Coursera, Inc.

Ladies and gentlemen, thank you for standing by, and welcome to Coursera's second quarter.

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Ladies and gentlemen, thank you for standing by and welcome to Coursera's second quarter 2025 earnings call. All participants are in listen-only mode and this call is being recorded. Following the prepared remarks, we will hold a question and answer session. To ask a question, please click the raise hand button and be prepared to unmute your line when prompted. I would now like to turn the call over to Cam Carey, Vice President of Investor Relations. Mr. Carey, you may begin.

Good afternoon. Thank you for joining us for Coursera's Q2 2025 earnings conference call. Today, I'm joined by Greg Hart, our President and Chief Executive Officer, and Ken Han, our Chief Financial Officer. Following their prepared remarks, we will open the call for questions. 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 published. 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 earnings press release and supplemental materials. Please note, all growth percentages discussed refer to year-over-year change unless otherwise specified. 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 from those expressed or implied in these forward-looking statements due to a number of risks and uncertainties, including those discussed in our earnings press release, shareholder letter, and SEC filings. Please refer to today's earnings press release for more details on our forward-looking statements. With that, I'll turn it over to Greg.

Thank you, Cam, and good afternoon, everyone. It's great to be with you all. Coursera delivered a strong second quarter. We are executing at a renewed and rapid pace, delivering revenue of $187 million and increasing our growth to 10% year over year. We also drove strong bottom line performance, generating $29 million of free cash flow, which was up 68% from the prior year. Given the early momentum we demonstrated in the first half, I am pleased to share that we are raising our expectations for full-year revenue and adjusted EBITDA. We now expect to deliver $738 to $746 million of revenue, raising the midpoint of our range by $17 million. We are also increasing our annual adjusted EBITDA margin target to 8%, delivering 200 basis points of year-over-year improvement while deploying investments intended to unlock more durable growth. As the pace of technology reshapes the labor market, I believe Coursera's market opportunity continues to expand, fueled by the global demand to embrace new technologies and skills. In Q2, we attracted seven and a half million new registered learners. This was the largest number of quarterly new additions since 2020, growing our total cumulative base by 18% year over year to 183 million. We also grew the number of paid enterprise customers we serve by 12% year over year, with 1,686 customers spanning businesses, governments, and campuses. As one of the largest and most globally distributed learning platforms, our data is becoming an increasingly powerful asset that provides us with a unique lens to help our learners, on the consumer side discover and master skills that can advance their careers, to support our enterprise customers looking for the best way to upskill their workforces at scale while navigating rapid changes in the labor market, and to draw insights that inform our content strategy, skill assessments, recommendation engine, and product development cycles as we begin to transform the learning experience. As part of my initial observations last quarter, I shared that we were in the early stages of implementing thoughtful changes to our operating model, focused on driving more innovation and engagement throughout our learner experience, more rapid product development cycles, more speed and agility in our content engine, and a data-driven approach to continuous improvement in all aspects of our business. To support these efforts, I was excited to announce the appointments of Patrick Souponce as Chief Product Officer and Grant Parsamian as Chief Data Officer, welcoming them to my leadership team. Both are seasoned leaders with deep expertise in building customer-centric products, scaling data transformations, and driving rapid innovation. They have hit the ground running, working alongside our teams to shape our next chapter of innovation, unlock new avenues for growth, and build new operational rigor that can accelerate our progress. Coursera's ecosystem is built on a strong foundation of assets, which I believe will help us shape the future of learning by reinventing how skills are developed and re-imagining how education is delivered at scale. Our branded content is one of those assets. Our catalog now includes more than 10,500 courses, having expanded by more than 36% over the past year. Learners come to Coursera to discover and master in-demand skills taught by world-class instructors trusted for their academic rigor, industry expertise, and career relevance. To meet the growing demand for AI skills, our generative AI catalog now includes more than 925 courses, having tripled over the past year. We recently surpassed 10 million enrollments in generative AI courses, seeing 12 enrollments per minute so far in 2025. In connection with this milestone, we were proud to announce new courses and certificates focused on job-specific generative AI skills, featuring offerings from AWS, deeplearning.ai, Google Cloud, IBM, Microsoft, Snowflake, and more. Earlier this month, Coursera was named to the Time 100 Most Influential Companies list for our efforts in expanding access to generative AI skills for learners around the world, helping the global workforce better understand and apply this new technology. We will continue to work closely with leading AI companies as well as our world-class universities who share our commitment to broadening access to job-relevant education so that learners can navigate and succeed in a fast-changing labor market, businesses can strengthen their workforce to remain competitive, and campuses can better prepare their graduates. As part of this commitment, we also continue to expand our catalog of industry micro-credentials. In July, we announced five new entry-level professional certificates from existing partners, including ADP, IBM, Microsoft and SAP, as well as our first certificate from Zoho. These certificates provide the necessary skills to start a career in various roles, from AI product manager to sales representative. Increasingly, they're also eligible to earn college credit, enhancing their value to our learners and opening new, more affordable pathways to college degrees. Earlier this month, we were pleased to share that 17 additional professional certificates from Meta, Microsoft, and IBM were awarded ECTS credit recommendations in Europe, along with five from ACE here in the US. We now have more than 30 micro-credentials with ECTS credit recommendations, with approximately 40 from ACE. As demand for career-aligned education from industry grows, We believe top universities will also view Coursera as a strategic platform to extend their