their objectives, maps them to the skills that they need to learn to do that, delivers those skills in a much more engaging fashion, leading to verifiable proof and mastery that they can then take with a trusted certificate out to the workforce.
Speaker #3: In terms of the things on nearer term that I'm excited about in the way we're approaching product development over both over Q2 and over the back half of the year, we're really focused on some of the themes that are going to be present in that unified platform.
Speaker #3: So I'm more interactive and applied learning capabilities. So you saw that reflected in the comments I had in my scripted remarks on the role-play improvements that we've had across both Coursera and Udemy at both platforms are leveraging AI to deliver AI-enhanced role-play.
Speaker #3: We also have real-time voice practice and immediate feedback on the Udemy side. They've got AI avatars. So there's a lot of invention that's happening there.
Speaker #3: I also mentioned the scripted remarks Ollie, which is our AI-native mobile learning app for Coursera Plus subscribers. And we really created that to basically both provide a benefit to our Coursera Plus subscribers, but really also to use that as a learning model.
Speaker #3: For us, as we think about the capabilities we need in the new unified platform, and we're leveraging the model that that team used to build Ollie, in the approach that we're taking to the unified platform.
Speaker #3: And then finally, delivering learning in the flow of work. So on the Coursera side, we launched our Claude connector with MCP. Obviously, on the Udemy side, they've had MCP integrations with Claude, with chat, with Copilot, and then on the Coursera side, we now have Claude and Copilot.
Speaker #3: And of course, we've had our app integration on OpenAI since the launch of their app ecosystem. All of that really helps us not just with our existing business on the two platforms, which of course is critical, but also with the capabilities that we believe are essential to the new platform that we're creating.
Speaker #5: Great. Thank you.
Speaker #1: The next question comes from the line of Eric Sheridan with Goldman Sachs. Please unmute your line and ask your question.
Speaker #6: Great. Thank you for taking the questions. Maybe two, if I can. Following up a little bit on Brian's question, when you think about working through the integration of the two businesses on the consumer side of the equation, how should we think about you being more aggressive on marketing over a multi-year time frame to sort of capitalize on the opportunity set that the merger presents you with?
Speaker #6: And how to think about what signal you're watching for to maybe think about moving from synergistic mode into sort of playing offense mode when you think about marketing relative to the growth opportunity?
Speaker #6: That would be number one. And then on Learn Vector, how should we understand the operating relationship? Because in the prepared remarks, it implied there would be aspects of the relationship that would potentially bring more to your platform or amplify growth.
Speaker #6: So away from the pure equity relationship, can you help us just better understand a little bit how the operating relationship between the two entities might proceed?
Speaker #6: Thank you so much.
Speaker #3: Sure. Maybe I'll start with the second part of your question. So we're working on a commercial relationship, but the high-level approach is basically leverage the innovations that.
Speaker #3: Learn Vector comes up with to improve the platform on Coursera. And to deliver more personalized, adaptive learning, that's what Andrew was very focused on with Learn Vector.
Speaker #3: And so we don't know exactly what those inventions and innovations will look like yet, but I'm highly confident that he is uniquely positioned to come up with things that we wouldn't have come up with on our own, and that can be real force multipliers for our effort.
Speaker #3: And importantly, the unified platform is being built in an AI-native way so that not only is it easier for us to build on that platform, it's also easier for us to integrate any potential features from Learn Vector.
Speaker #3: And then on the first part of the question, as we roll out that unified platform, which we expect will be over the first half of next year, we think that does create an interesting opportunity to move from what historically has been an effective performance marketing approach that we've taken at Coursera, to think about a broader approach to how we do that.
Speaker #3: My view is that even though conventional wisdom right now in the market seems to be that AI will shrink demand for learning and for the learning that we provide, my perspective is exactly the opposite of that, that AI will expand the demand for learning and that Coursera, with this new platform, will be uniquely positioned to serve that far better than any other company can.
Speaker #3: That is a moment to potentially pour some fuel on that fire if we see the right signals from that platform.
