Upwork Navigates Cross-Currents as AI Reshapes Freelance Demand

Upwork’s second-quarter results, released after market close on Monday (Aug. 10) offered up a snapshot of which freelance jobs are surviving artificial intelligence (AI), which ones may not, and what businesses are willing to pay people to do instead.

Earnings material from the company showed that low-complexity assignments are being automated faster than Upwork expected. At the same time, customers are spending more on larger projects, AI consulting is growing, and enterprises are tapping Upwork for work beyond traditional freelance engagements.

President and CEO Hayden Brown told analysts that “the trend we saw this quarter is really a continuation of last quarter.”

Upwork had previously identified about 10% of gross services volume (GSV) as more exposed to AI automation. Brown said Monday the latest weakness reflects faster erosion within that group, a “pull forward” from what the company had previously expected.

The client metrics bear that out. Active clients fell 4% year over year to 763,000, while GSV declined 3.6% to $966.4 million. Revenue declined 2% to $191.7 million. But GSV per active client rose 5% to a record $5,230, its eighth consecutive quarter of sequential growth.

Upwork is framing its strategy around three areas: SMBs, enterprise and AI. Brown said those are the company’s “growth building blocks,” with Business Plus aimed at larger SMB engagements, Lifted expanding its enterprise capabilities and AI changing both the work clients buy and how that work gets done.

Brown said average hourly contracts also reached a record 100 hours. The combination suggests that while Upwork has fewer active clients and less overall volume, the clients who are hiring are buying more substantial engagements.

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AI is contributing to the decline in some assignments while generating others.

GSV from AI-related work increased more than 22% year over year (though slowing from the fourth quarter of 2025’s 50% rate) and is running at an annualized rate of roughly $330 million. Within that business, AI Strategy & Consulting GSV grew more than 50%.

For SMBs, Brown said the hiring need is increasingly about applying AI rather than obtaining access to it.

“For many of these customers, the constraint is not access to AI technology, but access to people who understand how to apply it to their specific industry, workflow, or business problems,” she told analysts.

Upwork is also seeing clients hire people to finish or fix projects started with AI, including turning AI-generated code into production websites and improving machine-generated translations.

Even the way Upwork measures AI work is changing. Nearly half of freelancers in a recent company survey said their most recent project involved AI, while only 16% of job postings specifically mentioned AI. Brown told analysts clients increasingly assume AI will be used without spelling it out in a job description.

The spending patterns differ by customer segment. Business Plus GSV rose 174% year over year as larger SMB customers used Upwork for more complex, recurring needs. Brown said very small businesses are also shifting workloads toward AI-oriented work, calling the change in the customer base “an expansion, not a replacement.”

Enterprise opens another pool of spending. Brown said only about 10% of the roughly $650 billion enterprise contingent-labor market historically went to freelancers. Lifted allows Upwork to address other forms of contingent work, including staff augmentation and Employer of Record services.

Upwork said Employer of Record GSV grew 29% year over year and continues to expect Lifted GSV to grow about 25% in 2026.

The new demand is not growing fast enough to remove the near-term pressure.

Upwork cut its 2026 revenue outlook to $730 million to $750 million from $760 million to $790 million after the first quarter. The company now expects third-quarter revenue of $176 million to $184 million. Management said its updated forecast assumes “a heightened pace of AI-related automation and no improvements in the labor market.”

The guidance reduction helps explain why Upwork shares fell roughly 20% in after-hours trading. Second-quarter revenue reached the high end of Upwork’s forecast, but the outlook pointed to greater pressure ahead.

AI is not the only headwind. Changes to Google search are reducing referrals, particularly from unbranded searches, and weighing on new-client acquisition. Brown told analysts the effect has not stabilized. Upwork’s guidance assumes further deterioration through the third and fourth quarters.

The company is responding by putting another $5 million to $10 million into marketing in the second half after seeing returns from paid acquisition channels.

“It would be probably disingenuous for me to say that I know exactly how long this is going to take,” she told analysts in response to a question about rebuilding the client base and the transition of clients to higher quality AI-driven work.