HubSpot (NYSE:HUBS) Surprises With Q2 Sales But Full Year Guidance Underwhelms

Radek Strnad /
2022/08/04 4:38 pm EDT

Sales and marketing software maker HubSpot (NYSE:HUBS) beat analyst expectations in Q2 FY2022 quarter, with revenue up 35.7% year on year to $421.7 million. However, guidance for the next quarter was less impressive, coming in at $425.5 million at the midpoint, being 2.85% below analyst estimates. HubSpot made a GAAP loss of $56.3 million, down on its loss of $24.5 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) Q2 FY2022 Highlights:

  • Revenue: $421.7 million vs analyst estimates of $409.3 million (3.02% beat)
  • EPS (non-GAAP): $0.44 vs analyst estimates of $0.42 (3.54% beat)
  • Revenue guidance for Q3 2022 is $425.5 million at the midpoint, below analyst estimates of $438 million
  • The company dropped revenue guidance for the full year, from $1.72 billion to $1.69 billion at the midpoint, a 1.88% decrease
  • Free cash flow of $22.3 million, down 64.2% from previous quarter
  • Customers: 150,865, up from 143,689 in previous quarter
  • Gross Margin (GAAP): 81.2%, up from 79.7% same quarter last year

"Our solid results in the second quarter were driven by strong product innovation and a deep understanding of what our customers need to adapt to this macroeconomic climate," 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.

Companies need to be able to interact with and sell to their customers as efficiently as possible. This reality, coupled with the ongoing migration of enterprises to the cloud drives demand for cloud-based customer relationship management (CRM) software that integrate data analytics with sales and marketing functions.

Sales Growth

As you can see below, HubSpot's revenue growth has been impressive over the last year, growing from quarterly revenue of $310.7 million, to $421.7 million.

HubSpot Total Revenue

And unsurprisingly, this was another great quarter for HubSpot with revenue up 35.7% year on year. Quarter on quarter the revenue increased by $26.1 million in Q2, which was in line with Q1 2022. This steady quarter-on-quarter growth shows the company is able to maintain a strong growth trajectory.

Guidance for the next quarter indicates HubSpot is expecting revenue to grow 25.4% year on year to $425.5 million, slowing down from the 48.5% year-over-year increase in revenue the company had recorded in the same quarter last year. Ahead of the earnings results the analysts covering the company were estimating sales to grow 26.3% over the next twelve months.

In volatile times like these we look for robust businesses with strong pricing power. Unknown to most investors, this company is one of the highest-quality software companies in the world, and their software products have been the default standard in critical industries for decades. The result is an impressive business that is up an incredible 18,152% since the IPO. You can find it on our platform for free.

Customer Growth

You can see below that HubSpot reported 150,865 customers at the end of the quarter, an increase of 7,176 on last quarter. That is a little slower customer growth than last quarter but still in line with what we are used to seeing lately, suggesting that the company still has decent sales momentum.

HubSpot Customers

Key Takeaways from HubSpot's Q2 Results

Sporting a market capitalization of $16.7 billion, more than $1.24 billion in cash and with positive free cash flow over the last twelve months, we're confident that HubSpot has the resources it needs to pursue a high growth business strategy.

We enjoyed seeing HubSpot’s impressive revenue growth alongside the strong free cash flow this quarter. On the other hand, it was unfortunate to see that HubSpot's revenue guidance for the full year missed analyst's expectations. Overall, this quarter's results were mixed. The company is up 4.29% on the results and currently trades at $370.59 per share.

HubSpot may have had a tough quarter, but does that actually create an opportunity to invest 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.

One way to find opportunities in the market is to watch for generational shifts in the economy. Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks and as a result, the demand for cloud-native cybersecurity is skyrocketing. This company is leading a massive technological shift in the industry and with revenue growth of 70% year on year and best-in-class SaaS metrics it should definitely be on your radar.

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