Udemy built its empire on a simple idea: anyone could create a course, and anyone could buy one. That marketplace model made Udemy famous and made millionaires out of its top instructors.

Now the company is deliberately killing it.

In Q3 2025 earnings call, Udemy’s CFO admitted they are “intentionally reducing” single course sales to push users toward subscriptions. The logic is straightforward: Udemy keeps 82.5% of subscription revenue versus just 63% from one-off purchases. The subscription margin is set to grow to 85% in 2026, but so far, the bet isn’t paying off.

Consumer revenue fell 11% to $62.9M, its lowest point since 2019. The market reacted harshly, driving the company’s valuation down to a record low of $720M. Since its IPO, Udemy has wiped out more than 80% of its value

The Numbers Behind the Shift

To help make sense of the transition, Udemy’s Q3 report broke down revenue into “subscription” and “transactional” buckets for the first time. Likely trying to calm investors, two weeks ago they followed up with extra data extending that breakdown back to the start of 2024.

Even though Udemy grew subscribers by 37% quarter-over-quarter (from 215k to 294k), the money didn’t follow the same path. Subscription revenue saw a modest 13% rise to $11.7M, while transactional revenue fell by over $9M (dropping to $51.2M).

To put that in perspective: the amount of revenue they lost in single course sales ($9.1M) was almost as large as their total subscription revenue ($11.7M). No wonder investors weren’t happy.

The Pricing Problem

The secret to that subscriber growth lies in the pricing. I calculated the average monthly subscription cost and found a steep decline: it dropped from roughly $16 to $13.22 in a single quarter.

That’s a $2.75 drop per user. To drag the average down that fast, the influx of new learners likely came from international markets, where subscription rates are lower due to geo-pricing.

Short-Term Pain, Long-Term Gain?

Udemy is betting that the pain is temporary.

This is the strategy of Hugo Sarrazin, a McKinsey veteran who took over as CEO in March 2025. Three months into the job, co-founder CTO Eren Bali was moved to a part-time role, just four months after presenting what he called “the most ambitious product roadmap” in the company’s history.

Yes, they keep a bigger slice of subscription revenue (85% in 2026) compared to single course sales (63%). But subscriptions are still a much smaller bucket. My back of the envelope calculations show that despite the higher margins, Udemy’s own take-home from the consumer segment dropped by about $5 million in a single quarter.

The hope is that subscriber growth will eventually make up the difference. If Udemy can keep adding 79,000 subscribers per quarter like they did in Q3, they could recover the lost ground within two quarters.

But that growth came at a cost. To add those subscribers, Udemy slashed prices so aggressively that average revenue per user dropped from $16 to $13 per month. The more they discount to grow, the more subscribers they need to hit the same revenue target. And if growth slows down, or transactional revenue keeps falling, the math gets harder, not easier.

It’s a gamble. Udemy is sacrificing guaranteed revenue today for the promise of a larger, stickier subscriber base tomorrow. Whether that bet pays off depends on whether they can sustain this growth rate without relying on deeper and deeper discounts.

Instructors and the Double Squeeze

This aggressive push toward subscriptions comes with a heavy toll, particularly for the instructors who built the platform’s massive catalog of over 250,000 courses.

According to the Q3 2025 presentation, subscription revenue now represents 74% of total revenue, up from 68% just a year ago. With the enterprise side already fully subscription-based, Udemy is now actively forcing consumer customers away from buying single courses and into recurring plans.

When Udemy announced its new revenue share model in November 2023, they promised that “total instructor payouts will equal or exceed their current levels each year.” That promise is now clearly broken. My earlier analysis showed that the policy change cost instructors about $30 million in 2024, pushing total payouts back to 2022 levels.

And the squeeze is only getting tighter. The marketplace model still pays instructors 37% of a sale, but Udemy is actively killing marketplace sales. Meanwhile, the subscription model pays just 17.5%, dropping to 15% in 2026. Instructors are watching their better-paying revenue stream dry up while being funneled into the worse one.

This isn’t the first time Udemy has done this. In 2019, they cut instructor revenue share from 50% to 25%. Now they’re cutting it again.

To make matters worse, Udemy introduced ads on free courses in July 2025. While this created a new revenue stream for the company across 170 countries, they do not yet share any of that money with instructors.

Instructor earnings peaked in 2023 at $209.5 million. With growth stalled, pay rates being slashed to 15% next year, and the platform moving away from higher-paying single-course sales, 2026 looks bleak for the educators who actually built Udemy.