HubSpot FY Conference Summary Company Overview - **Company**: HubSpot (NYSE:HUBS) - **Event**: Ninth Annual Wells Fargo TMT Conference - **Date**: November 19, 2025 Key Points Industry Context - The software industry is currently facing challenges but presents significant opportunities, particularly in AI integration [8][9][10] AI Strategy - HubSpot's AI strategy focuses on embedding AI into all products to assist small and medium businesses (SMBs) in growth [8][9] - Three featured AI agents were launched: Customer Agent, Prospecting Agent, and Data Agent, along with a Breeze Assistant for go-to-market employees [9][10] - The differentiation of HubSpot's AI offerings lies in its deep understanding of SMBs and the context it provides for sales and marketing activities [10][11] Customer Base and Adoption - HubSpot has 280,000 customers utilizing its platform for marketing, sales, and service, which enhances AI effectiveness through contextual data [11] - AI adoption is driven by the presence of C-suite leaders prioritizing AI initiatives within companies, rather than company size [58][59] Data Management - The transition to an agentic architecture allows HubSpot to handle unstructured data, enhancing the context and quality of AI outputs [22][23] - Data Hub was rebranded to emphasize its role in improving data quality and facilitating AI workflows [66][67] Monetization Strategy - HubSpot employs a hybrid monetization strategy for AI, charging for both seats and credits based on the type of AI usage [48][49] - The Customer Agent is the leading consumer of credits, resolving over 60% of support tickets for more than 6,000 customers [49][50] Marketing and SEO Adaptation - HubSpot has diversified its marketing channels in response to changes in lead generation, focusing on platforms like YouTube and podcasts [94][95] - The concept of Answer Engine Optimization (AEO) is emerging as a new strategy to capture leads through AI-driven responses [95][96] Future Outlook - The adoption curve for AI technologies is expected to improve as customers gain trust in data quality and the effectiveness of AI solutions [102][103] - HubSpot aims to continue enhancing its AI capabilities and providing value to its customers through iterative feedback and improvements [102][103] Conclusion - HubSpot is well-positioned to leverage its extensive customer base, data management capabilities, and AI integration to drive growth and enhance customer experiences in the evolving software landscape [72][73]

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]

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]

Financial Data and Key Metrics Changes - Q2 revenue grew 18% year over year in constant currency and 19% on an as-reported basis, with subscription revenue increasing by 19% year over year [28][29] - Q2 operating margin was 17%, flat compared to the previous year and up three points sequentially [31] - Net income for Q2 was $117 million, or $2.19 per fully diluted share [31] - Free cash flow was $116 million, representing 15% of revenue in Q2 [31] Business Line Data and Key Metrics Changes - Total customers grew to 268,000 globally, with over 9,700 net customer additions in Q2 [29] - Sales Hub seat upgrades increased by 71% year over year, while Service Hub seat upgrades rose by 110% year over year [9] - 61% of new Pro Plus customers landed with multiple hubs, and 42% of the installed base by ARR now uses all three core hubs [8] Market Data and Key Metrics Changes - Domestic revenue grew 18% year over year, while international revenue growth was 19% in constant currency and 21% as reported, representing 48% of total revenue [29] - The company saw a significant increase in leads from diversified channels, with YouTube leads up 96% year over year and newsletter leads growing by 50% [16][17] Company Strategy and Development Direction - The company is focusing on AI integration across its platform to enhance customer experience and operational efficiency [20][25] - HubSpot is adapting to changes in marketing dynamics, emphasizing the importance of content across various channels as traditional SEO becomes less effective [100][101] - The strategy includes a hybrid pricing model that combines seat-based monetization with credits for AI-driven services [80][102] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the uncertain macro environment but expressed confidence in their proven playbook to navigate these conditions [33] - The company expects net revenue retention to improve due to faster seat upgrades and anticipates strong customer additions in Q3 and Q4 [29][90] - Management highlighted the importance of adapting to AI trends and the evolving landscape of customer engagement [42][106] Other Important Information - The company launched AI feedback summaries and AI ticket sentiment features in Q2 to enhance service team efficiency [24] - HubSpot's cash and marketable securities totaled $1.9 billion at the end of June, including the impact of share repurchases [31] Q&A Session Summary Question: Changes in inbound marketing due to AI - Management noted significant shifts in buyer behavior, with organic search being disrupted and more customers asking questions of LLMs rather than traditional searches [38][39] Question: Core seats and customer personas - The core seat is seen as a growth lever, expanding opportunities beyond traditional sales and service roles to include admins and operations [50][51] Question: Engagement with agents - Customer agent usage has shown strong weekly engagement, with resolution rates consistently around 50% and significant ticket deflections [55] Question: Billings growth and revenue outlook - Management indicated that the gap between billings and revenue growth is due to larger deals and longer billing terms, which should normalize over the next few quarters [67] Question: AI monetization strategy - The company is focused on delivering value before monetizing AI features, with positive indicators for future monetization as customer adoption grows [72][80]

