Rubrik's Q3 2026: Contradictions Emerge on Growth Strategy, Non-Cloud ARR, Market Position, and Identity Security

Date of Call: December 4, 2025

Financials Results

• Revenue: Subscription revenue $336M, up 52% YOY; Total revenue $350M, up 48% YOY; material rights contributed ~ $25M in Q3 (revenue growth ~36% when normalized for material rights).
• Gross Margin: Non-GAAP gross margin 83% in Q3, compared to 79% in the year-ago period.
• Operating Margin: Subscription ARR contribution margin +10% LTM vs -3% prior year (improvement ~1,400 bps); company expects non-GAAP subscription ARR contribution margin of ~9% for the full year.

Guidance:

• Q4 revenue $341M–$343M, up ~33% (≈30% normalized for material rights).
• Q4 non-GAAP EPS: -$0.12 to -$0.10.
• FY26 subscription ARR $1.439B–$1.453B (~32% growth).
• FY26 total revenue $1.280B–$1.282B (≈44% reported; ≈35% normalized); material rights ~ $68M for FY26.
• FY26 non-GAAP EPS: -$0.20 to -$0.16; free cash flow $194M–$202M.
• FY27: reported revenue growth expected to lag subscription ARR due to a reduction in material rights; modest improvement in contribution margin and modestly higher FCF expected.

Business Commentary:

• Record Financial Performance:
• Rubrik reported record subscription ARR of $1.35 billion for Q3, up 34% year-over-year.
• The record net new subscription ARR of $94 million was achieved, marking a significant growth.

• This performance was driven by strong customer adoption, particularly in cloud protection and identity resilience, and a successful land-and-expand strategy.

• Cyber Resilience and Identity Business Momentum:

• Rubrik's subscription revenue reached $336 million, growing 52% year-over-year.
• The company's identity business achieved $20 million in subscription ARR, with significant customer growth of over 50% in Q3.

• The growth in identity resilience is attributed to increased demand from CSOs and strategic partnerships, such as with CrowdStrike.

• Legacy Replacement and Cloud Protection:

• Bookings from legacy replacements accelerated, surpassing previous growth rates.
• Rubrik won significant contracts with major enterprises, including a top bank in Asia and a Fortune 250 professional services firm.

• The acceleration in legacy replacements is driven by the need for organizations to modernize infrastructure and ensure cyber resilience against evolving threats.

• Agentic AI and Rubrik Agent Cloud:

• Rubrik launched Rubrik Agent Cloud, a new product suite to manage AI agent lifecycle, incorporating context from Predibase acquisition.
• This expansion is aimed at addressing the operational challenges and governance of AI agents, with early customer enthusiasm and beta feedback.
• The introduction of Rubrik Agent Cloud is part of Rubrik's strategy to lead the AI enterprise future by providing comprehensive AI operations solutions.
  
  

Sentiment Analysis:

Overall Tone: Positive

• "This quarter has been our best ever," management said, noting record net new subscription ARR of $94M, subscription ARR of $1.35B (up 34% YOY), record $77M free cash flow, and that they "once again exceeded all guided metrics" and are "again raising our outlook."

Q&A:

• Question from Saket Kalia (Barclays): How additive can identity be to an average data protection deal? Is identity replacing established tools or creating new budget as you sell increasingly to CISOs?
  Response: Identity is fully additive — a net‑new CISO buyer; it sometimes displaces legacy/new‑gen vendors but largely creates new budget and new customers (40% of identity customers in Q3 were net‑new to Rubrik).

• Question from Saket Kalia (Barclays): Can you comment on the non‑SaaS (non‑cloud) ARR line — conversion versus natural churn — and how to model it into Q4 and next year?
  Response: Non‑cloud/non‑SaaS ARR will continue to decline as cloud ARR expands (cloud now ~87% of subscription ARR); model net new ARR on an annual basis and expect continued conversion to cloud.