reach. Last week, we were pleased to announce that the University of Cambridge is now collaborating with Coursera. For the first time, the university will bring a series of professional education courses to our platform. The first of these courses is now live, with more expected to launch in the coming weeks. To summarize, we will continue to invest in building a faster, more agile model that enhances the value of our brands, meets the rapid pace of skills development and empowers our instructors with new tools to create and augment courses that deliver a more engaging, personalized and impactful learning experience for the millions of learners and customers our platform serves. Turning to our product updates. Our team continues to make strong progress in developing new products and capabilities across our platform. And I would like to highlight a few notable recent innovations focused on delivering more value to learners and driving improvements in our conversion, engagement, and retention metrics over time. First, an update on Coursera Coach. Coach is our AI-powered tutor designed to support and enhance the learning experience on Coursera. To date, more than 2.6 million learners have exchanged 36 million messages with Coach, with the highest usage in the US, India, and Colombia. From our early data, we see that learners using Coach are 10% more likely to pass a quiz on their first attempt. Additionally, learners starting their careers are 40% more likely to use Coach than those working to advance their careers. demonstrating the potential impact of providing more personalized, interactive engagement across our platform. In June, Coach was recognized by the 2025 Newsweek AI Impact Awards, winning for AI Education Best Outcomes for its ability to adapt to the needs of individual learners. By combining trusted content with AI-enabled guidance, Coach is becoming increasingly powerful at providing a more personalized and interactive experience, grounded in the expertise of our instructors and Coursera's deep data-driven understanding of learning progression and skills development. Our team continues to build upon the initial tutoring use case, testing new capabilities in discovery and onboarding, career guidance, interactive role play, and customer support. We are excited about Coach's potential to drive stronger engagement throughout our platform and, most importantly, to deliver better outcomes for our learners. Next is AI translations. Coursera has been leveraging AI to broaden access to our high-quality catalog, starting with text-based translations in 2023. Today, our platform offers more than 5,500 courses in up to 26 languages. In April, I highlighted that the next phase of our translation efforts, AI dubbing, would begin to bring native language learning to Coursera, featuring the voices of our expert constructors. We started with an initial 100 courses from three partners at launch. Over the past few months, we have tripled the number of available courses, including many of our most popular titles from Google and have added support for a fifth language, Indonesian. To date, More than 120,000 learners have utilized AI dubbing to complete more than 400,000 learning hours, with the strongest engagement coming from our Spanish-speaking markets. Preliminary feedback from our learners highlights improved focus and understanding, as well as the time-saving benefits of remaining on platform for translation capabilities. We will continue to expand access to the world's best instructors with added support for more languages and content creators in the coming months. It's a prime example of harnessing advancements in technology that leverage the scale advantages of our global reach. These efforts expand our market opportunities and rapidly build on the foundational assets that have propelled Coursera's growth into one of the largest learning platforms in the world. Third, our efforts to better serve our growing population of international learners go beyond reducing language barriers. Last quarter, I highlighted the global rollout of our career-based discovery experience. As a reminder, this includes more than 60 role description pages that utilize Coursera's career graph to provide credential recommendations across different levels of career progression and skill mastery, as well as localized salary and job data for approximately 40 countries. This was one example of our broader efforts to reimagine the learner journey on Coursera, encompassing improvements in search, discovery, and onboarding. The scale and data of our platform create powerful opportunities for personalization and localization, enabling us to tailor content, language, recommendations, and experiences to meet the needs of individual learners and labor markets in different regions. This quarter, we started experimenting with preliminary enhancements to our go-to-market capabilities, aiming to guide individual learners more effectively through our funnel with an improved site experience, new promotional and geo-pricing capabilities, and better merchandising that articulates a clearer value proposition across our courses, certificates, and subscription offerings. the early results are promising. We're seeing positive impacts in our new paid learner conversion, including in international markets that drive substantial top of funnel activity and provide meaningful opportunities for us to deliver more valuable experiences, which can improve our paid conversion over time. I'm excited about our product roadmap for the rest of the year and look forward to providing updates and our momentum in the coming quarters. Our second quarter performance marks an important step in laying the foundation for our next chapter of growth. As a reminder, our efforts will be focused on three priorities. First, product-led growth is key to our strategy. Our team is making strong progress in enhancing our platform's capabilities, and I am confident in Patrick's and Grant's ability to accelerate our product development life cycles leveraging advanced AI and data-driven insights across all aspects of our business. Second, we will accelerate our content engine. The breadth and quality of our catalog enable us to serve both upskilling and reskilling use cases. I expect course builder, academic integrity features, and more AI production and ingestion capabilities will allow us to build a faster, more agile content model while preserving the value of our credible, high-quality brands and meeting the rapid pace of skills development required by real-time learner and business needs. Third, we will continue to improve our go-to-market capabilities. Our efforts to reimagine the learner journey are early and promising. By creating a more unified and integrated experience across our platform, we ensure that our investments in marketing and discovery deliver a more personalized, engaging, and valuable experience for the broad audience of learners and customers that we serve. I am excited to build our momentum as the year progresses. Now, I will hand it over to Ken to walk us through the financial performance and outlook in more detail. Ken, please go ahead.

