Executive Summary

Q3 2025 was a modest top-line quarter with revenue up 2% YoY to $217.96M and non-GAAP diluted EPS of $0.57; both exceeded internal outlook and beat S&P Global consensus (rev +$1.8M; EPS +$0.11) as execution improved in MDR and spending timing favored profitability . Revenue Consensus Mean: $216.15M*; Primary EPS Consensus Mean: $0.456* (actual $0.57) .
S&P Global values marked with *.
Management reset ARR expectations, guiding Q4 and FY25 ARR to “approximately flat vs Q3” (reflecting reduced precision and a desire to rebuild guidance credibility amid ongoing GTM changes), while tightening FY25 revenue to $856–$858M and raising FY25 non-GAAP EPS to $2.02–$2.09 .
Strategic vectors: AI-powered Command Platform, an expanded Microsoft security partnership (new MDR for Microsoft), and refocusing the sales engine under a new CCO; Rafe Brown named incoming CFO effective Dec 1, 2025 to drive operating rigor and growth scalability .
Key narrative drivers: larger, strategic platform deals with longer cycles; MDR as majority of ARR with attractive margins and double‑digit growth; international outgrowing North America; incremental Q4 conservatism to rebaseline forecasting precision .

What Went Well and What Went Wrong

What Went Well

Revenue and profitability topped outlook: Q3 revenue $217.96M (+2% YoY) and non‑GAAP operating income $36.9M (17% margin) were ahead of expectations; free cash flow was $30.1M . CEO: “Revenue for the quarter was $218 million, and operating income was $37 million, both ahead of our outlook… We once again delivered strong free cash flow of $30 million” .
MDR momentum and unit economics: MDR is “more than half of ARR,” still growing double digits; management argues MDR can run at higher gross margins due to automation and AI SOC investments .
Microsoft partnership and AI platform validation: new MDR for Microsoft and AI-generated risk intelligence reinforce the Command Platform differentiation and are expected to expand addressable opportunities .

What Went Wrong

ARR target reset and forecasting precision: Management acknowledged “we have fallen short of the ARR guidance” and lowered precision to “approximately flat” for Q4/FY, citing GTM changes and longer deal cycles in larger platform consolidations .
YoY compression in margins vs prior year: non‑GAAP operating margin declined to 17% (from 20% in Q3’24); non‑GAAP gross margin to 73% (from 74%); adjusted EBITDA $43.5M (down from $50.1M) as mix and timing weighed YoY .
Professional services continued to contract (-14% YoY), consistent with a deemphasis on lower-margin services; North America declined 1% YoY as international carried growth (+8% YoY) .

Financial Results

Headline P&L vs prior periods (actuals) and S&P Global consensus

Metric	Q3 2024	Q2 2025	Q3 2025 (Actual)	Q3 2025 S&P Consensus
Total Revenue ($M)	$214.65	$214.19	$217.96	$216.15*
Product Subscriptions Rev ($M)	$205.59	$208.10	$210.15	—
Professional Services Rev ($M)	$9.06	$6.10	$7.81	—
GAAP Gross Margin (%)	71%	71%	70%	—
Non-GAAP Gross Margin (%)	74%	74%	73%	—
GAAP Op Income ($M)	$12.82	$3.49	$5.90	—
Non-GAAP Op Income ($M)	$43.95	$36.35	$36.91	—
GAAP Net Income ($M)	$15.41	$8.34	$9.81	—
Diluted GAAP EPS ($)	$0.21	$0.13	$0.15	—
Non-GAAP Diluted EPS ($)	$0.66	$0.58	$0.57	$0.456*
Adjusted EBITDA ($M)	$50.08	$42.65	$43.51	$36.82 (EBITDA)*
Cash from Ops ($M)	$43.97	$47.54	$38.20	—
Free Cash Flow ($M)	$38.50	$42.28	$30.11	—

S&P Global values marked with *. Values retrieved from S&P Global.

Notes: Company “Adjusted EBITDA” differs from standardized S&P “EBITDA,” limiting comparability; management reports Adjusted EBITDA $43.51M vs S&P EBITDA actual $17.30M*, reflecting differing adjustments . S&P Global values marked with *. Values retrieved from S&P Global.

