Upwork Inc.’s (NASDAQ: UPWK) second-quarter revenue rose 7.5% year over year to $168.6 million, and gross margin improved. However, gross services volume edged downward.

“We achieved better-than-expected results across our financial goals while making significant strides in generative AI and growth across our business,” the company reported in a shareholder letter.

Analysts estimated revenue of $162.6 million, according to Yahoo Finance.

Marketplace revenue — which represents the lion’s share of revenue — rose 8.5% year over year to $156.6 million. Upwork cited several reasons for the increase, including client fee changes in April 2022 and a second-quarter increase in the number of virtual tokens — referred to as Connects — that workers use to bid on projects. In addition, the company introduced a contract initiation fee for clients of up to $4.95 per contract in April 2023.

The increases in marketplace revenue were partially offset by a reduction in talent services fees, according to the company. In May 2023, the company eliminated a tiered fee structure for talent — which ranged from 5% to 20% — in favor of a flat 10% fee.

Also reported: Gross services volume — the total amount clients spend on marketplace offerings and managed service offerings as well as additional fees — fell by approximately 1% year over year to $1.04 billion amid strong comparisons from last year’s second quarter and pricing changes, according to the company.

Overall, the number of active clients on Upwork’s platform rose 2% year over year to 822,000 in the second quarter.

Upwork’s second-quarter net loss fell to $4.0 million from $23.8 million in the second quarter of last year.

“In the beginning of the second quarter, we moved to quickly adapt to the macroeconomic environment by reducing costs, primarily in brand marketing and through reductions to our workforce,” the shareholder letter said.

Looking ahead, Upwork said it will be particularly focused on the AI space, according to the company. It recently made several announcements around AI including a job post generator to help clients create customizable job post drafts.

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Guidance

Upwork forecast third-quarter revenue of between $165 million and $170 million, an increase of 6% year over year at the midpoint.

Full-year revenue is forecast at between $665 million and $675 million, an increase of 8% at the midpoint.

Share price and market cap

Shares in Upwork were up 42.5% to $14.21 as of 1:13 p.m. Eastern time; they were 116.6% above their 52-week low, according to FT.com. The company had a market cap of $1.33 billion.