Thank you, Greg, and good afternoon, everyone. We delivered another solid quarter, generating total revenue of $187 million, up 10% from a year ago, driven by growth in both our consumer and enterprise segments. As Greg mentioned, our expectations for full-year growth have improved as we begin to implement new operating capabilities and execute on a focused set of initiatives. Please note that for the remainder of this call, as I review our business performance and outlook, I'll discuss our non-GAAP financial measures, unless otherwise stated. In Q2, gross profit was $105 million, up 13% year-over-year, with a 56% gross margin, up 180 basis points from 54% in the prior year period. The expansion on our gross margin rate continues to be driven by increased learner demand and engagement with content launched under our more recent production arrangements, which, as we've discussed, commonly include a lower revenue share and associated content costs. Total operating expense was $93 million, or 50% of revenue, an improvement of 150 basis points from the prior year period on continued operating discipline. Net income was $19 million, or 10.3% of revenue, and adjusted EBITDA was $18 million, or 9.6% of revenue. I remain pleased by our strong bottom line performance as we leverage our annual operating framework to enable the right long-term growth decisions over the course of the year. It is a strong indication of our operating discipline and a reflection of our capacity to invest in unlocking our next chapter of growth. Turning to cash performance in the balance sheet, Q2 marked our strongest quarter of cash performance to date. We generated $29 million of free cash flow, which included approximately $2 million in purchases of content assets treated similarly to other categories of capital expenditures. As Greg outlined, we continue to enhance our content engines capabilities with new partnerships, production arrangements, and learning experiences that we believe will deliver increasing value for our customers over time. We also expect these investments to produce longer-term benefits to our business model and economics, including the recent expansion in our gross margin. Our cash performance enhanced our already healthy balance sheet. As of June 30th, 2025, we had approximately $775 million of unrestricted cash and cash equivalents with no debt. Our capital allocation framework prioritizes the strategic optionality afforded by our strong financial position. We believe this current prioritization is particularly valuable given the industry's rapid transformation and our ambition to grow and enhance our leadership position. Now let's discuss the results of our operating segments. As a reminder, we now report our results in two operating segments, consumer and enterprise. At the start of 2025, we refined our segment reporting structure by integrating the degrees product results into our other consumer segment products, including courses, specializations, and subscriptions. The simplification was straightforward and reinforced our commitment to building a more unified end-to-end platform experience to benefit the broadest audience of global learners. The simplification has no effect on the reporting of our enterprise segment or consolidated results. All consumer segment results that refer to year-over-year change are comparable based on the reclassified historical results that we shared in connection with the transition last quarter. With that, let's discuss our strong consumer segment performance. In Q2, we delivered consumer segment revenue of $123 million, up 10% from a year ago. Growth was driven by top of funnel activity, as well as Coursera Plus subscription offerings. As Greg highlighted earlier, we added 7.5 million new registered learners, bringing our total base to 183 million. Additionally, we saw strong receptivity to our Coursera Plus subscription offerings and marketing campaigns, including localized promotions and pricing that benefited our paid conversion rate. Consumer segment gross profit was $75 million, up 13% from $67 million in the prior year period. Segment gross profit margin was 61%, up 160 basis points from a year ago as learners engaged with more recently launched content created under production arrangements that provide more favorable revenue share economics. To summarize, our consumer trends are stable and progress is promising. We're operating with renewed level of prioritization and focus demonstrated by our execution this quarter. As we seek to drive more significant growth, we're in the early stages of deploying investments across product, content, and marketing that can create more valuable and engaging experiences for our individual and enterprise learners over time. I'm pleased with the early indications offered by our more responsive consumer model and look forward to sharing updates on our ongoing progress. Moving to our enterprise segment. Enterprise revenue was $64 million, up 10% from a year ago, driven by growth in our business and campus verticals. Our second quarter performance was solid, and like all companies, we continue to monitor budgetary trends amidst the backdrop of a dynamic macro environment. Segment gross profit was $45 million, up 12% from $40 million in the prior year period. And segment gross profit margin was 70%, an improvement of 170 basis points from a year ago, driven by similar content engagement trends benefiting consumer. The total number of paid enterprise customers increased to 1,686, up 12% from a year ago, and our net retention rate for paid enterprise customers was 93%. Finally, turning to our financial outlook. For Q3, we expect revenue to be in the range of $188 to $192 million, representing growth of 7% to 9% year-over-year, weighted towards our consumer segment. For adjusted EBITDA, we're expecting a range of $10 to $14 million. As Greg highlighted, for the full year 2025, we are raising our expectations for both revenue and adjusted EBITDA, given the solid first half we delivered. For revenue, we now expect a range of $738 to $746 million, representing growth of 6% to 7% year over year. The midpoint of the range is a $17 million increase from the annual guidance provided last quarter, with the improvement concentrated in our consumer segment by nature of its more responsive revenue model. As highlighted earlier, consumer growth has been driven by strong year-to-date top-of-funnel activity, as well as Coursera Plus subscription receptivity, providing greater visibility into the back half of the year. Our assumptions on the trajectory of our enterprise segment have not changed as we continue to monitor and assess the current corporate spend environment, which could remain challenged for any macro uncertainty. For EBITDA... We are now targeting an annual adjusted EBITDA margin improvement of 200 basis points to 8%. This reflects an additional 100 basis points of anticipated improvement from our prior full-year target of 7%, or said otherwise, an incremental 9 million adjusted EBITDA dollars implied by the midpoints of our current and prior revenue guidance ranges. We believe our long-term operating framework as it relates to EBITDA, which enables us to pace our investments over the course of the full year versus optimizing for any single quarter, has been particularly helpful in 2025. It has provided the opportunity to assess our business and identify top investment priorities to drive growth, the capacity to deploy capital toward our most productive near-term growth opportunities, as well as strategic long-term initiatives. the ability to track and demonstrate our commitment to delivering scale and financial leverage in our operating model over time, and most importantly, the flexibility to make the right long-term decisions on behalf of our learners, customers, and shareholders. To close, I'm pleased with the solid execution our team has delivered year to date, giving us the confidence to substantially raise our annual revenue and growth guidance. While at the outset of many of our efforts, we are demonstrating progress in implementing new operational capabilities across all aspects of our business, while deploying targeted investments we believe can differentiate the value of our platform and reignite more significant, durable, and long-term growth. I'll now open the call for questions.

