WEBVTT - Upwork Rolls Into the Human + AI Era  

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<v Speaker 1>Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg BusinessWeek

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<v Speaker 1>with Carol Masser and Tim Steneveek on Bloomberg Radio.

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<v Speaker 2>Shares the online recruitment company Upwork surged five point five

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<v Speaker 2>percent this after it provided guidance for fiscal years twenty

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<v Speaker 2>twenty six and twenty twenty eight. At its twenty twenty

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<v Speaker 2>five in Investor Day, the company set it will now

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<v Speaker 2>achieve long term targets of seven to nine percent compound

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<v Speaker 2>annual growth rate. This of gross services volume, it's the

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<v Speaker 2>acronym GSV. What essentially means is it's the total value

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<v Speaker 2>of all transactions that occur on the upwork platform. The

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<v Speaker 2>company also settle to see revenue growth of thirteen to

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<v Speaker 2>fifteen percent and twenty percent adjusted EBADA compound annual growth

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<v Speaker 2>rate through twenty twenty eight. This comes after shares search

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<v Speaker 2>thirteen percent earlier this month, after it reported third quarter

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<v Speaker 2>results that beat expectations and raised it's full your forecasts.

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<v Speaker 3>Delighted to have with us right here in our Bloomberg

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<v Speaker 3>Interactive broker studio Erica g Search. She is the CFO,

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<v Speaker 3>Chief Financial Officer of Upwork.

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<v Speaker 4>Busy day for.

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<v Speaker 5>You, Very busy Yeah, busy, but great, A lot of

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<v Speaker 5>exciting stuff going on.

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<v Speaker 3>Well, Investors like what they heard from you guys in

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<v Speaker 3>terms of guidance. Talk to us about the outlook, what

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<v Speaker 3>you're seeing, how much confidence you feel in the outlook,

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<v Speaker 3>and what it kind of tells us about us economy

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<v Speaker 3>and kind of the workforce.

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<v Speaker 4>You know we have.

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<v Speaker 5>You know that our investor day was really timed perfectly

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<v Speaker 5>for us. The reason our stock went up thirteen percent

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<v Speaker 5>after our earnings report was we you know, at the beginning,

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<v Speaker 5>at the end of twenty twenty four, we told our

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<v Speaker 5>investors that we would, you know, take a year and

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<v Speaker 5>really reinvest in our company and rebuild up work and

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<v Speaker 5>we said that we would return to GSB and revenue

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<v Speaker 5>growth in twenty twenty six. Well, we did that two

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<v Speaker 5>quarters early. In Q three of twenty twenty five, we

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<v Speaker 5>report G three growth of two percent. We reported revenue

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<v Speaker 5>growth of four percent. And what we told them then

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<v Speaker 5>was that our results are going up into the right

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<v Speaker 5>right now, and that is because of really three investment areas.

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<v Speaker 5>When is AI, when is SMB expanding our relationship with SMB,

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<v Speaker 5>And one is the outsized opportunity that we have with

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<v Speaker 5>Lurge enterprise. But you know, with AI is really one

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<v Speaker 5>of the big stories for us because I don't know

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<v Speaker 5>how well you follow up work. But you know, we

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<v Speaker 5>have had a bit of an overhang over our stock

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<v Speaker 5>on the opposite side of the spectrum, thinking that we

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<v Speaker 5>were going to be you know, you know, hurt by AI,

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<v Speaker 5>whereas we are truly a beneficiary of AI. We now

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<v Speaker 5>see about annualized volume of three hundred million dollars in

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<v Speaker 5>GSB from the A category on our platform, and that

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<v Speaker 5>is accelerating. In Q three it was over fifty percent

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<v Speaker 5>growth per year.

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<v Speaker 2>So I want to remind everybody upwork is a hiring platform.

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<v Speaker 2>You can go there to find talent in development and

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<v Speaker 2>IT AI services, design and creative, sales and marketing, admin

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<v Speaker 2>and customer support. It's this two sided markets.

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<v Speaker 4>So that's right.

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<v Speaker 2>You have a good view on what exactly the type

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<v Speaker 2>of job that companies are hiring for and then also

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<v Speaker 2>the availability of that labor. What does that picture and

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<v Speaker 2>that balance look like right now?

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<v Speaker 4>Yeah, you know it. The last few years.

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<v Speaker 5>Have been, as we all know, tough the on the

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<v Speaker 5>job market, and you know, most companies in our industry

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<v Speaker 5>were down double digits over the past few years in

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<v Speaker 5>terms of both volume and revenue. Upwork was relatively flat

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<v Speaker 5>for the past couple of years. So you know, we

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<v Speaker 5>were gaining share against staffing companies even other online.

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<v Speaker 4>Marketplaces, but still relatively flat.

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<v Speaker 5>And it's really these investments that we've made in AI,

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<v Speaker 5>we're actually seeing both the AI category itself increase and

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<v Speaker 5>that is really.

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<v Speaker 4>Like I say, accelerating.

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<v Speaker 5>So this is this is AI work on the platform,

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<v Speaker 5>but also the investments on the front end. So if

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<v Speaker 5>you think about the hiring process and how that works,

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<v Speaker 5>there's a lot.

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<v Speaker 4>Of friction to it, right.

