Core Insights - HubSpot's shares fell 17.1% after reporting third quarter earnings, despite a revenue of $809.5 million, a 20.9% year-on-year increase, and adjusted earnings per share of $2.66, both surpassing analyst estimates [1] - The company's fourth quarter revenue guidance was slightly above analyst forecasts, but investor expectations were not met, leading to a sell-off [1] Company Performance - HubSpot's revenue for the third quarter was $809.5 million, reflecting a 20.9% increase year-on-year [1] - Adjusted earnings per share were reported at $2.66, exceeding expectations [1] - The revenue guidance for the upcoming fourth quarter was slightly above analyst forecasts, indicating continued growth potential [1] Market Reaction - The significant drop in HubSpot's stock price indicates that investor expectations were high, and the results were perceived as insufficient to justify the stock's valuation [1] - HubSpot's shares have shown volatility, with 18 moves greater than 5% over the past year, highlighting the impact of this news on market perception [3] Broader Market Context - The tech-heavy Nasdaq index fell approximately 1.4%, reflecting a wave of caution in the market, particularly affecting high-growth technology companies [4] - Investors are engaging in profit-taking due to concerns over stretched valuations following a surge in AI-related stocks [4] - Leadership at Goldman Sachs and Morgan Stanley has indicated the possibility of a market correction in the coming years, viewing it as a healthy feature of a long-term bull market [5]

Core Insights - HubSpot Inc. reported fiscal Q3 2025 results that exceeded expectations, with revenue of $809.5 million, a 21% year-over-year increase, and adjusted EPS of $2.66, surpassing the consensus estimate of $2.58 [1][2] Financial Performance - Revenue for Q3 was $809.5 million, exceeding the consensus estimate of $786.5 million [1] - Adjusted EPS for Q3 was $2.66, above the Street consensus of $2.58 [1] - For Q4, HubSpot expects adjusted EPS of $2.97–$2.99 and revenue of $828 million–$830 million, compared to the consensus of $2.97 EPS and $824.6 million revenue [2] Guidance Updates - The company raised its fiscal 2025 guidance for adjusted EPS to $9.60–$9.62 from $9.47–$9.53, versus the estimate of $9.50 [3] - Revenue guidance for fiscal 2025 was increased to $3.113 billion–$3.115 billion from $3.080 billion–$3.088 billion, compared to the Street view of $3.087 billion [3] Market Reaction - Following the earnings announcement, HubSpot shares fell 13.3% to $403.00 in pre-market trading [3] Analyst Ratings and Price Targets - Piper Sandler maintained an Overweight rating but lowered the price target from $675 to $590 [5] - Needham maintained a Buy rating and reduced the price target from $900 to $700 [5] - B of A Securities maintained a Buy rating and cut the price target from $640 to $515 [5] - Oppenheimer maintained an Outperform rating and lowered the price target from $750 to $550 [5] - Mizuho maintained an Outperform rating and reduced the price target from $700 to $550 [5] - Stifel maintained a Buy rating and cut the price target from $600 to $550 [5] - Keybanc maintained an Overweight rating and slashed the price target from $775 to $650 [5]

Group 1 - The article does not provide any relevant content regarding company or industry insights [1]

Core Insights - HubSpot reported revenue of $809.52 million for Q3 2025, marking a year-over-year increase of 20.9% and exceeding the Zacks Consensus Estimate by 2.96% [1] - The company's EPS for the quarter was $2.66, up from $2.18 a year ago, surpassing the consensus estimate of $2.58 by 3.1% [1] Financial Performance Metrics - Total customers reached 278,880, slightly above the average estimate of 277,121 [4] - Average subscription revenue per customer was $11,578, exceeding the estimated $11,283.92 [4] - Subscription revenues amounted to $791.68 million, compared to the average estimate of $770.12 million, reflecting a 20.9% year-over-year increase [4] - Professional services and other revenues were reported at $17.84 million, above the average estimate of $16.14 million, with a year-over-year increase of 19.1% [4] - Non-GAAP gross margin for subscription was $686.22 million, surpassing the average estimate of $672.09 million [4] Stock Performance - HubSpot's shares have returned +4.8% over the past month, outperforming the Zacks S&P 500 composite's +1% change [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating expected performance in line with the broader market [3]