As 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. We will now pause a moment to assemble the queue. Our first question will come from Steven Sheldon with William Blair. Please go ahead.

Hey, thanks for taking my questions. Great to see the revenue growth acceleration this quarter. For the guidance, I think the guidance would imply about 8% year-over-year growth at the midpoint in the third quarter, I think below 4% growth in the fourth quarter, so effectively deceleration against easier comps. Is there anything specific driving that assumption, as you did see acceleration this quarter in both segments, or is it more about just factoring in that continued macro uncertainty, especially in the enterprise segments?

Hi, Stephen. Thanks for the question, firstly. So what drove the improvement in the forecast is primarily the consumer business. The macro trends in enterprise, we don't think we're getting any better visibility, which is something affecting broadly the markets. So it's the consumer segment. And if you look at the core consumer item as it relates to the future quarters, We see strong growth going into next quarter as well. We see a little bit of a pullback seasonally, about 100 basis points for the traditional consumer. And as we mentioned before, we collapsed the degrees segment into consumer degrees will decrease this year. So the core consumer segment is rolling along at exactly this improvement. And anything less than that from a rate standpoint going forward is a tiny bit of seasonality in Q4 and our degrees product, which is part of the consumer segment.

Got it. That makes sense. And then maybe just to follow up, what are you guys seeing in terms of big tech making AI skills education a bigger priority? We saw the Microsoft's $4 billion pledge, I think, announced earlier this month. And then how are you thinking about positioning Coursera to be a key cog in big tech's plans there? You already have a lot of them as content partners. So is there more you can do there?

Great question, Steven. Greg, maybe I'll start with a little bit of context overall now that I've just gone through my first full quarter in the CEO role. So obviously it's still very early days, but I'm very pleased with the progress we're making. I am even more confident than I was a quarter ago on the massive opportunity in front of us for some of the reasons that you just mentioned. The pace of change is accelerating around the world. And with it, the need for reskilling and upskilling really continues to increase for both individuals and for companies, as you mentioned. And so meeting that need really requires a scaled global technology leader in education. I think we are very well positioned with all the right foundational assets. We've got amazing trusted content from the best universities and industry partners in the world. We have an AI-enabled learning platform. You heard me talk in descriptive remarks about some of the ways that we leverage AI to continue to improve that platform. We have global reach with 183 million registered learners. And then finally, we've got a very healthy and improving fundamentals to the business. We're growing at an accelerated pace. generating positive EBITDA-free cash flow. We have a very strong balance sheet, no debt, $775 million of cash or cash equivalents. So that's a phenomenal set of assets. What we are seeing in our conversations with enterprise partners is that they all recognize that the pace of change is accelerating and they need to make sure that they are adapting their companies to meet that pace. That requires thinking about what are the types of roles that they need and what are the types of skills that the people in those roles will need both today and tomorrow. So I think there is a large opportunity for us to play an important role in helping them address that shift that they're going through. It's something that we focus on internally here as well at Coursera. You know, we're making sure that we're not just leveraging AI to offer it as courses on AI and not just use it within the platform, but also use it to improve the productiveness and efficiency of everything we're doing across the business. And so I think we absolutely have a role to play in that transformation.

Good to hear. Thanks, Greg and Ken, and nice results.

We will take our next question from Taylor McGinnis with UBS. Your line is now open.

Yeah, hi, thanks so much for taking the question. Can you hear me?

