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Rapid7, Inc. (RPD)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered modest top-line growth and strong profitability: Revenue $214.19M (+3% YoY), non-GAAP diluted EPS $0.58, adjusted EBITDA $42.65M, and free cash flow $42.28M . Against S&P Global consensus, Rapid7 beat on revenue ($214.19M vs $212.06M*) and EPS ($0.58 vs $0.44*), reflecting disciplined execution and favorable bookings linearity .*
  • ARR reached $840.61M (+3% YoY), with 11,643 customers and ARR/customer at $72.2K; detection & response remains the core growth engine, while Exposure Command upgrades are skewing to larger, longer-cycle platform deals .
  • Guidance: FY25 ARR narrowed to $850–$865M (from $850–$880M), while FY25 non-GAAP EPS was raised to $1.90–$2.03 (from $1.78–$1.91); FY25 revenue and FCF maintained at prior ranges . Management cites extended cycles on higher ASP consolidation deals and prudent outlook into a back-half-weighted year .
  • Catalysts: Launch of Incident Command (AI-native SIEM), FedRAMP Authorization for InsightGovCloud, new Chief Commercial Officer to accelerate go-to-market, and announced CFO retirement/transition; management emphasized platform integration, agentic AI differentiation, and enterprise MDR expansion .

What Went Well and What Went Wrong

What Went Well

  • Strong profit and cash generation: non-GAAP operating income $36.35M, adjusted EBITDA $42.65M, FCF $42.28M; both revenue and profitability exceeded guided ranges . “Revenue and profitability were ahead of our outlook… strong free cash flow of $42,000,000” — Corey Thomas .
  • Strategic wins and validation for platform: several “seven-figure” consolidation deals with higher ASPs, including a major UK retailer consolidating on the Command Platform and MDR-led solution; larger enterprise use cases gaining traction .
  • Product momentum and differentiation: introduced Incident Command (AI-native SIEM), agentic AI embedded across SIEM/XDR/MDR, Active Patching via Automox, AWS Marketplace AI Agents availability; recognized as Leader in Frost Radar™ for MDR .

What Went Wrong

  • Growth still subdued: ARR +3% YoY to $840.61M and total revenue +3% YoY; professional services revenue -23% YoY as lower-margin services are deemphasized .
  • Non-GAAP operating margin down YoY to 17% (from 19%); GAAP operating margin 2% (from 3%), reflecting investments and mix .
  • Customer count declined sequentially (11,643 in Q2 vs 11,685 in Q1) as legacy transactional customers churn while larger strategic customers are added; Exposure Command upgrades skew to larger/longer cycles, reducing near-term predictability .

Financial Results

MetricQ4 2024Q1 2025Q2 2025
Total Revenue ($USD Millions)$216.26 $210.25 $214.19
Product Subscriptions Revenue ($USD Millions)$206.33 $203.94 $208.10
Professional Services Revenue ($USD Millions)$9.93 $6.32 $6.10
GAAP Gross Margin (%)70% 72% 71%
Non-GAAP Gross Margin (%)73% 75% 74%
GAAP Operating Margin (%)3% —% (GAAP op loss) 2%
Non-GAAP Operating Margin (%)18% 15% 17%
GAAP Diluted EPS ($)$0.03 $0.03 $0.13
Non-GAAP Diluted EPS ($)$0.48 $0.49 $0.58
Adjusted EBITDA ($USD Millions)$46.31 $38.90 $42.65
Net Cash from Operations ($USD Millions)$63.77 $29.76 $47.54
Free Cash Flow ($USD Millions)$58.84 $24.68 $42.28

Segment/geography breakdown:

MetricQ4 2024Q1 2025Q2 2025
North America Revenue ($USD Millions)$163.01 $157.95 $160.62
Rest of World Revenue ($USD Millions)$53.25 $52.31 $53.57
YoY Growth – Rest of World (%)14% 10% 10%

KPIs:

KPIQ4 2024Q1 2025Q2 2025
ARR ($USD Millions)$839.82 $837.22 $840.61
YoY ARR Growth (%)4% 4% 3%
Customers (Count)11,727 11,685 11,643
ARR per Customer ($USD Thousands)$71.6 $71.6 $72.2

Against S&P Global consensus (Q2 2025):

MetricConsensusActualSurprise
Revenue ($USD Millions)$212.06*$214.19 +$2.13M (beat)
Non-GAAP Diluted EPS ($)$0.44*$0.58 +$0.14 (beat)

Values retrieved from S&P Global.*

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
ARR ($USD Millions)FY 2025$850–$880 $850–$865 Lowered high-end by $15M
Revenue ($USD Millions)FY 2025$853–$863 $853–$863 Maintained
Non-GAAP Operating Income ($USD Millions)FY 2025$125–$135 $125–$135 Maintained
Non-GAAP Diluted EPS ($)FY 2025$1.78–$1.91 $1.90–$2.03 Raised
Free Cash Flow ($USD Millions)FY 2025$125–$135 $125–$135 Maintained
Revenue ($USD Millions)Q3 2025—$215–$217 New
Non-GAAP Operating Income ($USD Millions)Q3 2025—$29–$31 New
Non-GAAP Diluted EPS ($)Q3 2025—$0.44–$0.47 New
Weighted Avg Shares (Diluted, Millions)Q3/FY 202575.3/76.7 75.8/75.8 Updated mix

