Udemy CEO Hugo Sarrazin on AI-Powered Learning, Subscriptions & the Future of Online Education

The online learning industry is in a period of evolution shaped by AI driven personalization and shifting workforce demands. In that competitive space is Udemy, which is in the throes right now of a shift from a marketplace of user generated courses to a subscription based AI enhanced model serving a wide range of technical and professional content up to both consumers and enterprises. Their second quarter saw revenue in the enterprise segment up 7% year over year, and the company hit a milestone of more than 200,000 paid consumer subscribers. Although with a little bit of transition along the way, we sit down and go through it all with Hugo Sarazen, who became CEO in March to discuss AI powered learning, how Udemy is entrenching itself in enterprise clients, his skills as a CEO and so much more. Let's get into it. Hugo, thank you very much for joining. I think there's so much going on at Udemy. Let's get right into the heart of it. You joined in March of this year. You are brought on to lead this company in a pretty transformational pivot. Tell us what that is.

Well, listen, Udemy has been around for quite a number of years, 15 years. They were the first one, not the first one, but they were a part of a cast of characters that came out and went after the online learning category 15 years ago, and we ended up being the leader. We're $800 million revenue gorilla with a very unique positioning where we have a marketplace, but that category is currently under dress. Everybody in the category is being perceived as under threat by ai. There are post COVID aftermath. It really flourished rapidly during the COVID years and after that there's a bit of a speed bump like many of those, of that era. So there's a real need to rethink what is the business model moving forward and what's going to be the points of differentiation, and I'm super excited to be here to lead that change.

So just to break it down, when you talk about the marketplace, Hugo, there've been two areas. There's been the consumer side and there's also been the corporate or enterprise side. Talk to us about the pivot. Let's start with the enterprise piece of it.

So just to ground the viewers, 800,000,500 is in the B2B space selling to enterprise. We have 17,000 large enterprise who are buying our product, and then 300 million is on the B2C. These are individuals who buy courses. The challenge is slightly different, but at the heart of it is it covers both. So at the macro level, we have a really important disruption in ai.

(02:52)
AI is creating a, if I go back to online learning was a disruption in the cost of distribution. It made access to education more easy to get at a lower cost, and that was a big innovation and it lasted for 15 years. Now with ai, we have two types of disruption. The first one is we're reducing the cost of the creation of the content, and that's going to touch every part of the value chain. But the second one is where the opportunity, and this is why I'm so excited, is traditional learning. You and I will start the class at the same place.

It

Doesn't know what you know, it doesn't know what I know. You choose a medium advance or a beginner's class, and then we all start at the same place. It doesn't know which way you like to learn. It will be designed for the average learner, but now with ai, I can do mass personalization, I can adapt the learning methodology, the mode, the access to you, the learner, and that I think is a big opportunity. So what we're trying to do on the corporate side is we're trying to begin to pivot to use AI everywhere for the learner and provide a lot more personalization. And we can come back to that into a lot more detail. There's lots to unpack on the consumer. I think we have a slightly different but similar change. We are seeing that the world is being disrupted with ai. There's a lot of change in the skills that are required. Some of the new grads are struggling to get jobs. Some people in the role are trying to change jobs, and we have the opportunity to come and say, let us help you take ownership of your career and the skills you need, and therefore we're making a strong pivot to create career subscriptions that are targeted at outcome using AI to deliver really engaging content that's personalized to you.

Let's stick there then on the consumer side for a moment, Hugo, and talk about the business model Udemy's being built as a marketplace. Do you envision keeping the marketplace model or do you see a world in which more of the content will be proprietary created by Udemy itself and owning that IP becomes part of the model on the consumer side?

Perfect. Let's kind of unpack that a bit. So the marketplace itself, what we're doing is we have instructor, 85,000 of them worldwide are creating content. And it's incredibly dynamic. It's a competitive advantage compared to the other players in our market who are in a publisher model. A publisher model means that somebody goes, decides what to create and then spend some time creating it and then off we go. In a marketplace, it's way more dynamic. So every month, 35% of our content, our most used content is updated. When Deep Sea came out, within weeks, we had hundreds courses on Deep Sea.

Wow.

