HubSpot Inc (NYSE: HUBS) is having a rough Wednesday evening. The company reported its second-quarter results after the market closed, and while the numbers themselves were solid, the forward-looking guidance left investors wanting more. Shares dropped 19.2% to $202.16 in after-hours trading.
HubSpot's AI Pivot Spooks Investors Despite Q2 Beat
MarketDash
HubSpot beat estimates in Q2, but its guidance for the next quarter fell short. Here's why the stock is tumbling.
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Q2: A Beat, But Not Enough
Let's start with the good stuff. HubSpot reported revenue of $911.7 million for the quarter, up 20% year-over-year and ahead of the Street's $898.3 million estimate. Subscription revenue came in at $894 million, also up 20%, while professional services and other revenue added $17.7 million, up 8%.
Adjusted earnings per share landed at $3.26, beating the consensus of $3.02. The company also grew its customer base to 306,446, a 14% increase, and average subscription revenue per customer rose 4% to $11,800.
Cash and cash equivalents stood at $1.4 billion at quarter's end. HubSpot also bought back $531.9 million in shares during Q2 and, on Monday, authorized a new repurchase program of up to $1 billion over the next 24 months.
CEO Yamini Rangan framed the quarter as a deliberate step toward an AI-driven future. "In Q2, we made deliberate choices to accelerate our AI transformation," she said. "Scaling companies want real outcomes and predictable pricing when adopting AI, and we are evolving our product, pricing and go-to-market to meet those needs."
Rangan added that the AI shift opens up a larger opportunity, saying, "I'm confident these choices position us to drive long-term, compounding growth."
Guidance: The Elephant in the Room
So why the sell-off? It's all about what's next. HubSpot's third-quarter revenue guidance of $924 million to $925 million (up 14% year-over-year) falls short of the Street's $942.3 million expectation. Adjusted EPS guidance of $3.25 to $3.27 also misses the consensus of $3.45.
For the full year, HubSpot now expects revenue between $3.678 billion and $3.686 billion, down from its prior range of $3.70 billion to $3.708 billion. The Street was looking for $3.707 billion. However, the company raised its adjusted EPS outlook to $13.23 to $13.31, up from the previous forecast and above the Street's $13.10.
It's a mixed bag, but the market is clearly focusing on the revenue shortfall. Investors are worried that the AI transformation might be costing more than it's bringing in, at least in the short term.
HubSpot's stock is now trading at levels not seen in months, and the after-hours drop suggests more pain could come when the market opens Thursday. For now, the company is betting that its AI pivot will pay off in the long run, but Wall Street is taking a wait-and-see approach.
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