Financial Data and Key Metrics Changes - Q2 revenue grew 18% year over year in constant currency and 19% on an as-reported basis, with subscription revenue increasing by 19% year over year [27][28] - Operating margin for Q2 was 17%, flat compared to the previous year and up three points sequentially [31] - Net income for Q2 was $117 million, or $2.19 per fully diluted share [31] - Free cash flow was $116 million, representing 15% of revenue in Q2 [31] Business Line Data and Key Metrics Changes - Total customers grew to 268,000 globally, with over 9,700 net customer additions in Q2, reflecting an 18% year-over-year increase [27][28] - Sales Hub seat upgrades increased by 71% year over year, while Service Hub seat upgrades surged by 110% year over year [7][8] - 61% of new Pro Plus customers landed with multiple hubs, and 42% of the installed base by ARR now uses all three core hubs [6] Market Data and Key Metrics Changes - Domestic revenue grew 18% year over year, while international revenue growth was 19% in constant currency and 21% as reported, representing 48% of total revenue [28] - The company saw a significant increase in leads from diversified channels, with YouTube leads up 96% year over year and newsletter leads growing by 50% [14][15] Company Strategy and Development Direction - The company is focusing on AI integration across its platform to enhance customer experience and operational efficiency [18][24] - HubSpot is adapting to changes in marketing dynamics, particularly the decline in organic search traffic and the rise of AI-driven search [12][13] - The strategy includes diversifying lead generation channels and enhancing the value of the core platform through AI capabilities [41][42] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's strategy and innovation pace, despite a volatile macro environment [26][33] - The expectation for Q3 revenue is in the range of $785 million to $787 million, reflecting a 16% year-over-year increase in constant currency [33] - For the full year of 2025, total as-reported revenue is expected to be between $3.08 billion and $3.09 billion, up 17% year over year [34] Other Important Information - The company has launched AI features that are gaining traction, with over 4,000 customers adopting the customer agent [18][19] - The company is becoming an AI-first organization, with AI handling nearly half of support chats in Q2 [25] Q&A Session Summary Question: Changes in Inbound Marketing Due to AI - Management acknowledged significant shifts in inbound marketing due to AI, with organic search being disrupted and a need for companies to adapt their strategies [38][40] Question: Core Seats and Customer Personas - The core seat is seen as a growth lever, expanding opportunities for various customer personas beyond traditional sales and service roles [50][52] Question: Engagement with AI Agents - Early data shows strong engagement with AI agents, with high resolution rates and significant ticket deflections [56][57] Question: Billings Growth vs. Revenue Growth - Management noted that billings growth outpacing revenue growth is a positive indicator of business momentum, driven by larger deals and longer billing terms [70][72] Question: Customer Adoption of AI Agents - The company is seeing good adoption of AI agents, with predictable value leading to potential monetization in the future [78][79] Question: Marketing Hub Evolution - The Marketing Hub is evolving to help customers navigate changes in marketing dynamics, focusing on content distribution across various channels [108][110]

Financial Data and Key Metrics Changes - Q1 revenue grew 18% year over year in constant currency and 16% on an as-reported basis [7][26] - Subscription revenue increased by 16% year over year, while services and other revenue rose by 13% on an as-reported basis [26] - Domestic revenue grew 16% year over year, and international revenue growth was 19% in constant currency and 15% as reported, representing 47% of total revenue [26] - Average subscription revenue per customer was $11,000 in Q1, down 2% year over year in constant currency and 4% on an as-reported basis [27] - Net revenue retention was 102% in Q1, down two points sequentially as expected [28] - Q1 operating margin was 14%, down one point compared to the year-ago period [28] - Net income was $96 million in Q1 or $1.78 per fully diluted share [29] Business Line Data and Key Metrics Changes - Total customers grew by 19% to over 258,000 globally, with over 10,000 net customer additions in the quarter [8][27] - Large deal growth was strong, up 23% year over year, with significant momentum among the installed base [9] - Free to start conversion improved year over year, driven by better onboarding and product improvements [10] Market Data and Key Metrics Changes - The macro environment remains uncertain, with a heightened focus on value from customers [12][30] - The company is seeing strong demand across all segments, with no significant changes in demand patterns by industry or geography [51] Company Strategy and Development Direction - The company is focusing on AI adoption and has embedded AI across all hubs, aiming to create a unified customer platform [7][14] - The board has authorized a share repurchase program of up to $500 million, signaling confidence in the business and growth opportunities [8][29] - The strategy includes expanding customer agent capabilities and enhancing multi-agent orchestration [22][24] Management's Comments on Operating Environment and Future Outlook - Management acknowledges ongoing macroeconomic uncertainty but emphasizes the company's resilience and ability to deliver value [12][30] - The company expects net additions to moderate to roughly 9,000 and average subscription revenue per customer growth to be approximately flat in the coming quarters [27] - For the full year of 2025, total as-reported revenue is expected to be in the range of $3.036 billion to $3.044 billion, up 16% year over year [32] Other Important Information - The company has launched over 200 new features at its Spring Spotlight event, focusing on AI integration and customer journey enhancements [21][22] - The company is expanding its customer agent capabilities beyond the Service Hub to all Pro and Enterprise customers [20][81] Q&A Session Summary Question: Update on Agent.ai and multi-agent orchestration - Management discussed the progress of Agent.ai and the use of model context protocol for agent communication across hubs [38][40] Question: Contextualizing revised guidance and margin impact from M&A - Management explained the guidance reflects macro uncertainty and highlighted that the impact of M&A on operating profit is minimal [44][48] Question: Customer segments and hesitance in spending - Management noted that there have been no significant changes in demand patterns across segments, emphasizing the platform's essential role for customers [51][52] Question: Pricing for AI solutions and customer adoption - Management detailed the credit-based pricing model for customer agents, aiming to provide predictability and control over spending for customers [70][72] Question: Stability of gross retention and net revenue retention trends - Management confirmed strong momentum from the seat-based pricing model change, with consistent seat upgrade trends [76][78] Question: Expansion of Customer Agent beyond Service Hub - Management expressed confidence in the success of Customer Agent, noting its use across various customer interactions beyond post-sales support [81][84]

