HubSpot (NYSE:HUBS) Surprises With Q3 Sales, Stock Jumps 11.8%

Radek Strnad /
2022/11/02 4:26 pm EDT

Sales and marketing software maker HubSpot (NYSE:HUBS) beat analyst expectations in Q3 FY2022 quarter, with revenue up 30.8% year on year to $443.9 million. Guidance for the full year also exceeded estimates, however the guidance for the next quarter was less impressive, coming in at $445 million, 1.03% below analyst estimates. HubSpot made a GAAP loss of $31.4 million, down on its loss of $13.7 million, in the same quarter last year.

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HubSpot (HUBS) Q3 FY2022 Highlights:

  • Revenue: $443.9 million vs analyst estimates of $426 million (4.2% beat)
  • EPS (non-GAAP): $0.69 vs analyst estimates of $0.51 (35.9% beat)
  • Revenue guidance for Q4 2022 is $445 million at the midpoint, below analyst estimates of $449.6 million
  • Free cash flow of $35.5 million, up 58.7% from previous quarter
  • Customers: 158,905, up from 150,865 in previous quarter
  • Gross Margin (GAAP): 81.5%, up from 79.4% same quarter last year

“Q3 was another strong quarter for HubSpot, reflecting our continued focus on innovation and execution,” 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 two years, growing from quarterly revenue of $228.3 million in Q3 FY2020, to $443.9 million.

HubSpot Total Revenue

And unsurprisingly, this was another great quarter for HubSpot with revenue up 30.8% year on year. But the growth did slow down a little compared to last quarter, as HubSpot increased revenue by $22.2 million in Q3, compared to $26.1 million revenue add in Q2 2022. We'd like to see revenue increase by a greater amount each quarter, but a one-off fluctuation is usually not concerning.

Guidance for the next quarter indicates HubSpot is expecting revenue to grow 20.4% year on year to $445 million, slowing down from the 46.5% 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 21.1% over the next twelve months.

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Customer Growth

You can see below that HubSpot reported 158,905 customers at the end of the quarter, an increase of 8,040 on last quarter. That is a fair bit better customer growth than last quarter and a fair bit above the typical customer growth we have seen lately, demonstrating that the business itself has good sales momentum. We've no doubt shareholders will take this as an indication that the company's go-to-market strategy is working very well.

HubSpot Customers

Key Takeaways from HubSpot's Q3 Results

With a market capitalization of $13.9 billion, more than $1.28 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.

It was good to see HubSpot outperform Wall St’s revenue expectations this quarter. And we were also glad to see good revenue growth. On the other hand, it was unfortunate to see that the revenue guidance for the next quarter missed analysts' expectations. Overall, it seems to us that this was still a decent quarter for HubSpot. The company is up 11.8% on the results and currently trades at $294.4 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.