Financial Data and Key Metrics Changes - Revenue grew 18.4% year over year in constant currency, reaching $810 million, with an operating margin of 20% [4][18] - Subscription revenue increased by 21% year over year, while services and other revenue rose by 19% [18] - Net income was $140 million in Q3, translating to $2.66 per fully diluted share, with free cash flow at $147 million, or 18% of revenue [19] - Customer dollar retention remained in the high 80s, and net revenue retention was flat at 103% [18][19] - Calculated billings were $804 million, growing 19% year over year in constant currency [19] Business Line Data and Key Metrics Changes - Total customers increased by 10,900 in Q3, bringing the total to 279,000, a 17% year-over-year growth [18] - Multi-hub adoption is evident, with 43% of Pro Plus customers subscribing to three core hubs, up 4% year over year [5] - Deals over $5,000 in monthly recurring revenue grew 35% year over year, indicating strong up-market momentum [6] Market Data and Key Metrics Changes - Domestic revenue grew 17% year over year, while international revenue growth was 20% in constant currency [18] - International revenue represented 49% of total revenue, highlighting the company's global reach [18] Company Strategy and Development Direction - The company is focused on platform consolidation, multi-hub adoption, and up-market momentum as key growth drivers [5][15] - AI innovation is central to the company's strategy, with new features launched across all hubs to enhance customer experience [8][9] - The introduction of the Loop playbook aims to guide customers in leveraging AI for growth, with significant engagement metrics reported [12][13] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to achieve durable growth, emphasizing the strength of core growth drivers and emerging levers [25][17] - The company anticipates a step-up in net revenue retention in Q4, with expectations for a couple of points improvement for the full year of 2025 [18][19] - Management highlighted the importance of AI as a multi-year tailwind for growth, with ongoing investments in product innovation [24][17] Other Important Information - The company repurchased 780,000 shares of common stock under its share repurchase program, representing $375 million [19] - The acquisition of XFunnel aims to enhance brand visibility in AI-generated answers, integrating it into HubSpot's platform [14] Q&A Session Summary Question: Path to 20% Growth - Management believes it can grow faster than current levels, focusing on durable growth through strong core drivers and emerging growth levers [22][23] Question: Impact of AI Overviews - Management sees AI overviews as a significant opportunity for customers to enhance visibility and engagement through new marketing strategies [26][27] Question: Platform Consolidation Drivers - Customers cite total cost of ownership, unified data access, and AI adoption as key reasons for consolidating on HubSpot's platform [29][30] Question: Billings Growth and Revenue Inflection - Management noted that billings growth is influenced by various factors, including mix shifts and duration, and expects revenue growth to follow net new ARR trends [31][32] Question: Customer Adoption of AI Products - The company is seeing strong adoption of AI features, with positive trends in credit consumption and customer engagement [38][39] Question: ASP Growth Challenges - ASP growth has been impacted by new customer pricing and robust starter additions, but there are tailwinds from large deals and multi-hub adoption [45] Question: Customer Data Quality - The state of customer data varies, with higher quality observed among those using multiple hubs, and the introduction of Data Hub aims to improve data quality [52][54]

