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01/11 03:23
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call summary and Q&A reveal strong financial performance, with revenue and profit growth, robust free cash flow, and a positive outlook on AI integration and market strategy. The share repurchase program and customer growth further bolster confidence. Despite some uncertainty in AI monetization specifics, overall guidance remains optimistic, and the market strategy is well-aligned with current trends. These factors suggest a positive stock price movement over the next two weeks.
Revenue Growth Revenue grew 18% year-over-year in constant currency and 19% on an as-reported basis. The increase was driven by improving core business performance over the last 12 months and benefited from the leap year headwind that impacted Q1.
Subscription Revenue Subscription revenue grew 19% year-over-year. This growth reflects strong customer adoption and upgrades.
Services and Other Revenue Services and other revenue increased 21% on an as-reported basis, indicating strong demand for additional services.
Domestic Revenue Growth Domestic revenue grew 18% year-over-year, showcasing consistent growth in the U.S. market.
International Revenue Growth International revenue grew 19% in constant currency and 21% as reported, representing 48% of total revenue. This growth highlights strong global adoption.
Customer Growth The company added over 9,700 net new customers in Q2, ending the quarter with 268,000 customers, growing 18% year-over-year. This growth was driven by strong product adoption and customer acquisition strategies.
Average Subscription Revenue Per Customer (ASRPC) ASRPC was $11,300 in Q2, flat year-over-year in constant currency and up 1 point on an as-reported basis. This stability reflects consistent customer spending.
Net Revenue Retention Net revenue retention was 103%, up roughly 1 point sequentially, primarily driven by faster seat upgrades.
Calculated Billings Calculated billings were $814 million in Q2, growing 20% year-over-year in constant currency and 26% on an as-reported basis. The strengthening of the U.S. dollar at the end of the quarter contributed to a 6-point FX tailwind to as-reported billings growth.
Operating Margin Operating margin was 17%, flat compared to the year-ago period and up 3 points sequentially, reflecting improved operational efficiency.
Net Income Net income was $117 million in Q2 or $2.19 per fully diluted share, showcasing profitability.
Free Cash Flow Free cash flow was $116 million or 15% of revenue in Q2, indicating strong cash generation.
AI-powered features: HubSpot has embedded AI across its platform, including tools like deal intelligence, guided actions, and AI meeting assistants. These features are driving significant adoption and upgrades in Sales Hub and Service Hub.
Customer Agent: Adopted by over 4,000 customers, improving resolution rates by 5 points in one quarter.
Prospecting Agent: Strong early demand with 3,700 customers using it and 17,000 on the waitlist.
Content Agent: Used by over 12,000 customers to create content, with some generating the majority of their content through AI.
Smart CRM: Adoption is growing, with 25% of Pro+ customers adding more core seats. It integrates advanced reporting, workflows, and admin capabilities.
Upmarket momentum: Large deals are increasing, co-selling with partners is up 29% year-over-year, and brand awareness is at an all-time high.
Downmarket velocity: Starter tier improvements and pricing changes have led to increased free-to-starter conversions and a healthier customer base.
Diversified marketing channels: Investments in YouTube, social media, newsletters, and podcasts have significantly increased lead generation.
Revenue growth: Revenue grew 18% year-over-year in constant currency, with subscription revenue up 19%.
Customer growth: Net customer additions were over 9,700, bringing the total to 268,000 customers globally.
AI-driven operational efficiencies: AI handled nearly half of support chats and booked thousands of sales meetings, improving productivity.
AI-first company transformation: HubSpot is embedding AI across its operations and products, with 90% of engineers using AI weekly to enhance productivity.
Shift in marketing strategy: Adapting to declining organic search traffic and rising AI search by diversifying channels and optimizing for AI-driven discovery.
Macro Environment Uncertainty: The macro environment remains uncertain, with expectations of volatile conditions continuing for the remainder of the year. This could impact revenue growth and operational stability.
Decline in Organic Search Traffic: Organic search traffic is declining globally due to AI overviews providing direct answers, leading to fewer website clicks. This shift could affect customer acquisition strategies.
Competitive Pressures in AI Search: The rise of AI search and LLMs is changing how companies get discovered, creating competitive pressures to adapt and innovate in this emerging channel.
Currency Exchange Rate Volatility: The strengthening of the U.S. dollar at the end of the quarter created a 6-point FX tailwind to as-reported billings growth, indicating potential risks from currency exchange rate fluctuations.
Customer Retention Challenges: Customer dollar retention remained in the high 80s, which may indicate challenges in retaining customers and maintaining long-term revenue stability.
Economic Uncertainty Impacting Guidance: The company’s guidance reflects cautious expectations due to ongoing economic uncertainties, which could affect financial performance and strategic planning.
Revenue Guidance for Q3 2025: Total as-reported revenue is expected to be in the range of $785 million to $787 million, representing a 16% year-over-year growth in constant currency and 17% on an as-reported basis.
Revenue Guidance for Full Year 2025: Total as-reported revenue is expected to be in the range of $3.08 billion to $3.088 billion, reflecting a 17% year-over-year growth in both constant currency and as-reported terms.
Operating Profit Margin for Q3 2025: Non-GAAP operating profit margin is expected to be 20%.
Operating Profit Margin for Full Year 2025: Non-GAAP operating profit margin is expected to be 18%.
Net Income Per Share for Q3 2025: Non-GAAP diluted net income per share is expected to be between $2.56 and $2.58.
Net Income Per Share for Full Year 2025: Non-GAAP diluted net income per share is expected to be between $9.47 and $9.53.
Customer Additions for Q3 and Q4 2025: Net additions are expected to be at the high end of the 9,000 to 10,000 range for each quarter.
Net Revenue Retention for Full Year 2025: Expected to increase by a couple of points year-over-year, driven by the impact of seat changes.
Capital Expenditures for Full Year 2025: CapEx as a percentage of revenue is expected to be 5% to 6%, driven by higher capitalized software expenses.
Free Cash Flow for Full Year 2025: Expected to be approximately $580 million, with seasonally stronger free cash flow in Q4.
Share Repurchase Program: HubSpot has initiated a new share repurchase program. In Q2 and Q3, the company repurchased approximately 446,000 shares. There is $250 million of authorized purchases remaining under this program.
The earnings call summary indicates solid financial performance with strong revenue growth and optimistic guidance. Although there are constraints in billing growth, the company is confident in its AI and credit monetization strategies. The Q&A section reveals positive trends in AI adoption and international growth, despite some uncertainties in revenue translation timing. Overall, the optimistic guidance and strong financial metrics suggest a positive stock price movement in the short term.
The earnings call summary and Q&A reveal strong financial performance, with revenue and profit growth, robust free cash flow, and a positive outlook on AI integration and market strategy. The share repurchase program and customer growth further bolster confidence. Despite some uncertainty in AI monetization specifics, overall guidance remains optimistic, and the market strategy is well-aligned with current trends. These factors suggest a positive stock price movement over the next two weeks.
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