Rapid7 Inc. ((RPD)) has held its Q2 earnings call. Read on for the main highlights of the call.
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The recent earnings call for Rapid7 Inc. presented a balanced sentiment, highlighting robust performance in ARR and free cash flow, while acknowledging challenges like customer spending scrutiny and extended deal cycles. The detection and response segment continues to show healthy growth, but a narrowed ARR guidance reflects cautious optimism.
ARR Achievement
Rapid7 concluded Q2 2025 with an Annual Recurring Revenue (ARR) of $841 million, aligning with expectations and marking a 3% increase from the previous year. This achievement underscores the company’s steady growth trajectory in a challenging economic environment.
Strong Free Cash Flow
The company reported a robust free cash flow of $42 million for the quarter, demonstrating effective financial management and operational efficiency. This strong cash flow performance provides a solid foundation for future investments and strategic initiatives.
Detection and Response Growth
The detection and response business, which accounts for more than half of Rapid7’s ARR, continued to grow at a mid-teens rate year-over-year. This segment’s performance highlights the company’s strength in cybersecurity solutions and its ability to meet increasing market demands.
International Revenue Growth
International revenue contributed 25% to the total revenue, growing by 10% compared to the previous year. This growth indicates Rapid7’s successful expansion and penetration in global markets, enhancing its revenue diversification.
Gross Margin Performance
Rapid7 achieved a product gross margin of 76% and a total gross margin of 74%, reflecting strong cost management and pricing strategies. These margins are indicative of the company’s ability to maintain profitability while scaling its operations.
Continued Customer Spending Scrutiny
Customer spending scrutiny remains a challenge, particularly impacting the North American mid-market. This ongoing issue suggests a cautious approach from customers amid broader economic uncertainties.
Extended Deal Cycles
The company is experiencing extended deal cycles, especially for larger, more strategic deals. This trend highlights the complexities in closing significant contracts and the need for strategic adjustments to navigate these challenges.
ARR Guidance Narrowing
Rapid7 narrowed its full-year ARR guidance to a range of $850 million to $865 million, down from a previous high of $880 million. This adjustment reflects a more cautious outlook amid current market conditions.
Professional Services Decline
There was a year-over-year decline in professional services revenue, aligning with Rapid7’s strategic shift away from lower-margin services. This move is part of the company’s focus on higher-margin, scalable solutions.
Forward-Looking Guidance
For the third quarter and full fiscal year 2025, Rapid7 forecasts a narrowed ARR range of $850 million to $865 million, emphasizing strong pipeline conversion for the upcoming quarters. Despite macroeconomic uncertainties, the company maintains its full-year revenue guidance of $853 million to $863 million, representing a modest growth of 1% to 2%. Additionally, Rapid7 reiterated its free cash flow guidance of $125 million to $135 million and announced organizational changes, including a new Chief Commercial Officer to enhance go-to-market strategies and accelerate revenue growth.
In summary, Rapid7’s earnings call conveyed a balanced sentiment with notable achievements in ARR and free cash flow, tempered by challenges like customer spending scrutiny and extended deal cycles. The company’s strategic focus on detection and response growth, international expansion, and margin improvement positions it well for future success, despite a cautious outlook reflected in the narrowed ARR guidance.