Yes, yes.

Okay, perfect. Congrats on the quarter. Maybe just on the consumer outperformance. So if I look at the sequential dollar growth, I think it was the strongest that we've seen in some time. And typically, for you guys too, Q tends to be the lightest quarter. So when we look into 3Q, I guess, is there any reason why sequential dollar growth couldn't be stronger? I think you made some comments earlier about some lighter seasonality. So could you just elaborate on that? And then the second part to the question, maybe you could talk about where you see in terms of rolling out the product and go to market changes and consumer and what's left to come as we think about the growth trajectory and catalyst from here.

Sure, Taylor. Yes, as we mentioned before, the total increase was $17 million, of course, top line. Almost all of it focused on consumer. This is the forecast for the year, of course. We expect Q3 to be similar to Q2 from a growth standpoint for consumer, and then to slow a little bit in Q4 with typical seasonality, as well as some pullback on degrees. So that's how that $17 million spreads across the rest of the year.

Maybe I'll add just a little bit to what Ken shared to address the second part of your question, Taylor. First, we saw growth accelerate in our consumer business in every region across the world. So in North America, in Latin America as well, in EMEA, in APAC. And so that was really good to see that it was a broad-based acceleration there. In terms of the capabilities that we're focused on, when we talk about really driving more rapid product development and focusing that in a data-driven way to deliver improvements to the learning experience that drive better conversion, better engagement, and better retention, we're still in the early stages of rolling out the product that will flow from all of that focus. uh so i i think what you'll see is uh we're going to continue to have a very dedicated focus on continuous improvement across those metrics but we are going to not get ahead of ourselves and get over our skis in terms of how we think about that business benefit that that can drive until we actually start to see it we started to see some of those things uh in q we talked about that consumer business obviously has a more responsive revenue model Some of the things that we're doing from a geopricing perspective and from a conversion perspective are helpful. Obviously, the fact that we increasingly have a subscription-driven business, Coursera Plus Monthly, Coursera Plus Annual, we're seeing more and more shift to that. That's helpful for forward-looking revenue visibility. But it's still early days in terms of what we aim to accomplish on the platform. So that's a little bit behind how we think about it.

Great. Thank you guys so much.

Our next question will come from Brian Smilick with JP Morgan.

Great. Thanks for taking the questions. Shifting gears a bit to enterprise, good to see the NRR improve as well sequentially. Can you just talk about what you're seeing across government, business, and campus? I believe you called out business and campus as brighter spots, but just curious on trends across each subvertical. And then Greg, just shifting gears towards AI engagement, You know, with content up 36% year on year, 10 million plus AI enrollments. Can you just talk about monetizing AI tools as you drive deeper engagement across both consumer and enterprise longer term? Thank you.

Brian, this is Ken. I'll take the first part of your question, which is the relative performance of the verticals. So C4C has been a particularly bright spot for us. We have a particularly good product market fit, and we've seen nice growth there over time. As it relates to NRR, the government business, we lapped some contracts this last year, so that helped us. in the calculation. And C4B hasn't had, Coursera for Business, as much improvement, which is the largest vertical, of course. As we've talked about, the visibility there is a little harder to see, as many have seen across other industries, as it relates to corporate spend with uncertainty. So that's how the NRR breaks out. And the 93, just for clarity, we're pleased it improved from last quarter. But until we get to 100 plus, we're not going to be satisfied with that.

Yeah, I would certainly echo the last part of what Ken said. We still have a lot of work that we need to do on that front to get it to where we're happy with it from an NRR perspective. In terms of the catalog and its growth, as you mentioned, 36% growth. in the catalog to more than 10,500 courses now. Phenomenal interest in Gen AI. We are seeing that reflected both in the number of courses that we have, because obviously we have partners who want to meet that interest by creating new content. And so we've seen that triple the size of our course catalog in Gen AI over the past year. And then we're also using GenAI obviously as a tool to drive better engagement with that content. And so continuously looking to optimize the performance of our courses. You see that with things like coach dialogues, which is our AI driven tool that enables instructors to deliver Socratic dialogue in the course based off of their course material. So there's a lot of continued effort on that. And I would say broadly, what we want to do with content is make our content engine more responsive, both in terms of the breadth of catalog content that we can bring in across different subject matters, in terms of the duration of that content catalog, the modality in which it's offered, the languages in which it's translated. And we believe AI is a phenomenal tool to help us with all of that.

Great. Thank you both.

Our next question will come from Ryan McDonald with Needham. Please go ahead.

Thanks for taking my question and congrats on a great quarter. Maybe just starting on the consumer gross margins, but it's great to see the continued improvement there, particularly on a year-over-year basis. Can you talk about how sustainable some of these improvements are and maybe how we should think about gross margins in that segment structurally now as you continue to see more demand maybe beyond some of the largest content partners moving forward? Thanks.