Financial Data and Key Metrics Changes - Q1 revenue grew 18% year over year in constant currency and 16% on an as-reported basis [5][23] - Subscription revenue increased by 16% year over year, while services and other revenue rose by 13% on an as-reported basis [23] - Domestic revenue grew 16% year over year, and international revenue growth was 19% in constant currency and 15% as reported, representing 47% of total revenue [24] - Average subscription revenue per customer was $11,000 in Q1, down 2% year over year in constant currency and 4% on an as-reported basis [24] - Net revenue retention was 102% in Q1, down two points sequentially as expected [25] - Q1 operating margin was 14%, down one point compared to the year-ago period [26] - Net income was $96 million in Q1 or $1.78 per fully diluted share [27] - Free cash flow was $122 million or 17% of revenue in Q1 [27] Business Line Data and Key Metrics Changes - Total customers grew by 19% to over 258,000 globally, with over 10,000 net customer additions in the quarter [6][24] - Large deal growth was strong, up 23% year over year, with significant momentum among the installed base [7] - Free to start conversion improved year over year, driven by better onboarding and product improvements [8] Market Data and Key Metrics Changes - International revenue growth was 19% in constant currency, indicating strong performance in global markets [24] - The company noted a heightened focus on value among customers due to macroeconomic uncertainty [10][29] Company Strategy and Development Direction - The company is focusing on AI adoption and has embedded AI across all hubs, aiming to create a unified customer platform [11][12] - The strategy includes launching new features and enhancing existing ones to drive upmarket scalability and customer engagement [19][21] - The company has authorized a share repurchase program of up to $500 million, reflecting confidence in long-term growth opportunities [6][27] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing macroeconomic uncertainty but noted that business trends have not shifted dramatically [10][29] - The company expects net additions to moderate to roughly 9,000 in the coming quarters, with average subscription revenue per customer growth expected to be flat [24][29] - For the full year of 2025, total as-reported revenue is expected to be in the range of $3,036 million to $3,044 million, up 16% year over year [30] Other Important Information - The company has introduced a credit-based pricing model for AI solutions, allowing customers to start using features without additional costs [17][69] - The company is expanding its customer agent capabilities beyond the Service Hub, indicating strong early adoption and success [81] Q&A Session Summary Question: Update on Agent.ai and multi-agent orchestration - Management discussed the progress of Agent.ai and the use of model context protocol for agent communication across hubs [36][39] Question: Contextualizing revised guidance and margin impacts - Management explained that the revised guidance reflects increased macro uncertainty and that the impact of M&A on operating profit is minimal [42][48] Question: Customer segments and verticals showing hesitance - Management noted that they have not seen significant changes in demand patterns across industries, maintaining a broad and resilient customer base [49][50] Question: Share gain momentum in the mid-market - Management highlighted that they are seeing momentum across all segments, with a clear value proposition for mid-market and upmarket customers [56][58] Question: Differences in AI adoption between market segments - Management indicated that the sales pipeline remains healthy across all segments, with no significant changes in pipeline quality or velocity [60][62] Question: Pricing for AI solutions and customer adoption - Management clarified that the credit-based system is designed to provide predictability and control over spending for customers [66][69] Question: Stability of gross retention and net revenue retention - Management confirmed strong momentum from the seat-based pricing model change, with consistent seat upgrade trends [74][76] Question: Success of Customer Agent expansion - Management expressed confidence in the early success of Customer Agent, noting its use beyond post-sales support [80][82]