Rapid7’s second quarter saw results that exceeded Wall Street’s revenue and earnings expectations, but the market reacted negatively amid continued customer spending caution and challenges in expanding the customer base. CEO Corey Thomas emphasized that detection and response solutions remain the company’s primary engine of growth, with mid-teens growth in that segment and a growing contribution from larger, strategic enterprise deals. Thomas acknowledged that deal cycles are lengthening, stating, “The deal cycles are longer because we’re seeing larger, more strategic concentration,” and highlighted persistent scrutiny on technology spending, especially among North American mid-market customers.
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Rapid7 (RPD) Q2 CY2025 Highlights:
- Revenue: $214.2 million vs analyst estimates of $212 million (3% year-on-year growth, 1.1% beat)
- Adjusted EPS: $0.58 vs analyst estimates of $0.44 (30.8% beat)
- Adjusted Operating Income: $36.35 million vs analyst estimates of $30.87 million (17% margin, 17.7% beat)
- The company reconfirmed its revenue guidance for the full year of $858 million at the midpoint
- Management raised its full-year Adjusted EPS guidance to $1.96 at the midpoint, a 6.5% increase
- Operating Margin: 1.6%, in line with the same quarter last year
- Customers: 11,643, down from 11,685 in the previous quarter
- Annual Recurring Revenue: $840.6 million vs analyst estimates of $839.8 million (3.1% year-on-year growth, in line)
- Billings: $214.7 million at quarter end, up 4.3% year on year
- Market Capitalization: $1.38 billion
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 Q2 Earnings Call
- Matthew George Hedberg (RBC): Asked for details on the outlook for Q4 and confidence in pipeline conversion. CEO Corey Thomas explained that larger deals are driving longer cycles, but the pipeline supports the full-year target, and timing is deliberately spread across the back half of the year.
- Junaid Hamid Siddiqui (Truist): Inquired about adoption and sales channel progress for Exposure Command. Thomas reported that partners are excited by larger deal sizes, but deal cycles are longer than initially expected, shifting the revenue timing.
- Eric Michael Heath (KeyBank): Sought clarity on priorities for accelerating growth and internal performance metrics. Thomas highlighted educating the market about recent platform advancements and operationalizing expansion as immediate focus areas for the new Chief Commercial Officer.
- Joshua Alexander Tilton (Wolfe Research): Questioned the rationale for narrowing annual recurring revenue guidance. Thomas responded that the update reflects increased weighting toward larger, less predictable deals and a desire to maintain a prudent outlook amid volatility.
- Adam Charles Borg (Stifel): Asked about pricing and packaging for the new Command platform and trends in customer count. Thomas acknowledged ongoing work to make adoption easier, noting a shift away from smaller, transactional customers toward larger, strategic ones.
Catalysts in Upcoming Quarters
In the coming quarters, our analysts will be watching (1) whether Rapid7 can accelerate pipeline conversion and realize the anticipated late-year ramp in annual recurring revenue, (2) the effectiveness of the new Chief Commercial Officer in improving sales efficiency and cross-sell rates, and (3) customer adoption and upsell success of the fully integrated Command platform. We will also monitor progress in federal and international markets, as well as the impact of the company’s expanded AI capabilities on win rates and customer retention.
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