Q4 2024 Earnings Summary
- Improving demand environment and expected acceleration in revenue growth throughout 2025: HubSpot observed that, unlike the significant change in buying behavior seen in Q4 last year, this year showed a continuation of Q3 trends with customers more open to discussing growth initiatives. They expect their revenue growth rate to accelerate throughout 2025. ,
- Strong AI adoption driving customer value and growth: HubSpot's AI features are seeing robust adoption, with over 500,000 users on their agent.ai platform and over 5,000 builders creating agents. Customers are increasingly considering AI in their decision-making, and AI is driving momentum in their Content Hub, Sales Hub, and Service Hub. This positions HubSpot well in the AI-first future, enhancing customer acquisition and expansion. , , ,
- Significant growth in co-selling with partners, especially in the upmarket segment: HubSpot reported a 68% year-over-year increase in co-selling with partners. This growth is driven by their strategic focus on enabling partners to source, co-sell, and service customers, particularly in the upmarket segment. The partner ecosystem is also embracing HubSpot's AI-first approach, amplifying their market reach and driving growth.
- HubSpot expects a step down in constant currency revenue growth in Q1 2025, projecting it to be the low point for the year, indicating potential near-term growth challenges.
- The strengthening U.S. dollar is expected to cause a 200 basis point headwind to 2025 revenue growth and a 50 basis point impact on operating profit margin due to foreign exchange challenges.
- HubSpot has not included any direct monetization from AI agents in their 2025 guidance, suggesting potential uncertainty or delay in realizing revenue from AI initiatives. ,
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Total revenue (as-reported) | Q1 2025 | no prior guidance | $697 million to $699 million | no prior guidance |
Non-GAAP operating profit | Q1 2025 | no prior guidance | $98 million to $99 million | no prior guidance |
Non-GAAP diluted net income/share | Q1 2025 | no prior guidance | $1.74 to $1.76 | no prior guidance |
Operating profit margin headwind | Q1 2025 | no prior guidance | A little over 1 point | no prior guidance |
Total revenue (as-reported) | FY 2025 | no prior guidance | $2.985 billion to $2.995 billion | no prior guidance |
Non-GAAP operating profit | FY 2025 | no prior guidance | $543 million to $547 million | no prior guidance |
Non-GAAP diluted net income/share | FY 2025 | no prior guidance | $9.11 to $9.19 | no prior guidance |
Free cash flow | FY 2025 | no prior guidance | Approximately $560 million | no prior guidance |
CapEx as % of revenue | FY 2025 | no prior guidance | Roughly 5% | no prior guidance |
Foreign exchange impact | FY 2025 | no prior guidance | Approximately 200 basis point headwind to revenue growth and 50 basis point headwind to operating profit margin | no prior guidance |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Total Revenue | Q4 2024 | $672M to $674M | $703.14M | Beat |
Total Revenue (FY) | FY 2024 | $2.97B to $2.99B | $2.63B (sum of Q1–Q4 2024:) | Missed |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Demand environment | Q1–Q3 2024: Value-conscious environment with longer deal cycles and more decision-makers (Q1 ; Q2 ; Q3 ). Some macro weakness persisted, but demand remained stable. | Slight improvement in demand, with customers more open to growth initiatives since September. However, decisions remain value-driven and committee-based (Q4 ). Revenue grew 20–21% YoY (Q4 ). | Sentiment Improving: Conditions remain cautious but show green shoots, driven partly by interest rate changes (Q4 ). |
NRR & upgrade motions | Q1–Q3 2024: NRR hovered around 102%, supported by seat upgrades, but other upgrade motions lagged. Downgrade rates stabilized, yet value-driven customers limited expansions (Q1 ; Q2 ; Q3 ). | NRR rose 2 points to 104%, mainly from seat-based upgrades. Other upgrade motions still face headwinds, with value-conscious buyers limiting expansions (Q4 ). | Slight Positive Shift: Seat upgrades boosted NRR, though broader upgrade motions remain subdued (Q4 ). |
