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QI

QUALYS, INC. (QLYS)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 delivered a clean beat: revenue rose 10% to $169.9M and non-GAAP EPS increased 19% to $1.86; GAAP gross margin expanded to 84% and Adjusted EBITDA margin to 49% . Versus S&P Global consensus, revenue beat by ~2% and EPS beat by ~19% (see Estimates Context).*
  • Guidance raised: FY 2025 revenue to $665.8–$667.8M (from $656–$662M) and FY 2025 non-GAAP EPS to $6.93–$7.00 (from $6.20–$6.50). Q4 2025 guidance: revenue $172–$174M and non-GAAP EPS $1.73–$1.80 .
  • Free cash flow inflected: Q3 FCF was $89.5M (53% margin) with $49.4M of buybacks; NRR remained 104% as upsell remained challenging, but channels drove 50% of revenue and international grew 15% YoY (US +7%) .
  • Strategic catalysts: accelerating ETM adoption (up to 100% uplift vs VMDR), TrueConfirm exploit validation, QFlex pricing model, and FedRAMP High authorization expanding federal opportunities .

What Went Well and What Went Wrong

What Went Well

  • Strong top-line and profitability beat: revenue $169.9M (+10% YoY), non-GAAP EPS $1.86 (+19%), Adjusted EBITDA $82.6M (49% margin) with gross margin expansion to 84% GAAP/85% non-GAAP .
  • Channel and international momentum: channel mix rose to 50% (from 47%) with partner revenue +17% YoY; international revenue +15% vs +7% in the US .
  • Clear product and platform innovation: management emphasized the transition “from attack surface management to risk surface management using agentic AI-powered proactive risk management” . ETM pricing/packaging refined; “for every $1 of VMDR, ETM can drive an uplift of up to 100%,” with TrueConfirm included to validate exploitability before compromise .

What Went Wrong

  • Upsell traction mixed: NRR held at 104% (unchanged QoQ), as management noted “upsells remained challenging” despite improved gross retention .
  • Macro scrutiny on new business: Q4 guidance assumes continued budget scrutiny; billings expected to finish the year “a few percentage points below the revenue growth rate,” implying ~8% FY current billings growth .
  • Multi-quarter sales cycle evolution: while ETM enables faster POCs by ingesting third-party telemetry, some customers are still budgeting for next year, tempering near-term upsell conversion velocity .

Financial Results

MetricQ3 2024Q2 2025Q3 2025
Revenue ($USD Millions)$153.9 $164.1 $169.9
GAAP Diluted EPS ($)$1.24 $1.29 $1.39
Non-GAAP Diluted EPS ($)$1.56 $1.68 $1.86
GAAP Gross Margin (%)81% 82% 84%
Non-GAAP Gross Margin (%)83% 84% 85%
GAAP Operating Margin (%)29% 31% 35%
Adjusted EBITDA ($USD Millions)$69.7 $73.4 $82.6
Adjusted EBITDA Margin (%)45% 45% 49%
Free Cash Flow ($USD Millions)—$32.4 $89.5
FCF Margin (%)—20% 53%
Q3 2025 Actuals vs S&P Global ConsensusQ3 2025 ConsensusQ3 2025 Actual
Revenue ($USD Millions)$166.3M*$169.9M
Non-GAAP EPS ($)$1.56*$1.86

Values retrieved from S&P Global.*

KPIs and Mix

KPI / MixQ3 2024Q2 2025Q3 2025
Net Dollar Retention (%)—104% 104%
Channel % of Revenue—49% 50%
International Revenue Growth YoY—15% 15%
US Revenue Growth YoY—7% 7%
Customers ≥$500K—212 211
Non-GAAP Calculated Current Billings ($M)$167.4 $152.2 $186.4
Share Repurchases ($M)—$49.2 $49.4
Remaining Authorization ($M)—$254.6 $205.0
Capex ($M)—$1.3 $0.9

Product Contribution (LTM basis)

MetricQ3 2025
Patch Management + CSAM as % of Total Bookings17%
Patch Management + CSAM as % of New Bookings28%
TotalCloud CNAPP as % of LTM Bookings5%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($M)FY 2025$656–$662 $665.8–$667.8 Raised
GAAP EPS ($)FY 2025$4.47–$4.77 $5.23–$5.30 Raised
Non-GAAP EPS ($)FY 2025$6.20–$6.50 $6.93–$7.00 Raised
EBITDA Margin (%)FY 2025Low–mid 40s Mid–high 40s Raised
Free Cash Flow Margin (%)FY 2025Mid 30s Low 40s Raised
Revenue ($M)Q4 2025—$172–$174 New
GAAP EPS ($)Q4 2025—$1.26–$1.33 (22% tax) New
Non-GAAP EPS ($)Q4 2025—$1.73–$1.80 (21% tax) New
Capex ($M)FY 2025$7–$9 $5.5–$7 Lowered
Capex ($M)Q4 2025—$1.2–$2.7 New

