HubSpot (NYSE:HUBS) Posts Better-Than-Expected Sales In Q3 But Stock Drops

Kayode Omotosho /
2021/11/03 4:19 pm EDT
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Sales and marketing software maker HubSpot (NYSE:HUBS) announced better-than-expected results in the Q3 FY2021 quarter, with revenue up 48.5% year on year to $339.1 million. Guidance for next quarter's revenue was $357 million at the midpoint, which is 1.27% above the analyst consensus. HubSpot made a GAAP loss of $13.7 million, improving on its loss of $22.4 million, in the same quarter last year.

Is now the time to buy HubSpot? Access our full analysis of the earnings results here, it's free.

HubSpot (HUBS) Q3 FY2021 Highlights:

  • Revenue: $339.1 million vs analyst estimates of $326.5 million (3.87% beat)
  • EPS (non-GAAP): $0.50 vs analyst estimates of $0.44 (14.8% beat)
  • Revenue guidance for Q4 2021 is $357 million at the midpoint, above analyst estimates of $352.5 million
  • Free cash flow of $38.2 million, up 49.5% from previous quarter
  • Customers: 128,144, up from 121,048 in previous quarter
  • Gross Margin (GAAP): 79.4%, down from 81.3% same quarter last year

"At this year's annual Analyst Day, I provided an overview of our long-term growth strategy and introduced the four strategic pillars that are guiding our investments into the future," said Yamini Rangan, Chief Executive Officer at HubSpot.

Started in 2006 by two MIT grad students, HubSpot (NYSE:HUBS) is a software as a service platform that helps small and medium-size businesses sell, market themselves, and get found on the internet.

Although the share of digital commerce is rising every year, the majority of the small and medium sized businesses have still not fully embraced it. It is this digitization of SMBs, together with the rise of social media platforms and other customer engagement channels that has been fueling the demand for online marketing and sales platforms such as HubSpot.

Sales Growth

As you can see below, HubSpot's revenue growth has been impressive over the last year, growing from quarterly revenue of $228.3 million, to $339.1 million.

HubSpot Total Revenue

And unsurprisingly, this was another great quarter for HubSpot with revenue up an absolutely stunning 48.5% year on year. Quarter on quarter the revenue increased by $28.4 million in Q3, which was in line with Q2 2021. This steady quarter-on-quarter growth shows the company is able to maintain a strong growth trajectory.

Analysts covering the company are expecting the revenues to grow 30.3% over the next twelve months, although estimates are likely to change post earnings.

There are others doing even better than HubSpot. Founded by ex-Google engineers, a small company making software for banks has been growing revenue 90% year on year and is already up more than 400% since the IPO in December. You can find it on our platform for free.

Customer Growth

You can see below that HubSpot reported 128,144 customers at the end of the quarter, an increase of 7,096 on last quarter. That's in line with the customer growth we have seen last quarter but a bit below what we have typically seen over the last year, suggesting that sales momentum may be slowing a little.

HubSpot Customers

Key Takeaways from HubSpot's Q3 Results

With a market capitalization of $37 billion, more than $1.17 billion in cash and with free cash flow over the last twelve months being positive, the company is in a very strong position to invest in growth.

We were impressed by the exceptional revenue growth HubSpot delivered this quarter. And we were also excited to see that it outperformed analysts' revenue expectations. Overall, this quarter's results seemed pretty positive and shareholders can feel optimistic. But investors might have been expecting more than in-line guidance and the company is down 8.36% on the results and currently trades at $710 per share.

Should you invest in HubSpot right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

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The author has no position in any of the stocks mentioned.