AI adoption & monetization | Q1–Q3 2024: Embedded AI features saw rapid adoption (e.g., CoPilot, chatbots), especially in content and service use cases. No separate monetization yet; focus remained on driving usage (Q1 ; Q2 ; Q3 ). | Over 80 AI features launched, including Breeze Copilot and Customer Agent, with strong user metrics. No direct agent monetization assumed in 2025 guidance; pay-for-usage models are planned once value is proven (Q4 ). | Continued Momentum: AI is deeply embedded, driving customer traction. Monetization will come later, prioritizing value before pricing (Q4 ). |
Partner ecosystem | Q1–Q3 2024: Co-selling rose, with partners evolving from marketing agencies to CRM implementers (Q1 ; Q2 ). Q3 had less detail but noted AI-related partner enablement (Q3 ). | Co-selling grew 68% YoY, and partners are embracing an AI-first ecosystem. HubSpot adjusted partner commissions for better customer engagement (Q4 ). | Strengthening: Co-selling and AI alignment have boosted partner engagement. Commission changes drive active partner involvement (Q4 ). |
Profit & margins | Q1–Q3 2024: Operating margin trended 15% → 17% → 19%; strict cost controls and go-to-market efficiencies improved profitability (Q1 ; Q2 ; Q3 ). | Maintained 19% operating margin in Q4, with full-year 2024 at 17.5%. Guidance for 2025 expects an 18% operating profit margin, balancing growth with efficiency (Q4 ). | Stable Improvement: Focus on scaling efficiently continued, with margins rising and free cash flow strong (Q4 ). |
Macro & FX | Q1–Q3 2024: Persistent macro uncertainty and varying FX impacts. Q2 saw near-neutral FX; Q3 experienced a 4-point tailwind on billings but remained volatile (Q1 ; Q2 ; Q3 ). | Slightly improved sentiment, but value-driven buying remains. Stronger USD creates a 200 bps headwind to 2025 revenue growth and 50 bps to margins (Q4 ). | Continuing Challenges: Some positive demand signals offset by FX pressure, with cautious planning for 2025 (Q4 ). |
Seat-based pricing | Q1–Q3 2024: Launched in Q1, driving lower ASP but higher NRR for seat-based customers (+6–8 pts). Migration and model fine-tuning continued (Q1 ; Q2 ; Q3 ). | Key driver of Q4’s 2-point NRR uptick, with full migration by end of 2025. Price increases occur upon first renewal; ~50–60% of ARR will renew under seat-based by end of 2025 (Q4 ). | Positive Adoption: Lower entry pricing fuels more seats, boosting retention. Full benefits to unfold over multi-year migration (Q4 ). |
Multi-hub adoption | Q1–Q3 2024: Growing prevalence of 3+ hubs among Pro+ customers, fueling upmarket deals and higher ACV (Q1 ; Q2 ; Q3 ). | Over 35% of Pro+ ARR uses four or more hubs (+7% YoY). Customers consolidate on one platform to cut costs, boost visibility, and foster innovation (Q4 ). | Increasing: Cross-hub deals remain a key growth lever, with larger customers adopting multiple hubs (Q4 ). |
Uncertain outlook | Q1–Q3 2024: Ongoing caution around macro conditions. Q3 signaled limited visibility for 2025, though long-term drivers remain strong (Q1 ; Q2 ; Q3 ). | Still cautious for 2025. While small business sentiment improved, HubSpot expects value-driven buying to persist. FX also poses risks (Q4 ). | Guarded Stance: Growth is still subject to macro conditions, with slight optimism tempered by caution (Q4 ). |
Step-down & acceleration | Q1–Q3 2024: Not explicitly discussed as a separate topic. | Q1 2025 expected to be the low point in revenue growth before accelerating later in 2025. Reflects SaaS lag and steady improvements in demand (Q4 ). | Managed Expectations: Short-term dip followed by modest rebound in the second half of 2025 (Q4 ). |
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AI Monetization Strategy and 2025 Revenue Impact
Q: How will AI monetization affect 2025 revenue forecast?