Right now we have vibe coding in ways that nobody else has because that instructor community is very, very active in creating that content, maintaining it fresh and updating it. So we believe at the end of the day, that is a competitive advantage that we have and we will continue to have in the age of ai because what we're trying to do is combine what is magical about the instructor, the way they tell stories, the way they engage the user, and the way you can personalize with ai. So we're transforming that relationship, but we're going to keep the instructor at the heart of it. And I'll give you the simple example. I mean, there are thousands of people today who teach AWS thousand who certification on a s, but there is one fellow that has millions and millions of follower, super instructor. There's something special in the way he tells the story the way he provides examples that resonate with people. So people are flocking to the way he teaches. Even AWS gets their own classes on AWS on Udemy. So it's a powerful thing and we want to encapsulate the magic and help instructor be super successful moving

Forward. And in terms of the impact, in terms of the success defined as the consumer subscriber base, talk to us about recent performance. The messaging in your Q2 results, which I have in front of me, were a little bit mixed when it came to the consumer core customer. Talk to us about performance there.

So for the consumer, we're in a very, very interesting transition year. We have historically been in the business of selling individual courses at very large discounts. So we got a lot of volume, but we were not monetizing in a way that recognized the value we were providing. And as a result, our transaction marketplace in a world where online traffic is being disrupted and SEO is not as powerful as it used to be, we are struggling to maintain the transactional part of the business today. And what we ended up doing is we made a pivot that had two dimension. One, we moved to subscription, which has a much better lifetime value to CAC ratio, much better. So we will do that trade any day. And we had an amazing Q2 from that point of view, 40% year over year growth on subscriber. We reached 200,000. We've recently announced that we achieved the year end goal of 250. So we're changing the business model. And currently for your investors, a lot of folks are writing off our consumer business. They're ascribing zero value to what we are doing there. And I'm beginning to say, you need to pay attention. We have a subscriber business and that's audiences. Those are audiences. And in the subscription product that we have today is the worst we will have in the coming five years. Every quarter we're going to add more value to this and we're finding new ways to monetize. That's another part of the story that was super exciting. We signaled that we're beginning to monetize the certification itself.

(09:39)
So when you're career oriented and you have the opportunity to take class to learn about cybersecurity, Google Cloud or vibe coding, but now you have the ability to get the certification and we are part of that chain. We are making money part of that. So the revenue, I mean we triple the revenue per users when we do that. It's a pretty amazing pivot of monetization. We're also beginning to add advertising.

I'm listening to you to describe the consumer business and you're starting to sound of a heck of a lot like a digital media company. So let's talk about your distribution. Talk to us about where folks can find Udemy courses today and where might they be able to find them six months to a year from now?

Great question and great insight. So I have not described it this way, but let me kind of do it. So today you can go on our website, you dme.com, or you can go on our native app and you'll be able to choose from a whole range of courses and now subscription packages. And that's the historical model and that's where the marketplace used to demonstrate its value. Moving forward, we're going to still have that, but we're also leaning into some very specific partnerships. We're going to acquire customers through different model. One of them, which we announced already, is indeed the biggest place where people are finding jobs. We have put ourself in the middle of that transaction as they look for a job and they see the skills that they're missing. We are right there saying, we got you, we got your back,

We

Got the content and the labs, the tests, the role play, everything, the assessment to make you successful at getting that job. So that's a different way to distribute. There will be other ways, and we're investing heavily in building a much more robust partnership team where we're going to find ways to license our content where that is appropriate or attract traffic or users in a very different way, and then manage those relationships over time in the way that is exactly as you said, more like a digital media company amongst many things. It's not the only way, but I think it's an interesting analogy.

Well then let's talk about enterprise to see how you are shaping the pivot there. Talk to us about that, Hugo.

Yeah, it is a similar but slightly different play on the enterprise side. The real question, and I've spent a lot of time since I've been here, both with C-Suite executive, more than 300 of them I've spoken to and investors having them tell us what they think. And at a macro level, there is a lot of enthusiasm around ai. What are we going to do with ai? And everybody's trying different things with ai. All the vendors have come up with their own ai something or another. And I'm not talking about in our space, I'm just talking in the CRM space in ServiceNow, Salesforce, Google, everybody's got their AI story, which is the moment in time. And the question is, what are we doing to transform this experience? And I'll tell you a very powerful experience I had that informed the strategy. One of the large pharma company, which is a very big customer review to me. I was talking to the CTO and the meeting started and he said, Hugo, I don't want my engineers to spend any more time learning. I said, well, that's going to be a tough meeting. I'm going to have a long time. But what he really meant as we went and spoke and spoke, he said, Hey, my engineers, my software engineers are now using GitHub copilot.