Speaker #6: Thank you.
Speaker #1: Another question comes from the line of Ryan McDonald with Nedim & Company. Please unmute your line and ask your question.
Speaker #7: Hi. Thanks for taking my questions. Maybe starting on the enterprise segment and sort of the integrations and sort of the go-to-market strategy here for the back half, now that you have those teams integrated, obviously, we've talked in the past about some of the customer overlap here.
Speaker #7: Sort of given the fact that we won't have this sort of new AI-native unified platform ready maybe it sounds like until next year, how are we approaching sort of renewal discussions with the overlapping customers?
Speaker #7: And then just generally, are we leading with more of the Udemy platform approach or the historical Coursera enterprise platform approach? Just how are we kind of sort of strategizing in the go-forward process as we go into the end of the year renewal season here?
Speaker #7: Thanks.
Speaker #6: So since we still have two separate platforms today, that of course have some level of overlap in customers, but roughly 80% of the customers are non-overlapping.
Speaker #6: So there's far more opportunity to cross-sell and upsell to that piece of the customer base. On the overlapping customers, obviously, the conversation with them is how do we both ensure that they're getting value out of their existing relationships and how do we expand that value over time.
Speaker #6: Before we get to the unified platform and then certainly once we have that as well. Many of those customers are design partners. And so we've started enlisting design partners for the unified platform enterprise customers who we're exposing them to how we're thinking about it, showing them some of the features, getting their feedback.
Speaker #6: That's going to be a critical part of that effort. And we really think that will enable us to deliver a platform that's far more responsive to enterprise needs.
Speaker #6: I would say over the back half of the year, the things that we're really focused on from a roadmap perspective because of course, at the same time, we're also continuing to improve the existing platforms.
Speaker #6: Not just to serve the business, which of course is critical, but also because our customers expect it. And they should. And we also want to test out things that are going to be helpful in the unified platform that we're creating as well.
Speaker #6: And so some of the big themes around that are really AI-enabled learning. I just mentioned some of the MCP work and the AI connectors that we've developed, some of the role-play and custom dialogue or rather AI dialogues and then also hands-on technical applications.
Speaker #6: So ProLabs workspaces, et cetera. You all and all of our enterprise customers will have a chance to get a much deeper look at what we are building in our forward events, our enterprise-focused sales conferences that are coming up for our existing customers and for prospects in September.
Speaker #6: And so those are some of the big themes, though, that we are using right now in conversations and also that will be a big part of that event as well.
Speaker #7: Really helpful. And then maybe just a follow-up on Learn Vector. As a part of the commercial agreement and the investment, will Andrew and the team be able to sort of train the models that they're building sort of on the Coursera content and Udemy combined content library and I guess as on the backside of that as products come to market, will they be available on the Coursera and Udemy websites or are we thinking sort of a different sort of go-to-market motion with this year?
Speaker #7: Thanks.
Speaker #3: They'll be available as they are developed. They'll be available on the unified platform. Some of them may be available on one or both of the independent platforms as well.
Speaker #3: We haven't got certainly gotten that far until we understand what the some of the products might be. They are not trained on the course content.
Speaker #3: Obviously, that's the IP of our partners. And so no, there is no training that is done on the course content other than the specific AI features that we have within each individual course.
Speaker #7: Got it. Really helpful. Thanks.
Speaker #1: Next question comes from the line of Rishi Jalluriya with RBC. Please unmute your line and ask your question.
Speaker #7: Wonderful. Thanks so much for taking my question. Maybe just. Two that I would love to hit on. Starting with maybe just both related to Learn Vector.
Speaker #7: Number one, I'll ask the tough question that we're all getting asked, which is just around this. Being a related party transaction around I know we've got Andrew with us, right?
Speaker #7: Being the chairman of the board of Coursera, now the combined Coursera Udemy business as well as kind of founding this net new business and the strategic investment.
Speaker #7: Just help us understand kind of the pieces here and help us as we're talking to investors who may be worrying about a potential conflict of interest.
