Is HubSpot (HUBS) a Mispriced Growth Opportunity?

The stock of HubSpot (HUBS) has experienced a sharp decline in 2025, raising questions about whether the market has overcorrected to risks or fairly re-rated a once-high-flying growth stock. For investors, the challenge lies in reconciling the company's robust fundamentals-such as accelerating revenue growth, margin expansion, and AI-driven innovation-with a stock price that appears disconnected from these metrics. The question is not merely whether HubSpot is undervalued, but whether the dislocation between its intrinsic worth and market price represents a compelling opportunity or a cautionary tale.

Fundamentals: A Story of Resilience and Growth

HubSpot's Q3 2025 earnings report underscores its resilience in a challenging macroeconomic environment. Total revenue reached $810 million, reflecting 18.4% year-over-year growth in constant currency, with subscription revenue surging 21% to $791.7 million. Non-GAAP operating margins expanded to 20%, a dramatic improvement from a GAAP operating margin of 1.4% and a prior-year operating loss of -1.4% in Q3 2024 according to the report. This margin expansion, coupled with $191.8 million in free cash flow (18% of revenue), highlights the company's improving unit economics.

The Rule of 40-a key metric for SaaS companies-further reinforces HubSpot's strength. Its Rule of 40 score of 41 (combining 21% revenue growth and 20% operating margin) demonstrates a balance between growth and profitability according to analysis. Meanwhile, the company's balance sheet remains robust, with $1.7 billion in cash and investments, and a disciplined share repurchase program that saw $375 million spent to buy back 780,000 shares in Q3 as reported.

Valuation Dislocation: Mispricing or Re-rating?

Despite these fundamentals, HubSpot's stock price has fallen sharply in 2025, trading at a price-to-sales (P/S) ratio of 6.9x according to Sahm Capital. This is higher than the software industry average of 4.8x but below the peer average of 9.8x, suggesting potential for an upward re-rating. However, the price-to-earnings (P/E) ratio of -4,522.62 due to GAAP earnings-a negative figure due to GAAP earnings-muddies the valuation picture. Non-GAAP metrics tell a different story: the company reported $2.67 in non-GAAP earnings per share in Q3 2025, with a P/E ratio supported by strong earnings growth according to the earnings report.

Analysts argue that the stock is undervalued. A discounted cash flow (DCF) model estimates HubSpot's intrinsic value at $584.17 per share, while fair value estimates range up to $683.57 according to Yahoo Finance. The average analyst price target of $579.55 implies a 59% potential upside from the current price of $387.58 as noted by StockStory. Even the most conservative target of $450 represents a 36% gain, suggesting that the market may be underestimating the company's long-term potential.

Risks: AI Disruption and Competitive Pressures

The dislocation between fundamentals and price cannot be fully explained without addressing the risks. Analysts have tempered their optimism, citing slower near-term growth, rising uncertainty around AI integration, and software multiple compression according to analysts. HubSpot operates in a sector where AI is both a disruptor and an enabler. While the company has launched over 200 AI-driven features at its INBOUND conference and is monetizing innovations like Core Seats and Credits, competitors like Salesforce and Microsoft are also advancing their AI capabilities, threatening to erode HubSpot's upmarket traction.

Moreover, macroeconomic headwinds-such as delayed IT spending and cautious deal expansions-pose near-term challenges according to analysis. The company's 43% of Pro+ customers using 3 core hubs and 39% using 4+ hubs according to market data indicate progress in cross-selling, but scaling this to sustain growth will require continued execution.

A Compelling Entry Point?

For growth-oriented investors, the question is whether HubSpot's current valuation reflects these risks or overcorrects for them. The company's 21% subscription revenue growth, 20% operating margin, and $1.7 billion cash balance suggest a durable business model. Analysts project $828–830 million in Q4 2025 revenue, with non-GAAP operating margins expected to reach 22% as reported. These metrics, combined with a P/S ratio below peer averages, imply that the market may be discounting HubSpot's long-term potential.

However, the risks are real. AI disruption and competitive pressures could delay the realization of these fundamentals. Investors must weigh the potential for a re-rating against the possibility of further margin compression or slower growth.

Conclusion

HubSpot's sharp share price decline has created a valuation gap that appears to underprice its growth trajectory and operational improvements. While the company faces legitimate risks-particularly in an AI-driven market-its fundamentals suggest that the current price may not fully reflect its long-term potential. For investors with a multi-year horizon, the dislocation could represent a compelling entry point, provided they are prepared to tolerate near-term volatility. As always, the key lies in balancing optimism with caution, and in this case, the numbers seem to lean toward opportunity.