(13:46)
They're using Cursor. I want you to transform your experience to be not just in case learning, but just in time.

Interesting.

I want you to understand the way we are coding in our environment and provide the experience that allows us to make sure our engineers are more successful, that they are onboarded faster. I want you to read my log files when things break in production and understand what are the types of problem that they don't know so that you can come back all the way and then go through my engineers. And so it's a very different experience that they're asking for.

Can you deliver that, Hugo? I mean, when I think about the resources that Udemy is being built on, you're now talking about something completely different. You're now talking about getting entrenched in the actual activities of your clients. So with that in mind, who within an organization, within an enterprise are you selling to? I get it that you meet the CEOs, but is your customer cluster now a combination of the head of hr, the head of tech, the head of ops, who's making the buying decision, if that's ultimately what they think they want?

Yeah, so that's one version of what they think they want. But your question is still a super valid one. We are going to expand to whom we sell. We have historically, particularly during the COVID years sold to the head of learning and development l and d, which during COVID was like, oh my God, we send everybody home. They're all in their PJs, whatever. We need to give them the appropriate benefits. So a lot of that moment in time was targeted one type of problem and use case. Now we're moving to a more ROI selling.

(15:35)
We're targeting the business leaders in this case A CTO. We can do a similar thing with the head of sales, the head of call center, and we can talk about the cases there, and that becomes interesting. And then the other thing that you deliver when you go there, not only is it a more powerful ROI stickier solution, you also do something that a general purpose LLM cannot do. You are helping solve a workforce management problem right now. If I told you today you had 5,000 employees who did a open AI chat, GPT search and got an answer to something, what does that tell you As a manager? They may have gotten the answer they needed, but you haven't reskilled your workforce to be able to do something fundamentally different than they were able to do before. That's part of the question is like, Hey, I have people in digital marketing and I want them to be able to use the latest and the greatest tools that exist with ai. Help me take that workforce and transform them. So I'm trying to position us not just to deliver skill content, but re-skill the workforce of the future and that there's 92 million people that will need to get re-skilled because of AI in OECD country in the next five years, 92 million. I want to be there to solve those problems.

So with that in mind, Hugo and the different purchaser, the focus on ROI, do you feel as though that puts more pressure on performance? Because when you see client shift from a product where they intuitively want it, but perhaps aren't focused on measuring what the outcome is to now your clients being able to say, well, we entrenched you, we gave you visibility into our product development pipeline, and we therefore want to see productivity increase by x percent. That's how we are measuring your success. Are you concerned that this is going to place pressure on your model and on your team?

I am excited. It's the opposite. It's the opposite. I feel that the opportunity plays to our advantage. There are a lot of content catalog out there. My competition is delivering content catalog. It's more videos behind some on a portal somewhere that is not a very sustainable position. It will get commoditized with what I'm describing. Imagine that I'm going to take all the 250,000 courses. We have the biggest set of content. We're going to augment that with assessment. We're augment that with labs. We're going to augment that with AI role play. We're going to bring that into an LLM, and then we're going to show up at the enterprise and say, we're here to help you solve business problem. I like our chances. I like our chances any day.

Well, let's talk about how you're going to get there and let's talk about the money. Your margin has bumped up your gross margin. So congratulations. I saw about 300 to 400 basis point improvement and your free cashflow as a result was pretty strong in the second quarter, about 20% revenue conversion, 39 million of free cashflow listening to you. It feels as though a lot of that cash is destined to be invested in technology in this change. But tell us if you've got other priorities for uses of cash.

So everything you said is correct. And on top of that, I have almost 400 million of cash

On the

Balance sheet, on the balance sheet, and it's $200 million revolver. So if you step all the way back and with the vision that I'm painting, there's three things I think your listeners should recognize. One, we're doing a strong pivot away from the online content catalog into something new. And currently I'm calling it an AI enabled platform to re-skill the workforce of tomorrow. I'm going to be the first one in that category. I want to shape it. I've got some products that are coming out, and we can then talk about some of them already. And yes, I will need to invest more in product development to make sure we keep up with that. So that's one thing. The second is there is probably different capability or different skills that we will need to succeed, and the industry structure is probably not the right industry structure moving forward. So we're going to do a careful review of build versus buy all the time to figure out what are the best way for us to accelerate becoming this Udemy 2.0 that we need in the future.

