Rubrik's Q2 2026: Contradictions Emerge on Identity Security, ARR Decline, and Sales Strategy

The above is the analysis of the conflicting points in this earnings call

Date of Call: September 9, 2025

Financials Results

• Revenue: $310M total revenue, up 51% YOY; ~44% YOY excluding nonrecurring material-rights benefit
• Gross Margin: 82% non-GAAP, compared to 77% in the prior year

Guidance:

• Q3 revenue: $319–$321M (up 35%–36% YOY; includes higher material-rights benefit)
• Q3 non-GAAP subscription ARR contribution margin: ~6.5%
• Q3 non-GAAP EPS: -$0.18 to -$0.16 (~200M shares)
• FY26 subscription ARR: $1.408–$1.416B (up 29%–30%)
• FY26 total revenue: $1.227–$1.237B (up 38%–40%; 32%–34% ex material rights)
• FY26 non-GAAP subscription ARR contribution margin: ~7%
• FY26 non-GAAP EPS: -$0.50 to -$0.44 (~197M shares)
• FY26 free cash flow: $145–$155M
• Material rights add ~6 pts to FY26 revenue growth; minimal in FY27
• Q3 ~21%–22% of full-year net new ARR; Q4 strongest; margins lowest in Q3 then higher in Q4

Business Commentary:

• Subscription Revenue and ARR Growth:
• Rubrik's subscription revenue was $297 million, up 55% year-on-year, with subscription ARR surpassing $1.25 billion, growing 36% year-over-year.

• The growth was driven by strong demand for Rubrik's cyber resilience solutions and the adoption of additional security functionality by existing customers.

• Free Cash Flow and Profitability:

• Rubrik generated over $57 million in free cash flow this quarter, achieving a 19% cash flow margin.

• The improvement in cash flow was due to strong ARR performance, operating leverage, capital structure optimization, and favorable contractual terms, such as shorter contract lengths.

• Cyber Resilience and Market Expansion:

• Rubrik continues to lead the cyber resilience market, experiencing significant demand from customers needing to protect against cyber attacks.

• The company's ability to deliver fast recovery capabilities and a unified data security policy control has led to competitive wins against legacy and new-gen vendors.

• Identity and AI Initiatives:

• Rubrik's Identity Recovery solution has gained traction, with over 200 customers adopting the service within a few quarters of general availability.
• Investment in AI solutions, such as Agent Rewind, aligns with Rubrik's long-term strategy to simplify secure data access for generative AI applications, enhancing its competitive position.

Sentiment Analysis:

• Management said results “exceeded all guided metrics” and raised the FY26 outlook. Subscription revenue grew 55% YOY; total revenue rose 51% YOY. Non-GAAP gross margin improved to 82% from 77%. Subscription NRR stayed above 120%. Free cash flow was $57.5M vs -$32M a year ago. CFO highlighted subscription ARR contribution margin improvement (~1,800 bps YOY) and stronger-than-expected revenue tailwinds.

Q&A:

• Question from Saket Kalia (Barclays): What drove the strong free cash flow and how should we think about 2H free cash flow dynamics?
  Response: FCF strength came from higher ARR, better margins, capital structure optimization, favorable duration, and early renewals; FY guide implies ~12% FCF margin with some duration compression assumed.

• Question from Andrew Nowinski (Wells Fargo): Any impact from moving to annual sales comp plans and does it increase Q4 seasonality?
  Response: Shift to annual quotas aligned comp with how they run the business; minimal disruption so far; Q2 and Q3 should look similar, with Q4 seasonally strongest.

• Question from Howard Ma (Guggenheim): How are you levered to data growth and what’s the pricing mix; could consumption grow over time?
  Response: Pricing bundles data volume with security features; growth vectors are organic data growth, new workloads/users, and security feature attach; M365 aligns to per-user licensing.

• Question from Eric Heath (KeyBanc): What drove early renewals, the larger non-cloud ARR decline, and higher material-rights activity?
  Response: Early renewals co-termed with expansions (some multiyear); non-cloud ARR declined due to migrations as cloud mix nears mid-80s; material rights varied with legacy credit usage/expiry timing.

• Question from Matthew Martino (Goldman Sachs): How does GTM evolve to sell a broader platform across identity, AI, and data security?
  Response: Uses a 3-stage model—incubation (Rubrik x), product line sales, then core sales—delivering all products via Rubrik Security Cloud for integrated value.

• Question from Gregg Moskowitz (Mizuho): DSPM adoption and differentiation—when might adoption inflect?
  Response: Rubrik differentiates by unifying DSPM with identity intelligence and recovery for holistic cyber resilience; expects market to coalesce around combined data+identity+recovery platforms.

• Question from Thomas Ingham (CIBC): Update on competitive environment and win rates?
  Response: Landscape unchanged; Rubrik wins the vast majority versus legacy and new-gen due to its preemptive recovery engine enabling faster, cleaner recovery.

• Question from Junaid Siddiqui (Truist): Does MCP protocol adoption expand Rubrik into broader security orchestration?
  Response: Focus remains on cyber resilience and AI operations; Rubrik is a secure data lake plus AI stack (Predibase, Agent Rewind), not moving into prevention/detection.

• Question from James Fish (Piper Sandler): DSPM penetration update and outlook for Federal sector?
  Response: Strategy ties data and identity for posture and recovery; Federal is an investment area—now FedRAMP Moderate—with wins replacing new-gen vendors; significant long-term opportunity.

• Question from Zachary Schneider (Baird): How do deal sizes, renewals, and expansions differ across product tiers?
  Response: About half of lands are Enterprise Edition; expansions occur via upgrading editions and adding workloads (e.g., M365, cloud, databases); patterns vary by customer.