00:00I understand where the pressures are coming from. I think the street understands as well.
00:03The big question is, I guess, how do you compensate for that? How do you adapt to that?
00:09Is this just a future of dwindling growth or can you sort of turn this around?
00:14This is a moment where the entire labor market is going through a transition with AI.
00:20And we are really in a good position to navigate that from a position of strength
00:24due to the strong economics in the business and the fact that we have been building for
00:29this AI future. In fact, just this week, we launched the Upwork MCP server, which is really
00:34a major milestone for us in bringing AI agents into our marketplace on both the buy side and
00:40the sell side and enabling both clients and talent to really amplify the work they do on
00:45Upwork through AI. And this is the type of strategy that really speaks to where the future of work is
00:49going and starts to show us what Upwork will look like on the other side of the significant
00:54transition around AI coming into work. So kind of explain exactly the MCP server. Give me a sense
01:02here of exactly how that works and why that technology is unique to Upwork.
01:08We started seeing something really interesting in the last few quarters, Remain, where clients are
01:13increasingly having their own AI agents come to Upwork and those agents are trying to find and hire
01:19human talent on their behalf. We also are seeing more and more clients come to Upwork with these
01:25unfinished work products that they started with an AI tool and then realized they really need a human
01:30expert to get finished. Both of these behaviors are why we built the MCP. This really enables agents on
01:37both sides of our marketplace to connect in, to take the steps in the recruiting and hiring process,
01:43to help with management of work, and really pushes Upwork capabilities out into the ecosystem
01:48of AI endpoints, whether it's Cloud or ChatGPT, where both clients and talent are working. And this
01:54is particularly important because we are seeing major shifts, not just in what work is required and the
01:59integration of humans and AI agents, but also major shifts in where work is originating and the places
02:05where a company like ours can go to acquire those next customers who will be part of our future. And
02:10that,
02:11this MCP really puts us into the environments where those customers are already working.
02:15Give me a sense as to what prompted this specifically because I was speaking to another
02:20company that the traffic's in the same area you are and they raised some concerns. This was a few
02:24weeks ago, basically about all the AI bots kind of, you know, coming onto their site and scraping things,
02:30basically, you know, taking your business without really providing anything in return. Was that kind
02:34of what prompted this or was this something a little bit more holistic that was in development?
02:39It was something different. We absolutely have seen AI agents and bots come to our website trying
02:45to initiate activity, but we actually have the controls and protections that prevent them from
02:50doing that historically. However, as we've been seeing this increased demand and we've been seeing
02:55this pattern of clients and talent trying to use their own AI tools to take more of the steps and
03:01engage
03:01with Upwork clients and talent, we realized that through the MCP layer, we could offer a safe,
03:07a trusted, a secure way to authenticate the right agent actors on behalf of clients and talent and
03:13make sure that we're extending the value of Upwork in giving folks the trust, the security, the guarantees,
03:19the payments around both human and agentic work through this new capability. And that is really
03:24the reason why we built this out. So just with the quarter and with some of the softness there,
03:29this wasn't all because of AI. You specifically reference a soft labor market. And obviously,
03:34here at Bloomberg, we can see that in the data. There's just not the same amount of hiring activity
03:38that we maybe saw in the past. I assume that's the same for full-time employees as it is for
03:44part-time or contract type of employees. Is this just sort of an across-the-board softness that we're
03:50seeing out there? There's definitely a broad-based weakness in the labor market. We saw this in Q1.
03:57The market continued to be very subdued in Q2. When we talk to clients, they tell us they have
04:02pulled back hiring, not just on our platform, but broadly across all of their channels because of
04:07what's impacting them and their businesses and their budgets right now. So, you know,
04:12we are viewing this as kind of the status quo and we factored into our revised outlook. Basically,
04:17no improvement in the labor market. Our expectation in our guidance is that this soft labor market will
04:22continue through the remainder of the year. So when we talk about the long-term story for
04:28Upwork, Hayden, and I mean, obviously, you know, labor markets are cyclical to a certain extent,
04:32so that will resolve itself in its own. You have the MCP. It seems like that's addressing the AI issue.
04:38The longer-term growth story here isn't just about AI jobs and whether it's, you know, the impact on you
04:45or the people coming to look for them or the people providing them. I assume at some point
04:49we'll be in a different world. Maybe it will all be AI, but I assume maybe we'll get a little
04:54bit
04:54more right-sizing of what's going on in the labor market. Where does Upwork fit into that?
05:00Sure. You know, we can already see that all of these jobs, your job, my job, all of our jobs
05:04are
05:04changing with AI, but they're not going away. It is really just a new set of work that's emerging.
05:09And from our vantage point today, we can already see what Upwork will look like on the other side
05:14of this transition. That includes much bigger projects. We're seeing peak sizes of client
05:20projects, both in terms of spend and hours per project on the site just in the last quarter alone,
05:25because humans are moving up the value chain and doing more complex work. We also are seeing these
05:29new skills coming into the picture, more and more AI jobs. We saw 22% in the quarter growth of
05:36AI work on
05:37our platform, and that's now at a $330 million run rate. And then the final piece of the puzzle
05:41is really for Upwork, we've been tailoring our solutions for both SMBs and enterprise. And those
05:48parts of our business actually are performing at or above of our prior expectations, even in this
05:53software environment. Our business plus product was growing 174% year over year in the quarter.
05:58Our lifted product for enterprises is on track to hit its annual growth goals as well. So this is
06:04really a picture of strength from these new customer segments, including SMB enterprise,
06:08strength of AI work and the expansion to cover both the AI agents and the channels where people are now
06:13working.
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