Revenue and Customer Growth - Subscription revenue accounted for 98% of total revenue for the three and nine months ended September 30, 2025 and 2024 [116]. - As of September 30, 2025, the company had 278,880 customers across more than 135 countries [115]. - Subscription revenue for the three months ended September 30, 2025, increased by 21% to $791,678,000 compared to $654,738,000 in 2024, and for the nine months, it rose by 19% to $2,234,937,000 from $1,882,241,000 [143]. - The total revenue for the three months ended September 30, 2025, was $809,518,000, a 21% increase from $669,721,000 in 2024, and for the nine months, it reached $2,284,520,000, up 19% from $1,924,365,000 [143]. - The number of customers grew from 238,128 as of September 30, 2024, to 278,880 as of September 30, 2025, contributing to the increase in subscription revenue [144]. - Average Subscription Revenue per Customer for the three months ended September 30, 2025, increased to $11,578 from $11,235 in 2024, driven by higher demand for Professional and Enterprise products [144]. Financial Performance - The company expects to break-even from a profitability perspective in the next 12 months [120]. - The company reported a net income of $16,536,000 for the three months ended September 30, 2025, compared to $8,146,000 in 2024, while for the nine months, it recorded a net loss of $8,515,000 compared to a loss of $355,000 in 2024 [142]. - The company reported a net loss of $8.5 million for the nine months ended September 30, 2025, compared to a net loss of $0.4 million in the same period of 2024 [185][186]. - The effective tax rate increased to -209% for the nine months ended September 30, 2025, compared to -102% in 2024, reflecting a significant rise in income tax expense [176]. Cost and Expenses - Total cost of revenue for the three months ended September 30, 2025, increased by 34% to $133,518,000 from $99,324,000 in 2024, and for the nine months, it rose by 28% to $370,786,000 from $289,928,000 [148]. - Subscription cost of revenue for the three months ended September 30, 2025, was $117,025,000, a 38% increase from $85,066,000 in 2024, and for the nine months, it was $323,925,000, up 31% from $247,408,000 [149]. - Professional services and other cost of revenue increased by $2,235 (16%) to $16,493 for the three months ended September 30, 2025, and by $4,341 (10%) to $46,861 for the nine months ended September 30, 2025 compared to the same periods in 2024 [153]. - Research and development expenses rose by $36,529 (19%) to $227,714 for the three months ended September 30, 2025, and by $120,150 (21%) to $685,151 for the nine months ended September 30, 2025 compared to the same periods in 2024 [156]. - Sales and marketing expenses increased by $45,340 (15%) to $355,268 for the three months ended September 30, 2025, and by $117,834 (13%) to $1,021,844 for the nine months ended September 30, 2025 compared to the same periods in 2024 [159]. - General and administrative expenses grew by $2,819 (4%) to $80,747 for the three months ended September 30, 2025, and by $25,000 (11%) to $244,380 for the nine months ended September 30, 2025 compared to the same periods in 2024 [162]. Investments and Future Plans - The company plans to continue investing in research and development to introduce new products and applications, with a focus on enhancing customer experience [120]. - The company has invested in AI-enabled tools for guided selling and content generation to improve conversion rates and drive efficiencies [120]. - The company plans to continue expanding its sales force and marketing efforts to increase customer base and revenue [120]. - The restructuring plan included a workforce reduction of approximately 7% to reduce operating costs and enable investment in long-term growth [138]. - The company continued to invest in AI functionality and new product development, contributing to increased subscription and hosting costs due to customer base growth [151]. Cash Flow and Financing - Cash and cash equivalents increased to $614.4 million for the nine months ended September 30, 2025, compared to $410.1 million in the same period of 2024, representing a 50% increase [182]. - Net cash provided by operating activities was $513.3 million for the nine months ended September 30, 2025, up from $404.5 million in 2024, indicating a 27% increase [182]. - Cash used in financing activities totaled $900.5 million for the nine months ended September 30, 2025, primarily due to $485.3 million for stock repurchases and $459.8 million for repayments of the 2025 Notes [192]. - The company repurchased 1.0 million shares at an average price of $501.67 per share, totaling $500 million under the 2025 Share Repurchase Program [195]. - Net cash provided by investing activities included $1.9 billion from the maturity of investments, offset by $1.2 billion in purchases of investments for the nine months ended September 30, 2025 [189]. Other Financial Metrics - Net Revenue Retention is a key metric indicating the stability of the revenue base, calculated by dividing Retained Subscription Revenue by Retention Base Revenue [124]. - Interest income decreased by $7,528 (35%) to $14,252 for the three months ended September 30, 2025, and by $7,771 (13%) to $53,106 for the nine months ended September 30, 2025 compared to the same periods in 2024 [168]. - Other (expense) income showed a significant decline, with a loss of $2,346 for the three months ended September 30, 2025 compared to a loss of $565 in 2024, marking a change of $1,781 (315%) [172]. - The total obligation for operating leases was $328.2 million as of September 30, 2025, with $58.1 million expected in the next twelve months [194]. - The company has $2.7 million in letters of credit outstanding as of September 30, 2025, expected to remain in effect until 2029 [197]. - The company does not currently hedge its interest rate exposure, and a hypothetical increase of 100 basis points in interest rates would not have a material impact on the value of cash and cash equivalents or investments [203].