Speaker #7: Just kind of how that plays out. And then maybe related to that, I know the question was asked earlier about share buybacks. Maybe beyond that, if I think about the capital that you're putting here, I guess is this not something that you feel like given the partnerships you have, given the talent you have, given the kind of flywheel of innovation, that it's not something that you would be able to kind of build out yourself internally and this kind of requires that external investment and relationship?
Speaker #7: Thanks.
Speaker #3: I view this as an and, not an or. So we are absolutely building a suite of AI-native features to enhance the learning experience. And our team is going to continue to do that.
Speaker #3: I also believe that it's going to be tremendously helpful and an accelerant to have one of the world's foremost experts on AI. Andrew is literally the only person that both Sam Altman and Dario Amodei have worked for.
Speaker #3: And so he's going to come up with things that nobody else can come up with it. So the opportunity to be able to leverage that within the platform, to me, is a huge force multiplier.
Speaker #3: In terms of the investment, the board created a special committee that negotiated the terms of the investment, set the valuation, et cetera. And so it was handled the appropriate way given the fact that it is a related party transaction.
Speaker #3: All that Mike speak to some of the cash thinking and the cash flow perspective?
Speaker #6: Yeah. I just one thing I'd add on that we Greg and I consider the most important area for us to invest in terms of capital allocation is the next generation AI-native platform.
Speaker #6: And we are doing that internally the guidance that you see in the financials you see already incorporate the investment we're making. So the teams are already in place they're building the platform.
Speaker #6: This gives us the opportunity to kind of force multiply and move faster with frankly someone who may be able to hire people that very few companies in the world could hire in terms of AI talent.
Speaker #6: So it's sort of two irons in the fire gets us there faster is the idea. And so the other factor, of course, is that as we move towards higher EBITDA margin, much higher free cash flow into next year, we're going to be a very cash-generative business on the current platform.
Speaker #6: And that's just another factor as we think about deploying capital overall.
Speaker #7: Understood. Thank you so much. Appreciate it.
Speaker #1: Your final question will come from the line of Nafisa Gupta with Bank of America. Please unmute your line and ask your question.
Speaker #8: Hi. Thanks for taking my question. So one is kind of a follow-up to the earlier question, but with both internal AI initiatives and the Learn Vector partnership now, where do you think the largest opportunity is for AI to improve monetization?
Speaker #8: Is it learner conversion? Is it enterprise adoption? Is it content? Could there be pricing changes in the future? How should we think about monetization?
Speaker #3: Well, we're doing a lot of work right now on pricing and packaging across both the consumer and enterprise segments because obviously we have two different platforms today that have historically taken different approaches to pricing.
Speaker #3: And so not only do we need to do that work as part of bringing the two companies together, but we think it's also an opportunity to think really strategically and long-term about the monetization model that we want to create and how we can help that be as effective as possible at delivering a platform that creates value for our individual consumer learners and for our enterprise customers and then also does the right value creation from a shareholder perspective.
Speaker #3: In terms of how we're going to apply AI, it literally is applied across all areas of the platform. The enterprise components have MCP integrations into the flow of work directly into enterprise systems and then also of course into their integrations with either chat or Claude or Copilot, et cetera.
Speaker #3: And then also into third-party systems that they use, whether those are HIRSs or other systems. And then on the consumer side, the main thing that we think our learning experience needs to deliver, which our unified platform is very focused on doing, is a much more personalized approach that shifts learning from one to many to one to one.
Speaker #3: So understanding the objective, that somebody has when they arrive, at the platform, the skills that they have that are relevant to that objective, the gap that they have from where they are today to where they need to go to achieve that objective.
Speaker #3: The learning experience that helps deliver that gap and bring them on that journey in a far more effective engaging way that is personalized to them, proof of their ability to close that gap, demonstrate that skill that they have just mastery, not just knowledge of it, and that the knowledge and the mastery stick with them.
