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QUALYS, INC. (QLYS)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered solid top-line and profitability: revenue $164.1M (+10% YoY), GAAP diluted EPS $1.29, and non-GAAP diluted EPS $1.68; Adjusted EBITDA was $73.4M (45% margin). Operating cash flow declined to $33.8M (21% margin) due to working capital timing .
  • Results beat Wall Street consensus: revenue beat by ~$2.8M (~1.7%) and EPS by ~$0.20 (~13%); 21 revenue and 21 EPS estimates. Company raised FY 2025 guidance for revenue ($656–$662M) and EPS (GAAP: $4.47–$4.77; non-GAAP: $6.20–$6.50) . Consensus figures marked with an asterisk are from S&P Global*.
  • Channel-driven growth and international strength continued: channel now 49% of revenue (up from 46% YoY), with international growth of 15% vs. 7% in the U.S.; net dollar expansion rate improved to 104% from 103% in Q1 .
  • Strategic catalysts: FedRAMP High Authorization for Qualys’ Government Platform (DEA sponsor), enhancing federal and regulated vertical opportunity; launch of agentic AI-powered Risk Operations Center (ROC) and flexible platform pricing (QLUs) to accelerate adoption and upsell .

What Went Well and What Went Wrong

What Went Well

  • Qualys raised FY 2025 revenue and EPS guidance, citing solid execution and improving upsell/retention metrics (DBNER up to 104%). Channel contribution rose to 49% and international growth outpaced U.S. .
  • Product innovation momentum: agentic AI marketplace and autonomous remediation capabilities announced at Black Hat; continued expansion of TotalAI and ETM (Enterprise TruRisk Management) as ROC foundation .
  • Federal catalyst: achieved FedRAMP High Authorization, positioning Qualys among an elite group able to support sensitive federal workloads across VM, patch, EDR, CSPM, and broader risk management in a unified platform .
    • CEO: “With trusted innovation and early ROC adoption, we’re strengthening our position as the partner of choice... to drive durable long-term growth” .

What Went Wrong

  • Operating cash flow fell to $33.8M (21% margin) from $49.8M (34%) YoY and far below Q1’s $109.6M (69%), reflecting working capital dynamics and seasonality; free cash flow margin was 20% per CFO .
  • Margin compression: Adjusted EBITDA margin declined to 45% from 47% YoY as OpEx grew with investments in sales/marketing and R&D; GAAP operating margin slipped to 31% from 32% YoY .
  • New business environment remains challenging; management maintained conservative assumptions given budget scrutiny, despite improved upsell/retention .

Financial Results

MetricQ2 2024Q1 2025Q2 2025
Revenue ($USD Millions)$148.7 $159.9 $164.1
GAAP Diluted EPS ($)$1.17 $1.29 $1.29
Non-GAAP Diluted EPS ($)$1.52 $1.67 $1.68
GAAP Gross Margin %82% 82% 82%
Non-GAAP Gross Margin %84% 84% 84%
GAAP Operating Income ($USD Millions)$48.1 $51.8 $51.4
GAAP Operating Income Margin %32% 32% 31%
Adjusted EBITDA ($USD Millions)$69.9 $74.8 $73.4
Adjusted EBITDA Margin %47% 47% 45%
Operating Cash Flow ($USD Millions)$49.8 $109.6 $33.8
Operating Cash Flow Margin %34% 69% 21%

Consensus vs. Actual (Q2 2025)

MetricConsensus*Actual
Revenue ($USD Millions)$161.26*$164.06
Primary EPS ($)$1.48*$1.68
# of Estimates21*—

Values retrieved from S&P Global*.

Segment/Mix (selected)

MetricQ4 2024Q1 2025Q2 2025
Channel Revenue Mix (%)48% 49% 49%
U.S. vs International Mix (%)US 58% / Intl 42% US 57% / Intl 43% US 57% / Intl 43%

KPIs and Leading Indicators

KPIQ2 2024Q1 2025Q2 2025
Net Dollar Expansion Rate (%)103% 103% 104%
Calculated Current Billings Growth YoY (%)(2%) 7% 8%
Customers spending ≥$500K (LTM)207 —212 (+7% YoY)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD Millions)Q3 2025—$164.5–$167.5 New
GAAP EPS ($)Q3 2025—$1.00–$1.10 (26% GAAP tax; ~36.3M diluted shares) New
Non-GAAP EPS ($)Q3 2025—$1.50–$1.60 (21% non-GAAP tax) New
Revenue ($USD Millions)FY 2025$648–$657 $656–$662 Raised
GAAP EPS ($)FY 2025$4.27–$4.57 (20% tax) $4.47–$4.77 (22% tax; ~36.4M diluted shares) Raised (tax higher)
Non-GAAP EPS ($)FY 2025$6.00–$6.30 (21% tax) $6.20–$6.50 (21% tax) Raised
EBITDA Margin GuidanceFY 2025Low–mid 40s Low–mid 40s Maintained
Free Cash Flow Margin GuidanceFY 2025Mid-30s Mid-30s Maintained
OpEx Growth YoY (%)FY 202518%–20% (initial) 15%–17% Lowered