Strategy & Positioning - The company aims to be the number one AI-powered customer platform for scaling companies[3] - The company is positioned for long-term durable growth, driven by multi-hub deals, downmarket acquisition velocity, and strong platform retention[14] Financial Performance - Q3 2025 - Total revenue reached $810 million, a 21% increase year-over-year[16] - Subscription revenue was $792 million, a 21% increase year-over-year[16] - Professional Services & Other Revenue amounted to $18 million, a 19% increase year-over-year[16] - Operating profit was $161 million, a 29% increase year-over-year, resulting in a 20% operating profit margin[16] - Free cash flow was $147 million, a 14% increase year-over-year[16] Financial Guidance - Q4 2025 total revenue is projected to be between $828 million and $830 million, an 18% increase year-over-year[18] - Q4 2025 operating profit is guided to be between $183 million and $184 million, a 38% increase year-over-year, with a 22% operating profit margin[18] - Full year 2025 total revenue is expected to be between $3,113 million and $3,115 million, a 19% increase year-over-year[21] - Full year 2025 operating profit is projected to be between $574 million and $575 million, a 25% increase year-over-year, with an 18% operating profit margin[21]

Financial Performance - Total revenue for Q3 2025 was $809.5 million, representing a 21% increase year-over-year on an as-reported basis and an 18% increase in constant currency compared to Q3 2024[6] - Subscription revenue reached $791.7 million, up 21% on an as-reported basis compared to Q3 2024[6] - GAAP net income was $16.5 million, or $0.31 per basic and diluted share, compared to $8.1 million, or $0.16 per basic and diluted share in Q3 2024[6] - Non-GAAP net income was $140.3 million, or $2.67 per basic and $2.66 per diluted share, compared to $116.6 million, or $2.27 per basic and $2.18 per diluted share in Q3 2024[6] - The company generated $187.4 million in cash from operating cash flow, an increase from $159.5 million in Q3 2024[6] - Customers grew to 278,880, a 17% increase from September 30, 2024[6] - Average Subscription Revenue Per Customer was $11,578, up 3% compared to Q3 2024[6] - Total revenue for Q3 2025 reached $809.5 million, a 20.9% increase from $669.7 million in Q3 2024[16] - Subscription revenue was $791.7 million, up 20.9% from $654.7 million year-over-year[16] - Gross profit for Q3 2025 was $676.0 million, compared to $570.4 million in Q3 2024, reflecting a gross margin improvement[16] - Non-GAAP operating income for Q3 2025 was $161.5 million, up 28.9% from $125.2 million in Q3 2024[18] - Net income for Q3 2025 was $16.5 million, compared to $8.1 million in Q3 2024, indicating a significant year-over-year improvement[16] - Cash provided by operating activities for Q3 2025 was $187.4 million, compared to $159.5 million in Q3 2024[17] - The company reported a non-GAAP net income of $140.3 million for Q3 2025, up from $116.6 million in Q3 2024[19] - Non-GAAP diluted net income per share for Q3 2025 was $2.66, compared to $2.18 in Q3 2024, showing strong earnings growth[19] Future Projections - For Q4 2025, total revenue is expected to be in the range of $828.0 million to $830.0 million, up 18% year-over-year on an as-reported basis[12] - Non-GAAP operating income for Q4 2025 is expected to be in the range of $183.0 million to $184.0 million, representing a 22% operating profit margin[12] - Forecasted non-GAAP operating income for the year ended December 31, 2025, is projected to be between $574,000,000 and $575,000,000[24] - Non-GAAP net income for the year ended December 31, 2025, is expected to range from $511,000,000 to $512,000,000, with a non-GAAP net income per diluted share of $9.60 to $9.62[25] Expenses and Investments - Research and development expenses increased to $227.7 million in Q3 2025, compared to $191.2 million in Q3 2024, reflecting ongoing investment in innovation[16] - GAAP expenses for the three months ended September 30, 2025, totaled $117,025,000, with a GAAP expense as a percentage of revenue of 14.5%[20] - Non-GAAP expenses for the same period were $105,456,000, representing 13.0% of