EdTech Earnings: Two Tailwinds from Gen AI and a Skill Software Boost
COUR, UDMY, DUOL, SKIL + WDAY earnings sneak peek
Generative AI ignites a skilling boom
Generative AI is accelerating discussions about skills in the labor force. Multiple narratives are converging to drive this acceleration: fears about worker displacement in light of Generative AI, career paths and internal mobility, re-shoring trends, and improvements in education technology thanks to Generative AI.
This benefits publicly traded ed tech companies and companies involved in skilling. In public earnings, EdTech companies are citing two specific benefits.
Gen AI is causing people to seek new skills, particularly in Gen AI
Improvements in education technology efficiency thanks to Generative AI
At the same, the overall discussion about Gen AI & skills is creating demand in HR Techsoftware for skills mapping and upgrading.
EdTech companies are seeing the demand for Gen AI skilling
In Udemy’s prepared remarks, Greg Brown, Udemy’s CEO said, “In just over a year since Chat GPT launched, we’ve seen more than 4 million enrollments in the 2,000 plus AI courses in the Udemy catalog.”
Discussing demand for AI in the Q1 earnings, Coursera’s CEO stated, “We see broad appetite 4x what we saw last year in terms of people taking AI-related content.”
The benefits of Gen AI in EdTech are not limited to people wanting to learn AI, it’s also in using Gen AI to reduce friction and improve learning outcomes.
Gen AI is making it easier to learn and create materials
Duolingo has incorporated Generative AI into its premium subscription, “Duolingo Max”. Duolingo Max has a “Roleplay” feature where users can talk to the AI in the relevant language and get feedback on language use. This is improving language outcomes AND driving business growth. Duolingo Max helped drive revenue outperformance at Duolingo, causing Duolingo to beat earnings and raise revenue projections.
Coursera rolled out an AI-enabled ‘Course Builder’ feature that enables faculty to save time when building course materials.
Nerdy released an AI personalized tutor to improve outcomes and expand offerings.
The impact of Gen AI isn’t limited to EdTech, though. Tailwinds for skills are crossing over into HR.
Skills and Talent Intelligence in HR Tech
Josh Bersin, well-known HR analyst, wrote two recent pieces on how skills1, and Talent Intelligence, will disrupt the HR Tech Market. The ability for an organization to see and understand what skills it has, connect it with what skills are needed, and how to create a talent development plan will be highly disruptive, in his view.
Demand for these types of offerings could be rapidly growing. In Workday’s earnings call, they cited that Talent Optimization, “which leverages Workday Skills cloud”, it’s AI-first talent demand SKU, was one of its fastest growing SKUs ever. Over half of Workday’s core customers have adopted it.
Workday’s talent tools enables teams to understand employee skills and provide paths through gigs or credentialing to acquire new skills. Workday is hardly alone in this field. The rapid change in the labor market means companies are hiring less, externally, and employees are staying longer. Providing new opportunities within the org is positioned as a way to increase engagement and solve internal skills gaps.
Workday is not alone in this type of offering and Josh Bersin’s work are good items to read through. Back to earnings though.
Skills boom will continue
Generative AI is in the early phases of development. The demand to understand new skills, and the skills inside an organization, are in their early days. A number of companies across EdTech and HR Tech will be able to ride these waves for years.
Ed Tech Earnings Summaries
Coursera
Revenue: Coursera's Q1 2024 revenue was $169.1 million, a 15% increase year-over-year. However, this was slightly below their expectations due to softness in North American paid learners.
Enterprise Revenue: $57.5 million, up 10% year-over-year
Consumer Revenue: $96.7 million, up 18% year-over-year
EBITDA: Adjusted EBITDA was $8.3 million, representing a 4.9% margin.
Generative AI Impact: While generative AI content is driving interest and engagement, the delayed launch of a key AI-related product contributed to the revenue shortfall in North America.
Udemy
Revenue: Udemy's Q1 2024 revenue increased 12% year-over-year to $197 million, driven by a 24% increase in Udemy Business revenue.
Enterprise Revenue: Revenue increased by 24% YoY to $117.6 million.
Consumer Revenue: Revenue decreased by 2% to $79.2 million.
EBITDA: Adjusted EBITDA was positive for the fourth consecutive quarter at $6.5 million, representing a 3% margin
Generative AI Impact: Udemy saw significant demand for generative AI courses, with over 4 million enrollments in over 2,000 AI courses. They launched a Gen AI skills pack and see generative AI as a long-term driver of demand.
Duolingo
Revenue: Duolingo's Q1 2024 revenue grew 45% year-over-year to $167.55 million, exceeding expectations.
EBITDA: Adjusted EBITDA margin reached a record 26%
Generative AI Impact: Duolingo is actively incorporating generative AI into its language learning platform, particularly in its premium tier, Duolingo Max. They are experimenting with AI-powered features and leveraging AI to enhance the learning experience and personalize feedback.
2U
Revenue: 2U's Q1 2024 revenue was $198.4 million, a 17% decline year-over-year. This was primarily due to fewer steady-state programs and softness in the boot camp segment, partially offset by growth in executive education, particularly in AI-related offerings.
EBITDA: Adjusted EBITDA decreased 43% to $17.3 million, with a margin of 9%.
Generative AI Impact: 2U sees strong demand for AI-related skills and is actively incorporating AI into its alternative credentials segment. They signed new contracts for AI boot camps and are optimistic about the growth potential of AI-related offerings.
https://joshbersin.com/2024/05/enterprise-talent-intelligence-has-arrived-new-research-available/ and https://joshbersin.com/podcast/inside-microsoft-hrs-skills-strategy-a-lesson-in-innovation-investment/
This bit is key IMHO, learning AI content vs. learning to enable work are two very different scale problems. - "Gen AI in EdTech are not limited to people wanting to learn AI, it’s also in using Gen AI to reduce friction and improve learning outcomes."