Rapid7 2025 Q3 Earnings Revenue Beats Estimates Despite EPS Decline

Rapid7 reported fiscal 2025 Q3 earnings on November 6, 2025, with revenue rising 1.5% to $217.96 million, surpassing estimates. However, the stock plummeted 15% post-earnings after the company cut guidance and faced a Jefferies downgrade.

Revenue

Rapid7’s total revenue increased to $217.96 million in Q3 2025, driven by product subscriptions revenue of $210.15 million, which accounted for 96.3% of total sales. Professional services revenue declined to $7.81 million, reflecting the company’s strategic shift away from lower-margin offerings. The year-over-year revenue growth of 1.5% outperformed the Zacks Consensus Estimate by 0.9%, underscoring resilience in core subscription offerings despite macroeconomic headwinds.

Earnings/Net Income

Earnings per share (EPS) fell 37.5% to $0.15 in Q3 2025, compared to $0.24 in the prior-year period. Net income dropped 36.3% to $9.81 million. Despite the decline, the company noted a record-high Q3 net income in its 12-year history. The EPS shortfall and guidance reduction contributed to the stock’s sharp post-earnings decline, signaling near-term profitability concerns.

Post-Earnings Price Action Review

The strategy of buying Rapid7 shares following revenue beats and holding for 30 days appears promising despite recent volatility. Rapid7’s Q3 results showed a fourth consecutive EPS beat, with revenue exceeding estimates by 0.9%. However, the stock fell 15% after guidance cuts and a Jefferies downgrade, creating a potential buying opportunity if the company’s long-term growth trajectory aligns with its strategic initiatives. New leadership appointments and AI-driven security platform wins, such as a six-figure university contract, position Rapid7 for future momentum. Risks include a revised 2025 ARR target, timing delays in large deals, and a concerning Altman Z-Score of 0.37. While historical data on this strategy is limited, the recent price drop suggests a favorable risk-reward profile. Investors must monitor execution on strategic plans and analyst sentiment shifts.

CEO Commentary

CEO Corey Thomas highlighted growth drivers, including adoption of AI-powered cybersecurity platforms and expansion into cloud-native solutions. Challenges include macroeconomic pressures on enterprise IT budgets and competitive threats in threat detection. Strategic priorities include AI-driven analytics investments and partnerships, particularly in the APAC region, to strengthen market positioning. Leadership remains cautiously optimistic, emphasizing long-term product differentiation and customer retention.

Guidance

Rapid7 guided to full-year 2025 revenue of $880 million, with Q4 revenue expected to grow 12% year-over-year. EPS is projected between $0.14 and $0.16, with operating cash flow targeting $150 million. The company aims to maintain a 30% gross margin and accelerate enterprise client onboarding through automation.

Additional News

1. Jefferies Downgrade and Guidance Cut: Rapid7’s stock dropped 15% after Jefferies downgraded it from Buy to Hold, reducing the price target to $19. The firm cited reduced 2025 ARR guidance and operational uncertainties.

2. New CFO Appointment: Rafe Brown will assume CFO duties on December 1, 2025, signaling a leadership shift to stabilize financial operations.

3. Microsoft Partnership Expansion: Rapid7 integrated its MDR solution with Microsoft Defender, enhancing detection capabilities and positioning for growth in cloud security.