Management rationale: higher ASP consolidation deals with extended cycles, back-half weighted ARR, and prudence amid macro uncertainty; revenue/profitability ranges maintained given resilient D&R and strong cash generation .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024, Q1 2025)Current Period (Q2 2025)Trend
AI/Technology initiativesExpanded MDR coverage, Exposure Command momentum; board/go-to-market investments Launched Incident Command (AI-native SIEM); agentic AI embedded across SOC workflows; AWS Marketplace AI Agents; Active Patching Accelerating product innovation and AI differentiation
MDR/D&R demandMDR coverage expanding across Microsoft/AWS telemetry D&R >50% of ARR; mid-teens growth; multiple seven-figure wins; enterprise MDR rollout and co-managed detection Strengthening growth engine and enterprise penetration
Exposure management upgradesPlatform shift to consolidated sales approach; early Exposure Command adoption Larger strategic upgrades with higher ASPs and longer cycles; partners excited by broader workloads Longer cycles, larger deals; pipeline quality improving
Federal opportunityFedRAMP In Process designation FedRAMP Authorization achieved; benefits expected primarily in 2026; building capacity Structural upside; timing back-half/out-year
Go-to-market executionSharpening GTM; board additions New CCO appointment to operationalize platform expansion and ease seller motions Organizational upgrade for growth
Macro/Deal cyclesUncertain macro; slower start to 2025 Extended cycles on larger consolidation; prudent ARR outlook; backend weighting Persistent scrutiny; mix shift drives timing risk

Management Commentary

  • “We’re uniquely positioned to capitalize on the escalating customer demand to bring AI tools and capabilities into the SOC… We today have the products and the capabilities to win.” — Corey Thomas .
  • “We won a number of meaningful consolidation opportunities at higher ASPs… signature seven figure wins… demonstrate clear market validation of our approach.” — Corey Thomas .
  • “Operating discipline and flexibility… continues to serve us well… focused on delivering durable growth and expanding free cash flow over time.” — Tim Adams .
  • “We are narrowing our full year ARR guidance… and maintaining our revenue, operating income, and free cash flow ranges… Q3 ending ARR ~ $840M with net new ARR heavily weighted to Q4.” — Tim Adams .
  • “We’ve appointed Alan Peters as our new chief commercial officer… to accelerate our go-to-market efforts to capitalize on our unique product offerings.” — Corey Thomas .

Q&A Highlights

  • MDR trajectory: Continued strong demand; enterprise MDR expansion now ingests “all data and workloads” at quality and scale, underpinned by proprietary AI; management investing in team/services/AI around MDR .
  • ARR guide narrowing: Mix shift to larger, strategic consolidation deals with longer cycles and prudent stance in a volatile environment; many paths to achieve range, with seasonal back-end loading .
  • Exposure Command GTM: Partner ecosystem ramping; upgrades skewing to strategic larger deals vs original expectation of small-dollar 10–20% uplifts; higher ASPs but longer cycles .
  • Incident Command differentiation: Easier data ingestion, integrated threat intel, out-of-the-box MITRE-aligned workflows; simplifies SOC work and enhances decision-making .
  • Federal and India SOC: FedRAMP Authorization opens federal market with longer cycles and impact expected in 2026; India SOC capacity ramp in 2H, contributing to near-term opex dynamics .

Estimates Context

  • Q2 2025 actuals vs S&P Global consensus: Revenue $214.19M vs $212.06M*; non-GAAP diluted EPS $0.58 vs $0.44* — both beats .*
  • Q3 2025 guidance vs consensus: Guidance revenue $215–$217M vs $216.15M*; guidance non-GAAP EPS $0.44–$0.47 vs $0.46* — broadly in line; execution on enterprise MDR and Exposure Command upgrades will determine outcome .*
  • FY25 EPS raised (to $1.90–$2.03), suggesting consensus upward revisions near term; ARR narrowed implies sell-side may lower high-end assumptions and push more ARR to Q4 timing .*

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Profitability and cash flow resilience: Strong non-GAAP OI, adjusted EBITDA, and FCF amid modest growth provide downside support while GTM and product investments scale .
  • Beat-and-raise quarter on EPS with ARR prudence: Clear beat vs consensus on Q2 revenue/EPS and a raised FY25 EPS range, balanced by a narrowed ARR range due to longer-cycle, higher-ASP deals .*
  • Platform consolidation narrative is gaining momentum: Incident Command and agentic AI, plus enterprise MDR and Exposure Command, are driving larger strategic wins; expect timing variability but higher LTV .
  • Federal as medium-term optionality: FedRAMP Authorization expands TAM; expect impact skewed to 2026; capacity build underway .
  • Near-term trading: Focus on Q3 conversion and any color on Q4 pipeline quality; watch for disclosure on enterprise MDR traction, Exposure Command upgrade velocity, and any GTM efficiency metrics .
  • Medium-term thesis: Integrated, AI-driven SOC platform with MDR leadership and exposure management closed-loop remediation could accelerate growth as GTM is operationalized under new CCO .
  • Monitor catalysts and risks: CFO transition, GTM build-out, macro scrutiny/extended cycles, and execution on large deals; revenue/FCF guidance maintained offers stability, while ARR/larger-deal mix introduces timing risk .