FVRR Q3 Deep Dive: Upmarket Expansion and AI Initiatives Amid Active Buyer Declines

Online freelance marketplace Fiverr (NYSE:FVRR) met Wall Streets revenue expectations in Q3 CY2025, with sales up 8.3% year on year to $107.9 million. On the other hand, next quarter’s revenue guidance of $108.3 million was less impressive, coming in 0.9% below analysts’ estimates. Its non-GAAP profit of $0.77 per share was 12.7% above analysts’ consensus estimates.

Is now the time to buy FVRR? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

Fiverr’s third quarter results reflected a mix of progress and challenges, with the market reacting negatively to the report. Management attributed revenue growth and improved margins to the company’s ongoing strategy of moving upmarket and investing in product innovation, particularly for complex, higher-value projects. CEO Micha Kaufman highlighted that spend per buyer grew at its fastest rate since the pandemic, underpinned by strong adoption of dynamic matching and managed services, which target larger business clients. At the same time, management acknowledged uneven macroeconomic conditions and softness in active buyer trends, noting that declines in the small and medium business (SMB) segment continued to weigh on overall marketplace performance.

Looking ahead, Fiverr’s guidance is shaped by a cautious macroeconomic outlook and its commitment to transforming into an AI-first platform. Management emphasized that revenue growth will be driven by continued expansion in AI-related services and upmarket offerings, while profitability improvements are expected from operational efficiencies gained through recent restructuring. CFO Esti Levy Dadon stated, “We are redeploying cost savings into selective, high-impact investments in AI and upmarket initiatives.” Fiverr’s leadership also highlighted the structural tailwinds from AI adoption and upmarket penetration as key factors that could help offset ongoing weakness in SMB demand.

Key Insights from Management’s Remarks

Management credited the quarter’s performance to higher-value project growth, the success of AI-powered services, and operational streamlining following recent restructuring.

• Upmarket client focus: Fiverr’s shift towards serving larger businesses and more complex projects led to meaningful increases in average transaction values, with dynamic matching and managed services seeing double-digit growth in both size and value.

• AI-related services momentum: The company reported rapid expansion in AI-related categories, including programming, tech, and workflow automation, with the Programming and Tech vertical growing 14% year over year. Management believes this trend mirrors early digital transformation cycles.

• Services segment growth: The Services business, which includes Fiverr Go and Seller Plus, saw robust adoption, growing 40% year over year and now accounting for nearly a third of total revenue. Fiverr Ads and partnerships, particularly with Shopify, also contributed to this upside.

• Strategic restructuring: September’s restructuring streamlined operations and reduced headcount, contributing to improved profitability and cash flow. Management noted that these efficiency gains provided near-term margin expansion, although some cost savings will be reinvested in AI and upmarket growth.

• Active buyer headwinds: Despite higher spend per buyer, Fiverr continues to see declines in active buyers, largely from persistent weakness among SMB customers. Management stated there are no near-term assumptions of SMB recovery, and future growth will depend primarily on continued upmarket and AI-driven expansion.

Drivers of Future Performance

Fiverr’s future performance will depend on its ability to drive growth from AI-powered offerings and larger enterprise clients while navigating continued macroeconomic uncertainty.

• AI and upmarket expansion: Management sees continued growth opportunities in AI-enabled services and larger project engagements, aiming to position Fiverr as a leading platform for businesses seeking specialized, high-value freelance talent. These areas are expected to offset weakness in traditional SMB demand.

• Profitability through operational efficiency: Following its recent restructuring, Fiverr expects to maintain margin improvements, but plans to reinvest some savings into AI talent and new product development. The company’s long-term margin target remains at 25%, with operational discipline guiding capital allocation decisions.

• Macro and SMB trends remain uncertain: Leadership emphasized that revenue guidance assumes no improvement in the broader SMB environment. Fiverr’s outlook remains cautious due to ongoing volatility in labor markets and hiring activity, which could continue to pressure active buyer metrics and marketplace growth.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will be watching (1) signs of stabilization or growth in active buyer metrics, (2) the pace of adoption and monetization for AI-driven and upmarket services, and (3) Fiverr’s ability to sustain margin improvements while reinvesting in new product initiatives. Execution on the AI-first roadmap and resilience in the face of SMB headwinds will be critical to future performance.

Fiverr currently trades at $20.70, down from $21.62 just before the earnings. In the wake of this quarter, is it a buy or sell? Find out in our full research report (it’s free for active Edge members).

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