A: HubSpot's strategy is to embed AI across the platform without separate add-ons, focusing on delivering value first. They have not assumed any direct agent monetization in their 2025 guidance. The pricing model will eventually be a hybrid of seat-based and usage-based pricing, introduced as customers get consistent value from AI. -
Demand Environment and SMB Optimism
Q: Any change in demand environment and SMB optimism post-election?
A: There have been improvements, with customers more open to growth initiatives since September. However, buying trends remain value-driven, with decisions made by C-suite and boards. HubSpot is now considered a platform of choice in mid-market companies, with customers starting with multi-hub adoption and appreciating embedded AI without friction. -
Pricing Increase and Migration to New Model
Q: How will installed base receive pricing increase through 2025?
A: HubSpot is migrating customers to the new seat-based pricing model by year-end. Price increases for existing customers occur upon renewal after migration, with up to a 5% increase at first renewal. Expect 50–60% of ARR to have gone through first renewal by year-end. -
Impact of LLMs and DeepSeek on Costs
Q: How will DeepSeek and efficient LLMs affect inference costs?
A: DeepSeek has led to a spectacular reduction in COGS due to lower inference costs, as it's open-source and increased competition. Additionally, reasoning models like DeepSeek and OpenAI's o3 expand agents' capabilities to handle more sophisticated goals. -
Guidance for Q1 and 2025 Revenue Growth
Q: Is there extra conservatism in Q1 guidance compared to last year?
A: Unlike last year’s significant change in buying behavior, this year continued trends from Q3. HubSpot expects a step down in constant currency growth rate in Q1, which will be the low point for the year. Revenue growth is expected to accelerate slightly throughout 2025. -
Net Revenue Retention and Upselling Activity
Q: Are you seeing improvement in upselling activity?
A: Net revenue retention increased 2 points to 104%, mainly due to seat upgrades from the new pricing model. While downgrades and churn have stabilized, upgrades remain a headwind, as customers are still value-driven. -
Co-selling Growth with Partners
Q: What drove the 68% growth in co-selling with partners?
A: Multi-year efforts transforming partners into CRM implementers and focusing on upmarket opportunities led to this growth. Improved products and enablement resulted in more multi-hub deals sold and implemented with partners, who are now embracing an AI-first ecosystem with HubSpot. -
Customer Acquisition and ARPC Growth
Q: How should we think about new customer acquisitions versus ARPC growth?
A: With 9,800 net new customers, HubSpot is at the upper end of the expected range. A balanced mix across starter, professional, and enterprise tiers is observed. ASRPC is expected to stabilize, with low single-digit growth anticipated in the back half of the year. -
Internal AI Adoption and Expense Impact
Q: Will internal AI adoption affect expense growth, and where will savings go?
A: Internal AI adoption may lead to efficiencies, with savings reinvested in R&D and expanding sales capacity. HubSpot is reimagining go-to-market strategies in support, marketing, and sales with AI, aiming for mid to long-term impacts on innovation and efficiency. -
Unlocking New Use Cases with Generative AI
Q: How is generative AI unlocking new use cases for HubSpot?
A: By combining structured and unstructured data, HubSpot can provide real-time insights from sources like calls and emails, which make up 80% of customer conversations. Building a knowledge layer atop this data and reimagining the UI enables new capabilities in an Agentic future. -
DIY AI vs Packaged Software Positioning
Q: How does HubSpot view DIY AI versus packaged software for SMBs?
A: HubSpot believes SMBs prioritize ease of adoption and fast time to value over building solutions themselves. They aim to be the core platform with an ecosystem of tailored agents, providing a unified solution for SMBs. -
Framework for AI Consumption Pricing
Q: What is the framework for introducing consumption pricing for AI?
A: HubSpot focuses on delivering value first. As customers gain repeat usage from AI Agents, they will add usage-based pricing. Currently monetizing AI within the existing model, they plan to expand monetization as adoption grows in 2025. -
Control Tower for Agents
Q: How is HubSpot positioned to be the control tower for agents?
A: HubSpot is developing an agent platform where agents collaborate to achieve complex goals. With agent.ai, they've enabled 7,000 people to build agents, and users have grown to 900,000. They aim to be the platform where builders and users aggregate, leveraging their customer base and data.