Speaker #3: So it doesn't just get them to enable them to pass a certification, but actually sticks with them in practice. And then ensconcing all of that within a verified, trusted, certificate or badge that they can take with them to their employer, to a prospective employer.
Speaker #3: And so that's what we are focused on building with the unified platform and the consumer side. And obviously, elements of that learning experience that I just talked about will be highly applicable to the enterprise side of the business as well as they look to upskill and reskill their employees.
Speaker #8: Got it. Thanks. And if I can ask another one. So given the broader content catalog now, are you seeing any early evidence of enterprise customers opting for larger resizes or improved win rates in the enterprise side since the acquisition closed?
Speaker #3: I would say broadly, the business hasn't changed substantially versus pre-close. On the enterprise side, and we haven't delivered a new platform also. So it's the same those conversations are happening against the backdrop of the same two businesses and platforms that we have had historically.
Speaker #3: And I would expect that to broadly be the case until we deliver the new platform. As I mentioned, we're starting design partnerships with enterprise customers now.
Speaker #3: We'll be increasing that over the back half of the year. And we're looking to roll this out in stages starting the first half of next year.
Speaker #8: Got it. Thank you.
Speaker #1: We have one final question coming from the line of Devin Al with KeyBank Capital Markets. Please unmute your line and ask your question.
Speaker #7: Great. Yeah. Thanks for squeezing me in. Could you maybe unpack the NRR downtake with an enterprise? I believe that number stepped down by four points year over year.
Speaker #7: Anything to call out either on the Coursera or the Udemy business specifically? Any color on maybe how churn has trended across both businesses and maybe how would you think about the near-term trend line of that metric?
Speaker #7: As you guys go through the integration.
Speaker #3: Yeah. Thanks for the question. This is Mike. Yeah. So far, NRR, I think it's been a reasonably consistent picture for a while there. Across our three main business segments, obviously our largest segment is business.
Speaker #3: And we continue to have to be cautious there about the environment. We see pressure on L&D budgets. And that's been a relatively consistent theme for a while now.
Speaker #3: Our campus business and our government business are, actually, quite strong. The campus business overall is quite differentiated for us. And we continue to see pretty solid customer retention there.
Speaker #3: And then in the government side, as I've said, a few calls now, it's just kind of a lumpy business. Some quarters we have really strong retention, but at the end of the day, they're generally annual customers because they're governments.
Speaker #3: And they don't commit to more than a year. So it can be a little bit more lumpy. I would say really what we're seeing overall is just a consistent environment that not significantly different from last quarter or the quarter below.
Speaker #3: We are as Greg said earlier, seeing I think pretty solid execution with the teams fully integrated the two enterprise go-to-market teams just a few weeks ago, as Greg said.
Speaker #3: So we hope to see continued progress on the execution side on the enterprise business through the next couple of quarters. It does obviously take a while for progress to show up as revenue in that business.
Speaker #3: So positive signs on the execution side, but at the end of the day, the business environment remains consistent.
Speaker #7: Got it. Got it. And then maybe just my second question. I wanted to ask about your integration plan with an enterprise as well. Maybe specifically on the partner side.
Speaker #7: I believe Udemy has some pretty extensive relationship on the APAC region. I would love to just get some more color on how you guys kind of view that relationship going forward as you guys combine both Coursera and Udemy.
Speaker #3: Yeah. I mean, you're referring to Udemy's business in Japan and the partnership that Udemy has with Benese. To drive that business, it's a very unique partnership.
Speaker #3: As you note, we're very happy with it. They are very happy with it as well. I was in Japan within two weeks of closing the deal in May to spend time with the team there, get to know the business a little bit deeper, and get to know the Benese leadership.
Speaker #3: Really pleased with what we're seeing overall there and think there's opportunity for that business as well. I want to go forward basis.
Speaker #7: All right. Thank you, Devin. And thanks, everyone, for joining today's call. A replay will be available shortly on our investor relations website. We appreciate you joining us.
Speaker #7: Take care.
