Cloud security and compliance software provider Qualys (NASDAQ: QLYS) reported revenue ahead of Wall Street’s expectations in Q2 CY2025, with sales up 10.3% year on year to $164.1 million. Guidance for next quarter’s revenue was better than expected at $166 million at the midpoint, 1.3% above analysts’ estimates. Its non-GAAP profit of $1.68 per share was 13.3% above analysts’ consensus estimates.
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Qualys (QLYS) Q2 CY2025 Highlights:
- Revenue: $164.1 million vs analyst estimates of $161.3 million (10.3% year-on-year growth, 1.7% beat)
- Adjusted EPS: $1.68 vs analyst estimates of $1.48 (13.3% beat)
- Adjusted Operating Income: $70.09 million vs analyst estimates of $63.49 million (42.7% margin, 10.4% beat)
- The company slightly lifted its revenue guidance for the full year to $659 million at the midpoint from $652.5 million
- Management raised its full-year Adjusted EPS guidance to $6.35 at the midpoint, a 3.3% increase
- Operating Margin: 31.3%, in line with the same quarter last year
- Free Cash Flow Margin: 85.3%, up from 67.3% in the previous quarter
- Billings: $152.2 million at quarter end, up 10% year on year
- Market Capitalization: $4.93 billion
"In Q2, we executed well against our strategic agenda, delivering solid revenue growth and profitability," said Sumedh Thakar, Qualys' president and CEO.
Company Overview
Founded in 1999 as one of the first subscription security companies, Qualys (NASDAQ: QLYS) provides organizations with software to assess their exposure to cyber-attacks.
Revenue Growth
A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Over the last three years, Qualys grew its sales at a 12.4% compounded annual growth rate. Although this growth is acceptable on an absolute basis, it fell short of our standards for the software sector, which enjoys a number of secular tailwinds.
This quarter, Qualys reported year-on-year revenue growth of 10.3%, and its $164.1 million of revenue exceeded Wall Street’s estimates by 1.7%. Company management is currently guiding for a 7.9% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 5.7% over the next 12 months, a deceleration versus the last three years. This projection doesn't excite us and implies its products and services will see some demand headwinds.
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Billings
Billings is a non-GAAP metric that is often called “cash revenue” because it shows how much money the company has collected from customers in a certain period. This is different from revenue, which must be recognized in pieces over the length of a contract.
Qualys’s billings punched in at $152.2 million in Q2, and over the last four quarters, its growth slightly outpaced the sector as it averaged 10.5% year-on-year increases. This performance aligned with its total sales growth and shows the company is successfully converting sales into cash. Its growth also enhances liquidity and provides a solid foundation for future investments. 
Customer Acquisition Efficiency
The customer acquisition cost (CAC) payback period represents the months required to recover the cost of acquiring a new customer. Essentially, it’s the break-even point for sales and marketing investments. A shorter CAC payback period is ideal, as it implies better returns on investment and business scalability.
It’s relatively expensive for Qualys to acquire new customers as its CAC payback period checked in at 62.6 months this quarter. The company’s slow recovery of its sales and marketing expenses indicates it operates in a highly competitive market and must invest to stand out, even if the return on that investment is low.
Key Takeaways from Qualys’s Q2 Results
This was a beat and raise quarter. We were impressed by how significantly Qualys blew past analysts’ EBITDA expectations this quarter. We were also glad its full-year EPS guidance, which was raised from the previous figure, exceeded Wall Street’s estimates. Overall, this print had some key positives. The stock traded up 7.1% to $140.11 immediately after reporting.
Sure, Qualys had a solid quarter, but if we look at the bigger picture, is this stock a buy? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.