Well, there's so much going on, Hugo. I hope that you're going to come back as we see this progress, because talking about the pivot here and talking particularly about the subscription business on the consumer side, I like that you've called out. People should start paying attention. But before we leave, I have some questions about your own personal journey just very quickly. So for folks listening, Hugo joined in March of 2025, you serve on the board of Spencer Stewart, which is a very prestigious executive research, sorry, executive recruitment firm. I've worked with them to find CEOs in my own roles. You have previously had a nearly 27 year career at McKinsey.

I'd love just to get a couple of minutes, Hugo, on your perspective, on two things. One is moving from advisor and consultant to the big job and leading a transformation. That's number one. And then number two, just a lot of headlines out there on AI spells the end of consulting. I'd love to know if you think there's truth to that given the history you've had in the industry.

So let's tackle number one. So my experience at McKinsey is it was a fabulous experience. I spend a lot of time advising CEOs and C-suites and boards around strategic pivots and transformation, which I think is very helpful for what we're trying to do. I was in Silicon Valley, I led our business technology practice on the west coast. I did a lot of work with private equity for nearly the last decade. About a third of my work was helping tech companies invest a private equity company, invest in tech and do a lot of merger and acquisition. But also at McKinsey, I also had the pleasure of launching the digital capability and growing that and eventually also leading the whole technology capability of McKinsey on their executive committee. So that was a lot of operating role. At the peak before I left, we had 1,500 software engineers building different AI and digital tools.

(22:33)
So I was managing on a day-to-day operationally I was an intrapreneur. I built that from zero to that 1,500 people. I did pivot from there to work with one of my client UKG, which we helped grew from 2.4, grew almost double the revenue in the last three years where I was president and head of product and engineering, and it is an adjacent space to the one I'm in. It was human capital management. So I got to speak to the same buyer, see the same problem. So for me, the pivot from this incredible opportunity to be strategic, see a lot of things across the whole technology landscape to then be an operator for a number of years, and now the role I'm in, I think the preparation couldn't have been better,

(23:32)
Been better. So I feel I'm excited. I'm using a lot of the things I have learned. I'm applying it in different ways. I've learning new things I love to learn and this is the place I couldn't be more excited. That's kind of answer number one. Answer number two, listen, AI is going to transform the consulting industry. It will transform many industries. There is absolutely no question. In the same way the internet transform the consulting industry. I wasn't there, but if you go back before 30 years, people were calculating discounted free cashflow on an Excel spreadsheet and now was kind of like a big thing. Nobody does that anymore. It's automatically done. In the same way that when I joined, you would do research and you would call into New York, the big library, and they were like FedEx stuff, and then you would do something else. That's insane, right?

Yeah.

And now today you do it on the internet. Now we have a new version of that and it's called ai. And AI does a lot of really important groundwork for all the consultants. What it doesn't do, and that's where maybe the fun clickbait kind of stuff that happens right now around the despise of the entire consulting industry. It doesn't recognize that there are more to the work than simply a PowerPoint deck. There's a lot of change management, there's a lot of capability building. There's a lot of coaching and influencing leadership team to do certain things and that OpenAI is not replacing, and therefore that part of the role will continue. The thing that I think is the most troublesome, which people don't talk about is how is the apprenticeship model to change? I mean, firms like McKenzie and others recruit some incredibly talented people, incredibly talented people, but if they are not given the opportunity to be apprentice in the same way as they used to, because that's what the whole business model was, an apprenticeship

Machine. Oh, for sure. Yeah. I started out at Goldman Sachs as an analyst, right out of college. Similar cultural priority,

Same thing. So that to me is the big question is how does this apprenticeship model need to evolve to maintain that ability to build the next generation of future leaders?

Hugo Sarazen, CEO of Udemy, please come back because I think the next time you do, there'll probably be the next iteration of chat GPT. Actually, we know that's already on the meet, and we'll see that evolve and your own company's going to have done a lot very differently by the time we reunite as well. So thank you for taking the time today and let's follow up soon.

Thank you, Anne. Appreciate it. Wow.

I'm Anne Berry. Thanks for tuning into After earnings, the show that brings you up close and personal with the executive behind the world's most interesting publicly traded companies. If you learn something today, don't forget to like, subscribe, and share with your friends. Upcoming episodes will feature CEOs and CFOs from Elf Beauty, Robinhood, Cisco, and more. We'll see you back here.