• Question from Matthew Martino (Goldman Sachs): What's driving the acceleration in bookings from legacy replacements — AI modernization or urgent cyber risk concerns?
  Response: Both — modernization for AI and rising cyber threats are driving legacy replacement, with speed of recovery being a key decision factor for CIOs/CISOs.

• Question from Fatima Boolani (Citi): With rapid product expansion, are you considering consumption/flex models to make it easier for customers to access the full portfolio?
  Response: Rubrik remains a platform company focused on cross‑product value and customer experience; they are exploring ways to simplify consumption but the primary emphasis is on platform adoption, customer delight and expansion.

• Question from John DiFucci (Guggenheim): Why is Rubrik well positioned to secure AI agents and what else will customers need beyond Rubrik to solve this problem?
  Response: Rubrik's data+identity+application context enables end‑to‑end agent monitoring, governance and remediation (including Agent Rewind); customers still need broader AI tooling, but Rubrik provides the control layer to operationalize agents securely.

• Question from Brad Zelnick (Deutsche Bank): How are partnerships with AI platforms (e.g., Copilot Studio, AWS Bedrock) structured on GTM and co‑innovation?
  Response: Rubrik leverages existing hyperscaler partnerships and prebuilt go‑to‑market motions from its cloud relationships to extend distribution and integrations for Agent Cloud.

• Question from Brad Zelnick (Deutsche Bank): How will you monetize Rubrik Agent Cloud — dedicated SKUs or tier migrations?
  Response: Rubrik Agent Cloud is a separate product suite sold as incremental/dedicated SKUs (currently in beta) and will be monetized as a distinct offering.

• Question from Eric Heath (KeyBanc): Q4 guide implies seasonally stronger growth than Q3 — is that due to sales comp changes, pipeline strength, or something else?
  Response: The Q4 raise reflects strong Q3 performance and pipeline; it's about a ~3% uplift in net new ARR and the company manages on an annual net new ARR basis (comp changes evolving).

• Question from Gregg Moskowitz (Mizuho): How should we think about penetration rates for Identity Recovery/Resilience across your installed base?
  Response: Identity is broadly applicable and horizontal; early traction (~$20M subscription ARR, doubled customers in Q3) shows strong demand, but more time/data are needed to quantify long‑term penetration and pricing uplift.

• Question from Thomas Ingham (CIBC Capital Markets): Net new ARR has been lumpy — is this quarter's acceleration the new normal or should volatility be expected into '27?
  Response: Net new ARR can be lumpy quarter‑to‑quarter; this quarter was a record ($94M) but management plans and should be modeled on the annual net new ARR target rather than assuming a new quarterly norm.

• Question from Junaid Siddiqui (Truist): Are you seeing Rubrik help lower cyber insurance premiums, and does identity+data convergence differentiate you for insurance/compliance?
  Response: Yes — combined identity and data resilience is attractive to insurers (one insurer became a reseller); Rubrik can support underwriting confidence, though the market is still in early innings.

• Question from Keith Bachman (BMO): For the agent market, will the buyer differ, how will competition shape up, and when will beta move to GA?
  Response: Rubrik expects operations/CTO buyers to lead agent deployments; competition is early with multiple potential winners; product is in beta and GA is expected 'not too far' away.

• Question from Shrenik Kothari (Robert W. Baird): How should we think about uplift versus Identity Recovery from Identity Resilience and durability of your >120% NRR?
  Response: NRR drivers (high retention and multiple expansion vectors) should keep NRR strong (>120%), though some moderation is natural at scale; Identity Resilience likely drives price uplift but more data are required to quantify it.

Contradiction Point 1

Growth Strategy and Market Targeting

It involves a shift in the company's strategic focus and market targeting, which could impact revenue growth and market position.

