What happened

Shares of Upwork (NASDAQ:UPWK) were down a discouraging 12% at 11:50 a.m. EDT today, despite the freelance-jobs marketplace reporting better-than-expected sales and earnings in its first-quarter 2021 financial report, released last night.

Analysts had forecast that Upwork would lose $0.04 per share, pro forma, on $108.9 million in revenue for its first fiscal quarter of 2021. Instead, Upwork reported a surprise $0.03 per share profit, pro forma, and sales of $113.6 million.  

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So what

Upwork's sales grew 37% year over year, with gross sales volume (the amount of work billed by freelancers, through Upwork, to the employers who hired them) rising 41%. Gross profit margins on Upwork's revenue inched up 1 full percentage point to 73%. But significantly higher spending on research and development (up 38%), sales and marketing (up 29%), and general and administrative costs (up 32%) left the company still working at an operating loss.  

Nevertheless, net losses shrank by about one-third in comparison to last year's first quarter -- falling to $0.06 per share, when calculated according to generally accepted accounting principles (GAAP). That number, like the pro forma number, was apparently better than expected.

Now what

There doesn't seem to be a great reason for investors' disappointment (other than the fact that Upwork is still losing money). In addition to the first-quarter earnings beat, Upwork went on to predict another beat in the second quarter, with sales ranging from $119 million to $121 million, versus the $114 million analyst forecast. And for the whole of fiscal 2021, Upwork says you can expect to see sales between $480 million and $490 million, well ahead of the $467 million analyst consensus.

No prediction on GAAP earnings, but if Upwork beats on sales as it's promising to, it stands to reason that its earnings will turn out pretty well, too.

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