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024 and Q1 2025)Current Period (Q2 2025)Trend
AI/Technology initiativesTotalCloud 3.0, TotalAppSec, TotalAI launched; ETM/ROC GA and strong interest Agentic AI marketplace of cyber risk agents; autonomous remediation; expanded TotalAI/ETM at Black Hat Accelerating and broadening
ROC/mROC partner strategyETM as vendor-neutral orchestration layer; mROC services concept introduced mROC alliances certified; partners excited about pre-breach managed services and revenue model Building partner ecosystem
Macro/Budget scrutinyStable but scrutinized budgets; conservative NRR assumptions Environment “stable but challenging”; guidance conservatism maintained; upsell/retention improved Cautiously stable
Regional trendsIntl +15% vs U.S. +7%; mix 58/42 Intl +15% vs U.S. +7%; mix 57/43; channel 49% Consistent outperformance internationally
Federal/FedRAMPTargeting FedRAMP High in 2025; federal GTM investments Achieved FedRAMP High Authorization; pipeline expected to build over coming quarters Positive catalyst, medium-term build
Pricing/PackagingExploring consolidated consumption pricing Launch of platform pricing via QLUs (flexible module access) New pricing model to drive adoption
Billings momentumCurrent billings growth guided ~6–8% LTM current billings growth ~6–8%; Q2 at 8%; anticipate moderation 2H In line with guidance

Management Commentary

  • CEO (Sumedh Thakar): “Qualys is well armed with fresh new capabilities... flexible platform pricing to help customers unify pre-breach cyber risk management workflows, reduce costs, and address today’s toughest security challenges” .
  • CEO on agentic AI: “CISOs can augment their security teams with intelligent AI agents that perform autonomous analysis and take decisive, high-impact actions to reduce risk faster” .
  • CFO (Joo Mi Kim): “Adjusted EBITDA for [Q2] was $73.4M representing a 45% margin... Operating expenses... increased by 15% driven by investments in sales and marketing and R&D” .
  • CEO on FedRAMP High: “This milestone... positions Qualys as the only modern alternative to legacy scanners for federal, state, and local agencies” (see also press release) .

Q&A Highlights

  • Macro and guidance conservatism: Management sees a stable yet challenging environment; maintained conservative assumptions while noting improved DBNER to 104% and upsell activity .
  • mROC messaging: Partners differentiate with pre-breach risk services layered over existing customer tools; compelling service revenue opportunity vs. crowded MDR space .
  • Revenue vs. billings: Current billings tracked at ~6–8% annually; Q2 closed at 8%; expect moderation in 2H due to tougher comps .
  • Federal vertical: FedRAMP High is an important multi-quarter catalyst; near-term impact limited, with opportunity growing over coming quarters .
  • Pricing model: Launch of platform pricing (QLUs) aims to increase lands, reduce friction, and improve long-term loyalty and modular adoption .

Estimates Context

  • Q2 2025 beats: revenue $164.06M vs $161.26M consensus* and EPS $1.68 vs $1.48 consensus*. Both surpassed expectations, with strength from channel and international growth . Values retrieved from S&P Global*.
  • FY 2025 guidance raised (revenue and EPS) implies Street models may need upward revision to reflect higher ranges and tax rate changes (GAAP tax to 22% from 20%) .

Key Takeaways for Investors

  • Qualys delivered a clean beat on both revenue and EPS and raised FY guidance, underpinned by improving upsell/retention and strong international/channel momentum—supportive for near-term sentiment. Bold beats: revenue and EPS above consensus* .
  • Watch margin dynamics: Adjusted EBITDA margin compressed to 45% amid increased OpEx; management still targets low–mid 40s EBITDA margin for FY 2025 .
  • Working capital impacts drove weaker Q2 operating cash flow; expect normalization across halves given historical seasonality and billings timing .
  • Strategic catalysts—FedRAMP High Authorization and agentic AI ROC—expand medium-term TAM, particularly in public sector and complex enterprises consolidating pre-breach risk operations .
  • Platform pricing (QLUs) and mROC services should boost modular adoption and partner-led lands, potentially accelerating attach and upsell, though new business remains cautious in 2025 .
  • Billings growth tracking 6–8% for the year (Q2 at 8%), with tougher 2H comps; investors should watch current billings and DBNER (now 104%) as leading indicators .
  • Net-net: durable growth, elevated profitability, and expanding strategic positioning create a constructive setup; monitor execution on federal pipeline, platform pricing adoption, and margin/FCF trajectory .
Notes:
- Consensus figures marked with an asterisk are sourced from S&P Global (Primary EPS Consensus Mean, Revenue Consensus Mean, and # of Estimates).