Sure, Ryan. This is Ken. Thank you. So as it relates to consumer gross margin, we're seeing the benefit of a lot of the investments we've made in content is one key area, which we've talked about a fair amount historically. That has been very helpful in driving consumer margin and should continue. We also, with a lot of our newer content partnerships, have better revenue share. So as we've evolved the model and as we have a more substantial presence in the market, we're able to, and we help produce, we're able to secure better economics. And so we expect those trends to continue. It'll vary always a bit quarter to quarter, depending on the mix. I wouldn't say every single quarter, but by and large, We've improved the operating model around consumer. And if anything, I think over time, we're going to see additional upside there as we continue to invest and make product changes, product investments, including just the core of the learning experience itself.

And just to build on what Ken shared, like one of the reasons that we are really focused on building out our capabilities for the content engine is obviously it fuels the entire business. But also, as we enable content to be created more rapidly and for the cost of that creation to come down and for content to be optimized more readily across all of our courses, that gives us not only the ability to drive a better learner experience, to drive higher conversion, higher engagement, higher retention, all of which translates to faster growth. As we do all of that, that also puts us in a stronger position over time to get a larger share of that value creation and that economics.

That makes complete sense. Thanks for the color on that. Greg, maybe as a follow-up, as you think about sort of learners on the platform, you know, I continue to be impressed about the magnitude, even at this scale of net new learners that you drive. If there's a few things you could pinpoint, you know, of what's really driving that or maybe demographically or geographically, like where you're seeing sort of the greatest unlock, you know, are there a few things you could point to other than maybe just continued demand for Gen AI content? Is it this new AI translation that's unlocking new regions or are the career academies now starting to sort of unlock a different segment of the population? What do you think is the greatest contributor there?

Great question. So, you know, from a growth percentage perspective, we're seeing the fastest growth percentage come from APAC. Not surprisingly, just because it historically was a smaller part of our business. But it's also big in large numbers. You know, India has our second largest number of registered learners after the U.S., I would say broadly, certainly AI is a tailwind for us, both in terms of interest in GenAI content and obviously from a perspective of how we leverage that to deliver that content and deliver a better learner experience. I think also as more and more of the world uses Gen AI to learn anything, whether that's learning with a lowercase L or learning with a capital L, they become far more familiar with it and then they want to learn more and they understand the implications that might have for them as an individual. That certainly is true at the corporate level as well, obviously. So I think that that tailwind is not going to go away for the ed tech sector. And certainly our content gives us a differentiated advantage there, particularly in an era when AI makes the creation of content far easier. So having trusted content from the best universities and industry partners in the world is a very differentiated asset in our perspective and one that we intend to continue to build on. I would say other than that, there isn't a specific thing that I would call out other than the fact that I think our team is doing a really good job on top of funnel. I think they're doing a good job also on looking at promotions and pricing and how we can use those levers to drive better growth in the business. I still think we're early days in that. And so you can look to see us do more on that in the back half of the year on the enterprise side. I think you can also look to see us do more with what we've done in the past with academies. That's an active area of investment. So stay tuned on that front as well.

Awesome. Thanks, McKellar. Congrats again.

We'll take our next question from Jeff Silber with BMO. Please go ahead.

Thank you so much. Wanted to focus a little bit more on Coursera for business. Maybe you can talk generally about L&D budgets. Are companies holding back because of the uncertainty out there? Are they opening up a little bit more? Any color would be great.

Maybe I'll start and then, you know, Ken, you can add in as you see fit. I would say, obviously, there's a lot of macroeconomic uncertainty, you know, not just in the U.S., but around the world. And in those environments, that tends to lead to caution from a corporate spend perspective. At the same time, that is balanced against an increasing recognition from companies in all sectors that AI is going to have a major impact on their business and their workforce and that they need to be ahead of it. to ensure that they're not left in the dust by their competitors. And that one of the ways that they can stay ahead of it is by finding the right ways to upskill and or reskill their workforces to have the talents that they're going to need for the way that work will change. So I think you have those sort of balanced things happening. I would argue that some of the more Forward-looking enterprises are the ones that are really leaning in. And so those conversations are a lot of fun because we get to spend time with those customers and talk about what might be possible and how we can help them achieve that. And obviously your best customers always push you to be better. And so those are conversations that I really enjoy having. But I would say you're seeing those two things sort of happening and playing out in different ways at different companies. So there's definitely still a lot of caution out there, but then there are companies that are taking advantage of this time to really lean in.

All right. That's really helpful. And if I could shift gears and maybe get into the weeds a little bit. The tax bill that was signed earlier this month opened up something called a workforce Pell. You've got a lot of these Pell grants for what they call short term, high quality workforce aligned programs. It's got to be accredited. So I realize that your corporate partners is probably not going to be eligible for it. But is it possible to see some of those funds being used through programs at university partners?

I won't be able to answer the specifics of that question, but all I will say is we believe that that generally is a move in the direction that we see ourselves going anyway, which is really focusing much more on skills. We view skills as really the atomic unit that we are trying to provide on the platform. That's the reason that people come to Coursera to learn skills to help them grow their careers. That's the reason that enterprises work with Coursera to help their workforce gain the right skills that they need for whatever vertical they might be in and whatever their job needs are. And so I think broadly, that is a move that will benefit us and that we're 100% aligned with. I would expect that over time, just given the direction that policy is moving in the US, in the very least, we see that having other benefits for us. It's too early to forecast exactly how that might play out. But certainly, it's one of the reasons that we are very focused on working with you know, bodies like ACE here in the US or ECTS in Europe or NSQF in India to really take the micro-credentials that we offer the industry certificates and work to get those to be credit carrying. We think that that is good for learners. It's good for universities that can augment their existing curriculum with industry-driven credentials that are highly relevant for the jobs that are being hired for in the workforce today.