Segment and Geography

Metric ($M)	Q3 2024	Q2 2025	Q3 2025
Product Subscriptions Revenue	$205.59	$208.10	$210.15
Professional Services Revenue	$9.06	$6.10	$7.81
North America Revenue	$163.73	$160.62	$162.71
Rest of World Revenue	$50.92	$53.57	$55.25

KPIs and Unit Economics

KPI	Q1 2025	Q2 2025	Q3 2025
ARR ($M)	$837.22	$840.61	$837.73
Customers (#)	11,685	11,643	11,618
ARR / Customer ($k)	$71.6	$72.2	$72.1
Total Gross Margin (Non-GAAP, %)	75%	74%	73%
Product Gross Margin (Non-GAAP, %)	76%	75.6%	75%
Op Margin (Non-GAAP, %)	15%	17%	17%
Free Cash Flow ($M)	$24.68	$42.28	$30.11

Guidance Changes

Metric	Period	Previous Guidance (Aug 7, 2025)	Current Guidance (Nov 4, 2025)	Change
ARR	FY 2025	$850–$865M	“Approximately flat vs Q3 2025” (implies ~flat ~$838M)	Lowered precision/level
Revenue	FY 2025	$853–$863M	$856–$858M	Tightened
Non-GAAP Operating Income	FY 2025	$125–$135M	$130–$135M	Raised to upper half
Non-GAAP EPS (diluted)	FY 2025	$1.90–$2.03	$2.02–$2.09	Raised
Free Cash Flow	FY 2025	$125–$135M	$125–$135M	Maintained
Revenue	Q4 2025	—	$214–$216M	New detail
Non-GAAP Operating Income	Q4 2025	—	$25–$30M	New detail
Non-GAAP EPS (diluted)	Q4 2025	—	$0.37–$0.44 (76.6M diluted shares)	New detail

Reconciliations provided by the company indicate GAAP loss ranges offset by stock-based comp and amortization to arrive at non-GAAP ranges .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1–Q2 2025)	Current Period (Q3 2025)	Trend
AI-powered SOC / Command Platform	Launched Incident Command (AI-native SIEM); emphasized unified data, agentic AI, MDR integration .	Reinforced AI differentiation; announced AI-generated risk intelligence and MSFT MDR; platform validation via competitive wins .	Strengthening product narrative
Microsoft partnership	Noted broad ecosystem integrations; no specific MSFT MDR .	Expanded partnership; MDR for Microsoft across Defender telemetry, go-to-market collaboration beginning .	New GTM vector
Go-to-market (GTM) / Leadership	Announced new CCO in Q2 to accelerate growth .	CCO Allan Peters standardizing playbooks; reallocating focus to MDR; new CFO Rafe Brown to drive operational rigor .	Re-tooling underway
Deal cycles / Forecasting	Larger deals extend cycles; back-half weighting; narrowed ARR guide in Q2 .	Q4/FY ARR guided “flat” to rebuild confidence; acknowledged variance while changes are implemented .	More conservative
MDR economics and mix	MDR majority of ARR; mid-teens growth; strong economics .	Still double-digit growth; higher gross margins via AI/automation; focus to scale MDR profitably .	Positive mix tailwind
Exposure Command upgrades	Upgrades larger than expected but slower; partner ramp in progress .	Pipeline healthy; ASPs >2x expectations but longer cycles; focus to operationalize expansion engine .	Strategic, slower timing
International vs North America	International +10% YoY in Q2; 25% of revenue .	International +8% YoY; 25% of revenue; NA down 1% YoY; incremental investments internationally .	ROW outgrowing NA
Federal / Certifications	FedRAMP achieved (Q2 PR) .	Expect federal impact more in 2026; building capacity .	Early, 2026 lever

Management Commentary

“We ended the third quarter with $838 million in ARR… Revenue for the quarter was $218 million, and operating income was $37 million, both ahead of our outlook.”
“We… acknowledge that we have fallen short of the ARR guidance… we are today reducing our 2025 ARR target… and… embed a discount of the new business win benefits expected from Q4…”
“MDR… we run at a higher… profitability than your average MDR companies… building… automation and now the AI capacity… we can… run modern managed services at higher quality… and higher gross margins.”
“Our new MDR for Microsoft… brings together Rapid7's SOC expertise with Microsoft's security ecosystem to simplify operations, strengthen protection, and unlock new value…”
“We… are managing active change during the fourth quarter… ARR to end Q4 approximately flat quarter over quarter… tightening our full-year revenue… raising our full-year operating income… and… non-GAAP EPS…”

