Rapid7’s third quarter results were met with a significant negative market response, as investors focused on signs of execution challenges and customer growth concerns. Management attributed the quarter’s performance to continued investment in its managed detection and response (MDR) segment, organizational restructuring, and a push toward platform integration. CEO Corey Thomas acknowledged, “We have fallen short of the ARR guidance that we have provided to you in recent history and thus far this year,” while highlighting ongoing efforts to accelerate growth and improve operational discipline.
Is now the time to buy RPD? Find out in our full research report (it’s free for active Edge members).
Rapid7 (RPD) Q3 CY2025 Highlights:
- Revenue: $218 million vs analyst estimates of $215.9 million (1.5% year-on-year growth, 0.9% beat)
- Adjusted EPS: $0.57 vs analyst estimates of $0.46 (24.9% beat)
- Adjusted Operating Income: $36.91 million vs analyst estimates of $30.23 million (16.9% margin, 22.1% beat)
- Revenue Guidance for Q4 CY2025 is $215 million at the midpoint, below analyst estimates of $217.9 million
- Management raised its full-year Adjusted EPS guidance to $2.05 at the midpoint, a 4.6% increase
- Operating Margin: 2.7%, down from 6% in the same quarter last year
- Customers: 11,618, down from 11,643 in the previous quarter
- Annual Recurring Revenue: $837.7 million vs analyst estimates of $840.8 million (1.8% year-on-year growth, in line)
- Billings: $193.4 million at quarter end, down 4.2% year on year
- Market Capitalization: $919.4 million
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Rapid7’s Q3 Earnings Call
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Robbie Owens (Piper Sandler) asked about MDR economics and international growth. CEO Corey Thomas explained that MDR delivers higher margins due to automation and AI, and noted ongoing investment to expand both domestically and internationally.
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Fatima Boolani (Citi) questioned pricing competition and the outlook for balancing growth and profitability in 2026. Thomas responded that MDR growth remains strong and that investments now aim to scale profitably as the business transitions.
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Matthew Hedberg (RBC) inquired about large deal pipeline management and the impact of sales process changes. CFO Tim Adams said the Q4 outlook reflects a high-confidence baseline, with new leadership focused on improving sales conversion and forecasting.
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Michael Cikos (Needham) sought additional detail on the operational changes being implemented by Chief Commercial Officer Allan Peters. Thomas outlined efforts to standardize sales processes, accelerate upgrades to Exposure Command, and focus sales teams on the highest opportunity areas.
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Gregg Moskowitz (Mizuho) asked about expectations from the expanded Microsoft partnership. Thomas described it as both a technology integration and potential go-to-market collaboration, with significant growth expected as Microsoft customers seek managed security services.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will be watching (1) the pace at which Rapid7 executes its sales and operational realignment under new leadership, (2) customer adoption of the AI-powered Command Platform and upgrades to Exposure Command, and (3) the impact of the Microsoft partnership on MDR growth and cross-selling opportunities. Monitoring deal cycle lengths and improvements in ARR growth will also be important indicators of execution.
Rapid7 currently trades at $14.20, down from $17.81 just before the earnings. In the wake of this quarter, is it a buy or sell? Find out in our full research report (it’s free for active Edge members).
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