How has platform expansion influenced your sales strategy? - Fatima Boolani (Citigroup)

2026Q3: Rubrik's strategy is to be a comprehensive platform company, offering a single platform that grows in value as customers adopt more than one product. - Bipul Sinha(CEO)

As Rubrik expands to a multiproduct platform, how does the go-to-market strategy evolve? - Matthew Martino (Goldman Sachs Group, Inc., Research Division)

2026Q2: We are really looking at this as going down a platform path where our customers are going to buy multiple products from us. - Bipul Sinha(CEO)

Contradiction Point 2

Non-Cloud ARR Performance

It involves changes in the performance of non-cloud ARR, which is a critical component of the company's revenue and growth strategy.

Can you comment on the non-SaaS ARR line? - Saket Kalia (Barclays)

2026Q3: The non-cloud component of the subscription ARR has been declining as the focus is on growing the cloud SaaS business, which now constitutes 87% of the subscription ARR. - Kiran Choudary(CFO)

What drove early renewals, why did non-cloud ARR decline unexpectedly, and what caused increased material rights activity? - Eric Heath (KeyBanc Capital Markets Inc., Research Division)

2026Q2: Non-cloud ARR decreased by approximately 13% from the prior year, ahead of expectation. This was primarily due to migrations. We expect to stabilize over the next couple of quarters. - Kiran Choudary(CFO)

Contradiction Point 3

Rubrik's Position in the Market and TAM Expansion

It highlights a shift in Rubrik's positioning and the understanding of its total addressable market (TAM), which is crucial for investor expectations and strategic planning.

How long will the shift from legacy to next-gen backup vendors last, and is cyber resilience expanding the TAM? - Saket Kalia (Barclays)

2026Q3: Rubrik is a true platform company, transforming legacy backup to a data security platform. Our unique offering reduces cyber recovery time, combining data and identity security for comprehensive resilience. We are winning the majority of deals in head-to-head competition. The identity resilience angle expands our TAM, addressing rising identity-based attacks. - Bipul Sinha(CEO and Co-Founder)

Are rapid sales cycles and market shifts toward newer technology signaling an S-curve of adoption? - Kasthuri Gopalan Rangan (Goldman Sachs)

2026Q1: Rubrik is transforming the cybersecurity market by focusing on cyber resilience instead of prevention and detection. This approach has strong demand as it addresses the top priority for CIOs and CISOs. We are operating in a $50 billion market with no constraint on opportunity or demand. - Bipul Sinha(CEO and Co-Founder)

Contradiction Point 4

Cloud Transformation Impact on Revenue and ARR Growth

It involves differing explanations of the impact of cloud transformation on revenue and ARR growth, which is crucial for investor understanding of the company's financial performance and growth strategy.

What's driving the acceleration in legacy replacement bookings? - Matthew Martino(Goldman Sachs)

2026Q3: The non-cloud component of the subscription ARR has been declining as the focus is on growing the cloud SaaS business, which now constitutes 87% of the subscription ARR. - Kiran Choudary(CFO)

What is causing the divergence between revenue and ARR growth? - Andrew Nowinski(Wells Fargo)

2025Q4: Revenue growth is accelerating and, in fact, is now running ahead of net new ARR growth. There are a couple of reasons for this. - Kiran Choudary(CFO)

Contradiction Point 5

Rubrik's Approach to Identity Security

It reveals a change in Rubrik's strategy regarding identity security, which is critical for understanding their product development and competitive positioning.

How impactful is identity in a typical data protection deal? Does it replace existing tools or create new budget as sales to CISOs grow? - Saket Kalia (Barclays)

2026Q3: Identity is completely additive to the deal and is a net new buyer for Rubrik, targeting the CISO organization. It is not replacing any established tools but is a new solution, attractive to CISOs and offering a white space opportunity. - Bipul Sinha(Co-Founder, CEO & Chairman)

How large is the identity opportunity compared to other workloads such as 365? - Eric Michael Heath (KeyBanc Capital Markets)

2026Q1: Identity is a significant opportunity, with identity-based attacks being a major threat. We are combining identity and data security for a singular strategy. It's early, but we believe this will merge with data security, creating a large opportunity. - Bipul Sinha(CEO and Co-Founder)