The stock market appeared likely to keep falling on Thursday morning, building on losses from Wednesday's session. Although the nominal catalyst for the downward move was a downgrade of U.S. government debt, many market participants believe that after the sizable advance in recent months, stock market indexes were prone to a pullback.
Even with futures on major benchmarks pointing toward modest losses at the beginning of the trading session, companies focused on freelance workers and the gig economy fared well. Earnings reports from both Upwork (UPWK 3.40%) and Fiverr International (FVRR 3.74%) lent support to the idea that gig work is gaining acceptance in the global workplace. Although both stocks are well below their record levels in recent years, the two companies have high hopes about what the future will bring.
An up move for Upwork
Shares of Upwork climbed 16% in premarket trading Thursday morning. The freelance marketplace provider reported second-quarter financial results that revealed some favorable trends that could keep the business rebounding.
Upwork's financial results were mixed. Revenue for the quarter came in at $169 million, which was up 7% year over year. Upwork's net losses narrowed considerably to $4 million, and adjusted pre-tax operating earnings went positive. The company attributed the improvement on the bottom line to cost savings actions taken earlier in the period in response to difficult macroeconomic conditions it faced. Take rates increased from 15% a year ago to 16.3% during the quarter.
Investors seem quite pleased with the extensive efforts Upwork has made to emphasize the expertise of its gig workers in artificial intelligence (AI) and machine learning. A new partnership with OpenAI will give Upwork credibility in attracting interest from businesses seeking help with their AI projects, with dedicated specialties in areas like large language models, prompt engineering, and other productivity-enhancing skills.
It's likely that near-term pressures will keep Upwork from growing as quickly as some investors would prefer, as is evident from gross services volume falling 1% year over year and active client counts remaining relatively flat over the past several quarters. In time, though, shareholders are optimistic that the need for qualified support in key specialty areas will drive more interest in Upwork's marketplace.
Fiverr follows suit
Gains for Fiverr International's stock weren't quite as impressive as those of Upwork's shares. However, the freelance platform provider's shares did manage a 5% gain in premarket trading early Thursday.
Fiverr's metrics for the second quarter of 2023 generally showed modest growth. Revenue of $89.4 million was up 5% year over year. Active buyers remained flat at 4.2 million, although spending per buyer climbed at a roughly 2% annual rate. Take rates improved by nearly a full percentage point to 30.7%, and Fiverr eked out a modest profit of $200,000 and adjusted pre-tax operating earnings of $15.3 million.
Fiverr is using AI in a novel manner, with the release of its Fiverr Neo designed to match up employers and gig workers in a way that's most likely to produce mutually beneficial relationships. Neo is powered by the latest technologies in neural networking, machine learning, and large language models, and Fiverr is excited about its ability to provide the perfect match for its clients.
Some have feared that AI would pose a threat to demand to gig work, as the technology could replace the need for human employees. However, Fiverr sees more upside in artificial intelligence than downside, and that could be the turning point for a stock that is still well below its all-time highs.