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<v Speaker 5>You know, a client comes onto our website, they post

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<v Speaker 5>a job, they have to write it up, they have

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<v Speaker 5>to search for talent, the talent has to write a

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<v Speaker 5>job proposal.

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<v Speaker 4>Well, now AI does all of.

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<v Speaker 5>That for both our clients and our talent, and it's

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<v Speaker 5>making them find each other faster and you.

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<v Speaker 4>Know and kind of fulfill these jobs and get them done.

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<v Speaker 3>Those matches work. Like what percentage of the time are

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<v Speaker 3>where is that?

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<v Speaker 4>It's like, well, not not good?

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<v Speaker 5>Well no, So what the AI is doing is it's

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<v Speaker 5>writing the job post, it's writing the job proposal, and

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<v Speaker 5>of course that you know they're they're there can be editing. Yeah,

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<v Speaker 5>but now we do have AI interviewer, and and we

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<v Speaker 5>also one of our one of our most successful, very

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<v Speaker 5>recent launches is Uma, which is our you know, our

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<v Speaker 5>AI companion on our site is now recruiting talent. So

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<v Speaker 5>so the client asked for a certain type of talent,

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<v Speaker 5>Uma goes out within our you know, eighteen million strong

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<v Speaker 5>talent based and identifies the right talent for that job.

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<v Speaker 5>Now we're seeing fill rates much higher using the using

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<v Speaker 5>the AI recruiter than with the human recruiter. Why, well,

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<v Speaker 5>you know, I think we have one of the best

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<v Speaker 5>data sets honestly on the planet. And if you think

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<v Speaker 5>about what these what this AI is actually really good at.

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<v Speaker 5>It's good at at at you know, uh, spinning lots

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<v Speaker 5>and lots of data, right, And so you know, we've

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<v Speaker 5>been building our our platform is over ten years old,

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<v Speaker 5>and we've been building this data set of you know,

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<v Speaker 5>what types of jobs match with which talent. You know,

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<v Speaker 5>whether client client is price sensitive or you know, maybe

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<v Speaker 5>their quality sensitive. And so the recruiter, the air recruiter

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<v Speaker 5>is much better at scanning across all of this data

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<v Speaker 5>than a human can be.

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<v Speaker 2>Are you are you seeing demand stay of stable decrease

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<v Speaker 2>or increase from the side of your platform that is

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<v Speaker 2>looking for the workers.

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<v Speaker 5>Yeah, so client demand and I think you know what

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<v Speaker 5>we are seeing is client demand has been where we

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<v Speaker 5>have seen the biggest impact from from you know, I

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<v Speaker 5>would say the job market and the economy written large.

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<v Speaker 2>Maybe like like if the economy is softer, then demand

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<v Speaker 2>will go down from the cience, yes.

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<v Speaker 5>And and and if you think about that, if you

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<v Speaker 5>think about you know, our our online marketplace is primarily

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<v Speaker 5>SMB customers, right and so small the small medium sized business.

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<v Speaker 4>So if you think about what's going on there.

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<v Speaker 5>When inflation is high, you know, you know this this

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<v Speaker 5>hits consumer whiles it also hits SMB you know leaders

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<v Speaker 5>and and and then also when interest rates are high,

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<v Speaker 5>they have lower access to capital, right, And so we

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<v Speaker 5>do see the demand environment in terms of just pure

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<v Speaker 5>volume of SMB hirers, uh, you know, relatively flat in.

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<v Speaker 4>This in this you know right now.

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<v Speaker 5>But what we are seeing is, you know, we are

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<v Speaker 5>one of the few places where these SMB customers can

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<v Speaker 5>actually access very high quality AI talent and afford you know,

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<v Speaker 5>in an affordable way and quickly. And so as they're

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<v Speaker 5>trying to implement AI work within their businesses.

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<v Speaker 4>You know, contingent.

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<v Speaker 5>This contingent marketplace that we offer is one of the

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<v Speaker 5>best places they can.

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<v Speaker 3>Find what's your take on AI and the impact it's

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<v Speaker 3>going to have on the labor force.

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<v Speaker 5>So you know, we have amazing data on this, and

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<v Speaker 5>what we are seeing is is that AI is not

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<v Speaker 5>going to replace humans. What's going to you know, humans

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<v Speaker 5>with AI will replace humans without AI, right, And so

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<v Speaker 5>what we're seeing AI replace very simple tasks, but not

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<v Speaker 5>you know, the larger, more complex work because these a

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<v Speaker 5>these AI agents are not that edgentic, right, they have

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<v Speaker 5>no judgment, They cannot complete the complex tasks. So what

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<v Speaker 5>we've seen over well, what we've seen over the years

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<v Speaker 5>is you know, jobs that are three hundred dollars in

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<v Speaker 5>lower those have those have gone down on our platform.

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<v Speaker 4>So about two years ago we had.

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<v Speaker 5>About five percent of our work with job three hundred

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<v Speaker 5>dollars and lower.

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<v Speaker 4>Now it's about three and a half percent.

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<v Speaker 5>But at the same time, the AI jobs on our platform,

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<v Speaker 5>clients who engage in AI work spend about three times

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<v Speaker 5>what our normal you know kind of platform work does

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<v Speaker 5>and so you know, we see that growing and growing

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<v Speaker 5>because that work is more complex. It requires humans and

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<v Speaker 5>you know humans using AI agents, but it requires humans

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<v Speaker 5>in the loop.