HubSpot (HubSpot (HUBS)) reported a solid first quarter on Wednesday after the close, beating analyst estimates on both the top and bottom lines. The company also raised its full-year guidance. So why are shares getting hammered, down more than 20% in after-hours trading?

The answer lies in the fine print of the guidance, where the second-quarter outlook came in a bit below what Wall Street was expecting. It's a classic case of "good news, but not good enough" — and the market is punishing the stock accordingly.

HubSpot Q1 Financials

HubSpot reported first-quarter sales of $880.995 million, up 23% year-over-year and ahead of the Street consensus estimate of $863.290 million. Subscription revenue was $862.3 million, also up 23%, while professional services revenue came in at $18.7 million, up 22%.

Earnings per share hit $2.72, beating the consensus estimate of $2.47. The company grew its customer base 16% year-over-year to 299,458, and average subscription revenue per customer rose 6% to $11,722.

HubSpot also bought back $211 million in shares during the quarter, with $789 million remaining under its current buyback authorization.

"Q1 was a solid quarter of revenue growth, customer growth, and operating margin expansion," CEO Yamini Rangan said.

What's Next For HubSpot

For the second quarter, HubSpot expects revenue between $897 million and $898 million, up 18% year-over-year. That's just shy of the Street consensus of $899.20 million. Adjusted EPS is expected between $3 and $3.02, well above the $2.86 estimate.

For the full fiscal year, the company raised its revenue guidance to a range of $3.700 billion to $3.708 billion, up from a prior range of $3.69 billion to $3.70 billion and above the Street estimate of $3.669 billion. Full-year EPS guidance was raised to $13.04 to $13.12, up from $12.38 to $12.46, also above the Street estimate of $12.45.

So the full-year picture looks better, but the second-quarter guidance is a bit light. And the 18% year-over-year revenue growth expected in Q2 and the full year would trail the 23% growth seen in Q1. That deceleration, combined with the Q2 miss, is likely what's spooking investors.

Rangan highlighted the company's AI push, saying customers are choosing HubSpot as their "agentic customer platform." She noted that AI innovations launched at the Spring Spotlight event — including Customer Agent, Prospecting Agent, and Data Agent — "are delivering outcomes for customers and will strengthen our AI momentum."

HubSpot Stock Price Action

HubSpot stock was down 20.8% to $193 in after-hours trading on Thursday. The stock's 52-week range is $187.45 to $682.57, so it's now trading near the bottom of that range.