Coursera hit a significant milestone in Q3 2024 – its consumer segment crossed $100M in revenue for the first time. But this achievement was overshadowed by the company’s increasingly cautious outlook for the year.

Back in February, Coursera started 2024 with optimistic projections. Since then, each earnings call has brought more sobering news, culminating in their latest announcement that triggered a ~20% overnight stock price drop and led to 10% workforce cuts. At the time of writing, Coursera’s market capitalization was around $1.08 billion.

The May earnings call delivered another blow. After cutting revenue projections by $35 million, Coursera’s stock fell 15% to an all-time low. The company then overhauled its leadership team, cutting two top positions and moving to a simpler structure where division heads report straight to the CEO.

So why is Coursera struggling to hit its targets? I read through the earnings call transcript to find out why. Two big reasons stood out.

First, while people are signing up for courses (especially AI-related ones) at a healthy clip – about 7 million new learners this quarter – they’re not sticking around as long as they used to. Fewer people are renewing their subscriptions, particularly in regions outside North America.

New courses, especially AI ones, aren’t attracting as many visitors as past launches did. And while the same percentage of visitors are signing up, they’re not staying subscribed as long. This means these new courses aren’t bringing in as much money as Coursera had hoped.

Second, Coursera’s enterprise business, which serves companies and governments, is still feeling the aftermath of pandemic-era spending. Many government programs that funded online learning during lockdowns are winding down. The net revenue retention rate dropped to 89%.

Cost-Cutting Across Online Learning Platforms

The layoffs at Coursera come just a month after competitor Udemy cut 20% of its staff – about 280 people. Both companies used similar corporate language in their announcements, with Udemy talking about “reallocating resources” and “reducing organizational layers.”

This isn’t Coursera’s first round of cuts. Their last major layoff was about two years ago, aimed at “slowing our rate of spending.” Interestingly, that was before the AI boom, which has since driven significant engagement – Coursera now sees six new enrollments per minute in their AI courses.

With 1,295 full-time employees at the end of 2023, this 10% reduction means about 150 people will lose their jobs. Coursera expects these cuts to save $30 million annually.

Coursera’s Q3 2024

Despite the challenges, Coursera’s Q3 revenue reached $176.1 million, up 6% from last year. Here’s how each segment performed:

The consumer segment hit a milestone by crossing $100M for the first time. Enterprise revenue grew steadily, reaching $60.4M.

The degrees segment showed an interesting trend – while revenue dropped to $13.4M, the number of degree students actually grew 29% year-over-year to 26,400, primarily due to new cohorts in recently launched Indian programs.

They also generated $17M in free cash flow and ended the quarter with $719M in cash, giving them a strong financial cushion despite the current challenges.