revenue[20] - For the nine months ended September 30, 2025, GAAP expenses reached $323,925,000, with a GAAP expense percentage of 14.2%[20] - Non-GAAP expenses for the nine months were $292,033,000, accounting for 12.8% of revenue[20] - The GAAP subscription margin for the nine months ended September 30, 2025, was $674,653,000, with a GAAP subscription margin percentage of 85.2%[21] - Non-GAAP subscription margin for the same period was $686,222,000, with a non-GAAP subscription margin percentage of 86.7%[21] - Non-GAAP free cash flow for the three months ended September 30, 2025, was $146,937,000, compared to $129,231,000 in 2024[22] - Non-GAAP operating cash flow for the same period was $191,780,000, up from $164,008,000 in 2024[23] Strategic Initiatives - The company plans to continue its AI strategy, having released over 200 new product innovations during the annual INBOUND conference[7] - The company issued $460 million of convertible notes due in 2025 with a coupon interest rate of 0.375%[31] - Restructuring charges related to severance and facility costs are expected to be in the range of $9-10 million, with cash payments of approximately $31.0 million for abandoned facilities through 2027[32] - The company plans to exclude restructuring charges and related cash payments from non-GAAP earnings, operating cash flow, and free cash flow metrics to provide clearer insights into operational performance[32] - A fixed long-term projected tax rate of 20% will be used for non-GAAP items to ensure consistency across reporting periods[32] - The exclusion of stock-based compensation and amortization of acquired intangible assets is intended to provide a clearer picture of operational performance compared to peers[30] - Acquisition-related expenses and disposition-related income are excluded from non-GAAP measures to better reflect operational performance[30] - Strategic investments in privately held companies are recognized but excluded from fundamental operating activities for clearer performance comparison[32] - The company expects to incur incremental restructuring charges related to abandoned facilities as part of a consolidation plan initiated in January 2023[32] - Revenue generated from intangible assets is included in non-GAAP income measures, despite the exclusion of amortization expenses[30] - The company believes that excluding non-cash interest expenses from operating results allows for better comparisons with prior periods and peer companies[31]

Core Insights - Clara Shih has been appointed to HubSpot's Board of Directors, bringing her expertise in AI from her role at Meta [1][2] - HubSpot's stock has declined by 34% this year, contrasting with the Nasdaq's 22% gain, indicating investor concerns about AI's impact on future business [3] - The company is actively integrating AI into its operations to enhance efficiency and growth potential [4] Company Developments - Clara Shih joined Meta to lead its AI product team, focusing on tools for businesses, including the recently launched Business AI [2] - HubSpot is acquiring XFunnel, a platform aimed at optimizing business presence on AI search engines, and has already introduced its own AI tool for brand awareness analysis [7] - HubSpot's CEO highlighted Shih's leadership and experience in AI product development as crucial for the company's growth strategy [5][6] Market Context - The tech sector is experiencing varied impacts from the AI boom, with HubSpot facing challenges as investors express concerns about AI's future business implications [3] - Analysts predict a slowdown in HubSpot's revenue growth this year and in 2026, reflecting broader market apprehensions [3]

If you are looking for a stock that has a solid history of beating earnings estimates and is in a good position to maintain the trend in its next quarterly report, you should consider HubSpot (HUBS) . This company, which is in the Zacks Internet - Software industry, shows potential for another earnings beat.This cloud-based marketing and sales software platform has seen a nice streak of beating earnings estimates, especially when looking at the previous two reports. The average surprise for the last two qua ...