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2 2025)Current Period (Q3 2025)Trend
Agentic AI / ETMLaunched agentic AI marketplace; ETM positioned as pre-breach orchestration with identity and remediation; mROC alliance partners formed .“Future…moving to risk surface management”; ETM includes CSAM and TrueConfirm; up to 100% uplift vs VMDR; ~28 POCs converted; shift to reporting ETM penetration starting Q1’26 .Strengthening adoption and packaging clarity
TrueConfirm (Exploit validation)Announced at ROCon: exploitability validation preview .Confirm exploitability before compromise; included with ETM (not standalone upsell) .Broadening capability; key differentiator
Federal / FedRAMP HighAchieved FedRAMP High; early public sector wins; D.C. office expansion .High six-figure upsell to federal agency; long-term opportunity; mixed near term due to scrutiny .Building pipeline; multi-year opportunity
Partner ecosystem (ROC/MROC)Certified new MROC partners; channel mix up to 49% .Channel now 50%; partner-led deal registrations increased; ROC partners driving new logos (e.g., major Middle East airline) .Scaling partner-first motion
Pricing model (QFlex)Introduced QFlex platform pricing to flex module adoption .QFlex beta success; Global 10 customer increased annual bookings >50% .Positive early traction
Competitive landscapeVM market shifting from detection to remediation; leadership in patch management .Management cites GigaOm leader position; focus on remediation and business risk vs CVE volume; main competitors Tenable/Rapid7 .Qualys positioned toward outcomes vs detection

Management Commentary

  • “The future of cybersecurity is moving from attack surface management to risk surface management using agentic AI-powered proactive risk management with business quantification and automated remediation.”
  • “For every $1 of VMDR, ETM can drive an uplift of up to 100%… ETM pricing is going to include cybersecurity asset management… and agentic AI.”
  • “TrueConfirm… removes the guesswork… by running safe exploits… to confirm whether the attackers will succeed… [and] the next logical step… automated remediation with TrueRisk Eliminate.”
  • “QFlex… an existing Global 10 customer made a multi-year commitment… increasing annual bookings by over 50% while adding new modules.”
  • “Adjusted EBITDA… was $82.6 million, representing a 49% margin… demonstrates our ability to maintain high operating leverage… while continuing to innovate.”

Q&A Highlights

  • ETM pricing and upsell path: ETM includes CSAM and TrueConfirm; upsell path to Eliminate (patch/mitigation) to drive outcomes; management reiterated “up to 100%” uplift vs VMDR .
  • Federal demand and macro: Early-stage but promising; FedRAMP High enabling conversations; mixed near-term due to scrutiny; longer-term investment continues .
  • Competition and differentiation: Focus on narrowing findings and rapid remediation vs CVE volume; named Tenable/Rapid7 as primary competitors; highlighted leader status in patch management .
  • NRR and upsell: NRR at 104%; goal to increase by converting VMDR → ETM and cross-selling Eliminate; no material one-time revenue items .
  • R&D prioritization and AI efficiency: Leveraging AI internally to boost engineering efficiency (20–25% gains) and shifting incremental hires to India to manage R&D expense; continued investment without needing a CRO hire .
  • Billings outlook: FY current billings expected ~8%, with Q4 below revenue growth due to tough comps .

Estimates Context

  • Q3 2025 beat vs S&P Global consensus: revenue $169.9M vs $166.3M*, EPS $1.86 vs $1.56* (material beats likely to drive upward estimate revisions).*
  • Q4 2025 consensus sits near guidance: revenue $173.2M*, non-GAAP EPS $1.78*, aligned with company’s $172–$174M and $1.73–$1.80 ranges .*
  • FY 2025 consensus EPS ~$6.98* broadly consistent with raised non-GAAP EPS guidance $6.93–$7.00 .*

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Qualys is executing on a high-margin growth model with structural margin expansion (EBITDA 49%) and strong FCF conversion (53%), supporting buybacks and optionality .
  • The narrative is shifting toward proactive, business-aligned risk reduction: ETM + TrueConfirm + Eliminate present a differentiated, outcome-driven stack likely to enhance upsell and stickiness .
  • Partner-first motion (50% revenue via channel) and ROC/MROC services are accelerating top-line and expanding reach, especially for ETM deployments .
  • Federal momentum post FedRAMP High positions Qualys for multi-year public sector growth; near-term revenue contribution remains modest amid budget scrutiny .
  • Near-term trading setup: strong Q3 beat and raised FY guidance are positive catalysts; Q4 guide in-line with consensus reduces event risk while sustaining credibility .
  • Medium-term thesis: VMDR-to-ETM conversion, QFlex-driven multi-module adoption, identity risk integration, and agentic AI remediation provide durable growth levers with improving NRR potential .
  • Watch items: upsell cadence (NRR >104%), billings trajectory (~8% FY), and execution on ETM packaging/pricing as the company transitions disclosures to ETM penetration in 2026 .