What Happened?
Shares of cybersecurity software provider Rapid7 (NASDAQ:RPD) fell 29.5% in the afternoon session after it provided a weak financial outlook for the upcoming quarter and full year, which overshadowed its fourth-quarter results. While the company's fourth-quarter revenue and adjusted earnings per share were slightly ahead of Wall Street's expectations, sales were flat compared to the previous year. The main concern for investors was the company's guidance. For the first quarter of 2026, Rapid7's revenue forecast came in about 2.5% below what analysts had predicted. Furthermore, the full-year adjusted earnings per share guidance for 2026 missed estimates by a significant 21.8%, and the full-year revenue forecast also fell short of expectations.
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What Is The Market Telling Us
Rapid7’s shares are quite volatile and have had 18 moves greater than 5% over the last year. But moves this big are rare even for Rapid7 and indicate this news significantly impacted the market’s perception of the business.
The previous big move we wrote about was 6 days ago when the stock dropped 3.3% on the news that the "AI replacement" narrative reached a fever pitch following the release of new models from Anthropic and OpenAI. The simultaneous debut of Anthropic's Claude Opus 4.6 and OpenAI's "Frontier" agent platform raised concerns that autonomous agents are no longer just tools, but new operating systems that can cannibalize traditional software. This suggests that specialized applications might be reduced to mere features within frontier models, rendering legacy seat-based licensing models increasingly obsolete. The catalyst is the models' unprecedented agentic power. Opus 4.6’s "software hunting" capability allows it to autonomously audit and patch complex codebases, while OpenAI's Frontier platform bypasses traditional CRM and ticketing interfaces to perform enterprise work directly. By commoditizing sophisticated workflows into low-cost API calls, these releases threaten the recurring revenue of software giants. As AI builds bespoke tools on demand, the market is aggressively repricing the entire software application layer.
Rapid7 is down 49.1% since the beginning of the year, and at $7.27 per share, it is trading 80.8% below its 52-week high of $37.93 from February 2025. Investors who bought $1,000 worth of Rapid7’s shares 5 years ago would now be looking at an investment worth $82.75.
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