Q&A Highlights

MDR unit economics and margins: Management emphasized structurally better MDR margins enabled by automation/AI; justified scaling MDR as a profitable growth vector .
International growth outpacing North America: 25% of revenue, faster growth than overall; continued investment and process alignment across regions .
Pricing/competition in MDR: Despite competitive market, MDR growing double digits; value proposition is AI-driven SOC combining tech and expert service; retention rates remain strong .
Forecasting and pipeline conversion: Larger platform deals extend cycles; Q4/FY ARR guided conservatively to rebuild credibility as CCO/CFO changes roll through; visibility expected to improve in 2026 .
Exposure Command upgrade motion: Upgrades are larger than expected (>2x ASP) but with longer cycles; efforts underway to operationalize expansion playbooks .

Estimates Context

Q3 2025 vs S&P Global consensus: revenue $217.96M vs $216.15M* (beat), non‑GAAP diluted EPS $0.57 vs $0.456* (beat) . S&P Global values marked with *. Values retrieved from S&P Global.
Q4 2025 outlook vs consensus: Company revenue guide $214–$216M vs S&P consensus $215.17M* (in-line), company non‑GAAP EPS $0.37–$0.44 vs S&P consensus $0.416* (range brackets consensus midpoint) . S&P Global values marked with *. Values retrieved from S&P Global.
EBITDA note: S&P “EBITDA” consensus $36.82M* vs S&P “actual” $17.30M* contrasts with company’s Adjusted EBITDA $43.51M due to differing definitions; investors should anchor EBITDA comparisons on consistent definitions . S&P Global values marked with *. Values retrieved from S&P Global.
Implication: Estimate models likely raise FY25 EPS (company raised to $2.02–$2.09) and anchor Q4 revenue/EPS near guidance midpoints; ARR frameworks may reduce FY exit level/precision given “flat” commentary .

Key Takeaways for Investors

The narrative is shifting from pure platform build to disciplined GTM execution: CCO/CFO transitions, standardization, and MDR prioritization are intended to compress deal cycles and improve forecasting reliability into 2026 .
MDR remains the core growth and margin engine; management asserts structurally superior MDR unit economics via AI SOC—expect continued mix shift toward MDR with improving profitability .
ARR conservatism near term (flat Q4/FY) is a reset to rebuild guidance credibility amid operational changes; watch Q4 pipeline conversion and 1H’26 expansion metrics for confirmation of re-acceleration .
Product catalysts: AI-generated risk intelligence (Remediation Hub), MDR for Microsoft, and continued platform integration should support competitive wins and larger consolidation deals despite longer cycles .
Geography: International growth (25% of revenue, +8% YoY) offsets NA softness; UAE expansion and certifications (DESC/FedRAMP) provide medium-term regional and federal pathways .
2025 financial frame: Revenue tightened to $856–$858M; non-GAAP EPS raised to $2.02–$2.09; FCF $125–$135M maintained—supporting a durable cash profile while investing in GTM and AI capabilities .
Trading lens: Near-term stock drivers include confidence restoration in ARR trajectory, evidence of MDR-driven margin expansion, and early revenue contribution from Microsoft partnership; estimate revisions likely skew positive on EPS vs flattish ARR .

Additional Relevant Press Releases (Q3 period)

AI-generated risk intelligence launched in Command Platform (Remediation Hub) to accelerate remediation prioritization; rollouts in late November .
Recognized again in Gartner Magic Quadrant for SIEM; positioning supports AI-native SIEM (Incident Command) narrative .
Strategic expansion into UAE with local platform instance and DESC certification, strengthening regional GTM .

Appendix: Q4 & FY25 Guidance Detail (Company)

Metric	Q4 2025	FY 2025
ARR	Approximately flat vs Q3 2025	Approximately flat vs Q3 2025
Revenue ($M)	$214–$216	$856–$858
Non-GAAP Op Income ($M)	$25–$30	$130–$135
Non-GAAP EPS (diluted)	$0.37–$0.44 (76.6M diluted shs)	$2.02–$2.09 (75.9M diluted shs)
Free Cash Flow ($M)	—	$125–$135
Non-GAAP Reconciliations	GAAP op loss $(10)–$(5) Q4; add SBC ~$30M and amort ~$5M	GAAP op loss $(8)–$(3) FY; add SBC ~$118M and amort ~$20M