All right. Appreciate the call. Thanks so much.

We'll take our next question from Brian Peterson with Raymond James. Please go ahead. Brian, your line is open. Feel free to unmute.

I'm sorry, guys, bamboozled by that mute button there. But congrats on the strong quarter. Just a couple for me. Is there anything that you can kind of share on the linearity of what you saw at the top of the funnel over the course of the quarter and in some of the efforts that you're working on on the conversion side? Do we still feel like there's more room to gain there? And again, maybe just a follow up. How should we be thinking about the trajectory of the NRR on the enterprise business? Thanks, guys.

Sure, Brian. So there there wasn't a notable difference in linearity during the course of the quarter. We've been improving steadily on the conversion side and there is room for more. So we're excited about the direction that's taken and. Yeah, so we're not done with improvements there yet. And there's been a lot of specific focus on conversion. And I think we'll enjoy enhancements along the way as we enhance the product as well. With regards to NRR, we're not forecasting improvements going forward. Not yet. We don't, again, have enough visibility. This last quarter was, again, particularly good partially because of some mechanical lapping in the government business. But it's an area, you know, we need to improve upon and upon which we're pretty focused.

I might just add a little bit on the consumer side, but it applies to enterprise as well, which is, you know, we don't have a complicated business. It's top of funnel conversion, then getting those converted learners to engage. And then as they engage, you retain them for longer and you drive higher output. We have not historically been nearly as focused on the relationship between what we do in product and on the platform and those metrics as we have the potential to be. We are only a quarter or so into reorienting everything we do around that. How do you drive a better platform and a better product experience? How do you deliver that product faster? And how does that product delivery translate into improvements in every single one of those metrics? And so my goal is for us to continue to improve over time on those things. The pace at which we do that, what moves in any given quarter, we're not gonna be able to forecast But by bringing more rigor to that approach, by having it be very data-driven, and by speeding up our pace of execution, I'm hopeful that we can deliver that over time and see that reflected in our results in future quarters.

Great, Collar. Thank you.

Our next question will come from Yi-Fu Lee with Cantor Fitzgerald.

Thank you for taking my questions, and congrats on the strong executive order. So my question revolves around a pair of new hires, most recently with Chief Data Officer Grant and Chief Product Officer Patrick. Greg, previously you talked about using a more data-driven approach to manage the business. I guess, can you help us elaborate on what are the points, concrete data points you are looking to monitor to understand, hey, the business is going better fundamentally. And I also have one more follow up for Ken on the financial side.

Sure. In some ways, at a macro level, I sort of just mentioned them. Like, what traffic are we getting? How good a job are we doing at converting that traffic from a visitor into a paid learner? How good a job are we doing at engaging that paid learner, helping them complete courses, and then retaining those learners for longer? And as you do that, obviously that increases the revenue you receive from those learners. And that is also broadly true on the enterprise side, although the mechanisms might be somewhat different. And so what we are really focused on doing is making sure that every single aspect of what we do is instrumented so that we understand the relationship between all those things. And so if we make this change to the way that the first module of a course gets consumed by a learner, does that increase engagement? If we do that and it does increase engagement, does it actually lead to higher retention? Does it lead to better outcomes for that learner? And so that's a really high level way of thinking about everything we're doing. But my belief is you can improve what you can't measure. And if you're not paying attention to the measurement, you're not gonna improve it. And so we need to make sure that we're doing that across all of our platform. And that's what's behind the focus on our content engine, because that is the fuel of our business. behind our learner journey, which is all the ways that people interact with and engage with Coursera outside the specific act of learning itself. And then workforce learning at scale, building better integrations with LMSs and LXPs, better tools for enterprise admins, better dashboards, all of those types of things to really make sure that enterprises that leverage Coursera are getting the right outcomes from their perspective. My belief is all of that starts with data. All of that starts with really rapid product development cycles. Hiring Grant on the data side, hiring Patrick on the product side are both meant to really accelerate our progress on those fronts.

Hey, Greg, can you just tease us on that? I understand that coach and translation is a hot product you guys are focusing on. Like in terms of Patrick, right? What are the, like, in terms of the roadmap, the things that you want him to focus on? And then can I just squeeze one for Ken? It's the gross margin size. 61% on the consumer. We've seen infection on the enterprise side for 70%. I was wondering, to help us on the modeling, Ken, like, what... What should we expect on the optimization going forward? We understand it's improving, it's going more positively, and there's more to go. We just want to make sure our models are reasonable going forward. Thanks, James.

