Shares of Upwork Inc. plunged dramatically in premarket activity on Tuesday, February 10, 2026, following the release of a first-quarter financial outlook that fell short of analyst projections. The stock was last indicated down approximately 26% at $13.92, a stark drop from its previous close of $18.79. This severe negative reaction underscores the market's current low tolerance for any signs of softening demand within the software and internet sectors, even when recent quarterly performance meets expectations.
The freelance marketplace operator reported fourth-quarter results that actually exceeded forecasts. Adjusted earnings per share came in at $0.36 on revenue of $198.4 million, both slightly ahead of consensus estimates. For the full year 2025, the company achieved record revenue of $787.8 million, representing a 2% annual increase. However, these positive historical figures were overshadowed by guidance for the current quarter. Upwork anticipates first-quarter revenue in the range of $192 million to $197 million and adjusted EPS between $0.26 and $0.28, both below Wall Street's expectations.
Investor concern is being driven by several key metrics and strategic shifts. The company ended 2025 with 785,000 active clients, a decline from prior periods. Furthermore, management's commentary pointed to a "softer start to 2026," jarring investors who were looking for sustained momentum. Chief Financial Officer Erica Gessert stated that 2026 is expected to be "a year of accelerating growth," but the market's immediate focus has locked onto the near-term profitability pressures outlined in the first-quarter forecast.
The lowered margin outlook is directly tied to increased operational spending. Management on the earnings call linked the profitability guidance to investments in enterprise client initiatives and marketing, specifically citing integration work related to its Lifted platform and incremental marketing investments. The company guided to first-quarter adjusted EBITDA—a key measure of operating profit—of $45 million to $47 million. This spending is part of a broader strategic transition aimed at capturing larger enterprise customers, a move that carries execution risk if the revenue contribution from these efforts is delayed.
Analysts are closely monitoring the company's Gross Services Volume (GSV), which represents the total value of work transacted on the platform. This metric, along with active client counts, is a crucial indicator of underlying platform health and can significantly impact investor sentiment around guidance. The selloff suggests traders are prioritizing these near-term operational metrics and the timing of profit generation over the company's longer-term narrative, which heavily emphasizes the role of AI in facilitating human collaboration.
The broader market context has been unkind to software stocks. Year-to-date, the S&P 500 software index has declined roughly 16%, reflecting a risk-off attitude toward the sector. This environment leaves little room for companies that miss expectations or issue cautious commentary. Following the report, analysts at Citizens Financial Group cut their price target on Upwork to $22 from $27, highlighting limited visibility into the timing of enterprise revenue contributions as the company executes its strategic pivot.
Moving forward, the market's checklist for Upwork is clear. Investors will demand stabilization in active client counts, evidence that the enterprise segment can ramp up without excessively crimping margins, and confirmation that AI-related service categories are driving durable, recurring revenue growth rather than one-off projects. The stock's performance when regular trading commences at 9:30 a.m. ET will be a critical test, indicating whether the premarket sell-off was an overreaction or a rational repricing based on the new guidance.
Upwork operates in a competitive online talent platform space, contending with rivals like Fiverr International Ltd. and traditional staffing firms expanding their digital offerings. In this landscape, factors such as pricing, platform take rates, and customer churn are paramount and directly influence the GSV and client figures that now sit at the center of the investment debate following Tuesday's disappointing forecast.
