QLYS Q2 Deep Dive: Platform Expansion and Federal Momentum Highlight Steady Execution

August 12, 2025 at 03:05 AM EDT

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Cloud security and compliance software provider Qualys (NASDAQ: QLYS) reported Q2 CY2025 results exceeding the market’s revenue expectations, 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
Annual Recurring Revenue: $656.2 million at quarter end, up 10.3% year on year
Billings: $149.4 million at quarter end, up 7.9% year on year
Market Capitalization: $4.62 billion

StockStory’s Take

Qualys’ second quarter performance reflected steady execution in a competitive cybersecurity landscape, with management attributing growth to product expansion, increased channel partner activity, and rising demand for integrated risk management solutions. CEO Sumedh Thakar highlighted the company’s focus on its cloud-native Enterprise Threat Management (ETM) platform and new Agentic AI capabilities as key contributors. The quarter also saw progress in partner-driven sales and an improvement in net dollar expansion rate, with CFO Joo Mi Kim noting, “We are optimistic that we were able to make an improvement from both the gross retention as well as upsell perspective this quarter.”

Looking forward, management is positioning Qualys for continued growth by doubling down on platform innovation, ramping investments in marketing, and pursuing opportunities in the federal sector following the recent FedRAMP High authorization. Thakar emphasized the company’s aim to unify identity and asset risk management across complex customer environments, stating, “Our focus is on integrating identity posture with infrastructure and third-party risks to provide a holistic view.” CFO Kim outlined plans for increased sales and R&D spending, while cautioning that new business remains challenging amid ongoing budget scrutiny across the cybersecurity market.

Key Insights from Management’s Remarks

Qualys’ management credited Q2 growth to new platform capabilities, partner-driven expansion, and robust customer adoption in both commercial and public sector markets.

Cloud-native risk platform traction: The launch of the ETM solution and Agentic AI marketplace drove adoption, with early customer wins highlighting demand for unified risk management and automated remediation across diverse environments.
Channel partner momentum: Revenue from channel partners grew notably faster than direct sales, reflecting a strategic shift toward partner-led growth. Management expects this trend to persist as more partners become certified to deliver managed Risk Operations Center (mROC) services built on Qualys’ platform.
New pricing model introduced: The flexible Qualys Unit (QLU) pricing model was rolled out, enabling customers to purchase access to multiple modules and switch between solutions more easily. Management believes this will drive larger deals, increase upsell opportunities, and accelerate customer adoption of additional products.
Public sector progress: Qualys achieved FedRAMP High authorization, positioning it as a modern alternative to legacy security solutions for government agencies. Early deployments in federal accounts and a strong showing at its public sector risk conference underscore potential for incremental growth in this vertical.
Product and identity security expansion: The addition of Identity Security Posture Management (ISPM) addresses the growing importance of credential-based risks. By integrating identity analytics with asset and threat data, Qualys aims to provide a more comprehensive risk view for customers.

Drivers of Future Performance

Looking ahead, management expects continued pipeline growth from recent product launches, expanded partner programs, and deeper public sector engagement, while remaining watchful of macro headwinds and customer budget pressures.

Partner-led sales acceleration: Management projects sustained momentum from channel partners, especially as more are certified to deliver managed Risk Operations Center services, expanding Qualys’ reach and driving new business in both commercial and government segments.
Federal sector ramp-up: With FedRAMP High authorization, Qualys anticipates increased adoption among government agencies and commercial entities requiring high-security compliance, though management notes that meaningful bookings from this vertical are more likely in the next year.
Ongoing investment in innovation: The company plans to increase spending on sales, marketing, and R&D—particularly to support new product adoption and top-of-funnel pipeline creation—while balancing these investments against profitability targets and continued macroeconomic uncertainty.

Catalysts in Upcoming Quarters

Our team will be closely monitoring (1) initial customer adoption and upsell trends linked to the new QLU pricing model, (2) the pace at which certified partners drive managed Risk Operations Center deployments, and (3) progress in securing larger federal contracts following FedRAMP High certification. Execution in these areas, along with continued net retention improvements, will be key signs of strategic traction.

Qualys currently trades at $127.01, down from $130.81 just before the earnings. Is there an opportunity in the stock?The answer lies in our full research report (it’s free).

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