Sure. You mentioned a couple of different things, coach, AI translations, AI dubbing, etc. broadly, we are going to be investing in coach forever. because it is the way that we can make every single course on Coursera, since it is an AI-driven tutor, a more personalized, more interactive, more engaging experience. And so we want to pour as much energy into that as we possibly can, because we see that the learners who engage with Coach have higher completion rates, they have higher quiz pass rates, and it leads to better outcomes for those learners. The same is also broadly true and not surprising. on AI translations and AI dubbing. We now have 5,500 plus courses that have been translated into 26 different languages. We have 350 courses that have been dubbed into now six different languages. the cost of translating and dubbing is unbelievably cheaper because of AI. And also, the outcomes are better, not surprisingly. A learner learns better in their native language than they do in English. And so we see that when we translate content into more and more languages, we get better engagement and better completion rates from learners in those geographies and in those languages. Those are just two examples of some of the things that we're going to continue to invest in.

Andy, this is Ken, specifically on the consumer gross margin. We do, for all the reasons Greg just mentioned, we do expect that to expand over time. There's no near-term improvement we're going to forecast for the coming quarter. We have increased the forecast, of course, for the EBITDA margin for the year, which is pretty significant, and up a couple hundred basis points over last year, which follows on a 760 basis improvement the year before and 550 the year before that. um you're newer to the story but it's something that we've kind of pledged to improve every year and then we invest the excess into more growth um we were a little overwhelmed with the improvement in the gross margin in total in absolute dollars and couldn't when we have a 17 million dollar increase in the outlook uh that flows down to a gross margin in a fashion we were able to reinvest some but not as much so we expect that to trend to continue on the EBITDA margin line, again, a couple hundred basis points. But in this current year, we don't have an increase in the consumer margin that we're planning, but we do expect it, again, to continue to increase over time.

Our next question will come from Josh Baer with Morgan Stanley. Please go ahead.

Great, thanks for the question. I wanted to dig into the Consumer Plus subscription that was called out several times. Can you kind of generalize the user, the subscriber, just as far as what stage of life or stage of career, geography, and then the behavior, like once turning on that subscription, what courses and content are they gravitating to? Is there a way to generalize some of those behaviors?

I don't know that there's a great way to generalize that just because learners come in all different flavors from all over the world. But I would say broadly, you have kind of starters, switchers, and advancers, right? So people who are at the very beginning of their career and looking to gain skills that help them be better prepared for a first job. You have the the advancers, the people who are already in a role and are looking to build their skills in that role. Oftentimes they might, you know, come to Coursera because their company actually like has a program with Coursera. and wants them to get upscaling. But oftentimes that will then lead to, you know, potential exposure to the platform that leads them to become an ongoing consumer learner outside of whatever their work, you know, might be asking them to get upscaled on. And then you have the switchers, the folks who, you know, are in a career, but they want to, they realize they want to do something else. I would say that you have, differences geographically around types of content, but not radical differences. India is one of our fastest growing locations for interest in Gen AI content. I'm not super surprised by that, just given that India has a strong emphasis on education and obviously has a strong tech background from a workforce perspective, and also it's a massive country from a population perspective. It's not surprising that you would have more enrollments coming from there, given that it's our second largest registered learner base. Beyond that, I think it gets really hard to make generalizations. Obviously, broadly, we see the most interest in courses that are in AI, tech, data, networking, cybersecurity, business. And that's sort of been our historic sweet spot.

Thanks, Greg. Any update on scale, size of the subscription, or growth?

Josh, we haven't broken down the consumer product like that externally. Okay.

Thanks, Ken. Great quarter. Thank you. Thank you. Thank you.

Our next question will come from Sarang Vora with Telthy Advisory Group. Sarang, your line is open. Feel free to unmute.

Thank you. Great quarter as well from my side. My question is on the Coursera produced content. I know a lot of professional certificates came into this quarter and a lot of branded content came as well, but just curious on how is that pipeline developing on the Coursera produced content? And how do you see that scaling? Are there any specific areas you, you know, as you have progressed over the past couple of months, are there any areas you have identified for CPC? Just any color over there would be helpful. Thank you.

So at a high level, you know, one of the things that was really clear when I came into the role was we need to make sure that we're investing more into our content engine, both creating Coursera produced content, but also just all of the tooling that both we use to create content, but also all of our partners use to create content to enable better agility, you know, faster production cycles, more format, you know, flexibility, and obviously on the Coursera-produced content, that provides some good economics for us. Generally, there's exclusivity as well on that. We have better control over it, and also we use Coursera-produced content as a testbed for things that we can apply across all of our content and all of the platform. And so, you know, we've invested 17 million last year in Coursera produced content. We recognize six million dollars of investment in the first half of the year. Our goal is to increase our year over year investment overall for 2025. You know, we haven't sat down and gone through the forecast for 2026 yet. But I would expect that generally, given that we're seeing success and that we like the dynamics of that aspect of the business, that that is going to continue to be an investment area for us.

That's great. Thank you and good luck ahead. Thank you. Thanks, Ron.

That wraps today's Q&A session. A replay of this will be available on our Best Relations website in the next 24 hours. We appreciate you joining us.

This concludes today's conference call. You may now disconnect.