HubSpot Inc

HubSpot's second quarter results beat Wall Street expectations but drew a negative market response, with management attributing the underwhelming outcome to delayed customer purchases and softer net new customer growth. Revenue came in at $911.7 million, up 19.8% year over year and above analyst estimates of $897.9 million, while adjusted EPS of $3.26 beat the $3.02 consensus. The company lowered its full-year revenue guidance to $3.68 billion at the midpoint from $3.70 billion, but raised its adjusted EPS guidance to $13.27 at the midpoint. CEO Yamini Rangan said deliberate changes to pricing and product trials slowed conversions, and that April got off to a slow start. Analysts on the call focused on AI adoption, pricing strategy, and the pace of enterprise versus SMB uptake.

HubSpot lowered its quarterly net customer addition assumption to 5,000 to 6,000 for the rest of 2026, down from a prior expectation of 9,000 to 10,000, after adding only 7,000 in the second quarter. The reset implies annual customer-base growth of about 7%, down from roughly 12% under the old assumption, and points to revenue growth settling near 11% a year. CEO Yamini Rangan cited deliberate changes to AI-agent sales and a tougher buying environment with larger committees and more C-suite approvals. Second-quarter revenue rose 20% to $911.7 million, adjusted operating margin reached 20.3%, and free cash flow was $167.9 million. Shares fell 19% to about $210, roughly 60% below their 52-week high of $525.51.

Software stocks declined sharply on Thursday, led by drops of more than 15% in Datadog, Figma, and HubSpot following their quarterly results. Datadog beat top- and bottom-line estimates but posted an adjusted gross margin of 80%, slightly below the 80.7% consensus. Figma also beat estimates but flagged rising AI inference spending, with its CFO noting the company bears the cost of inference for beta products without offsetting revenue, causing near-term gross margin variability. The iShares Expanded Tech-Software Sector ETF fell more than 2%, and while the sector has rebounded over 35% from its April low, it remains down 3% year to date.

HubSpot shares plunged 23% in early trading Wednesday following its second quarter results, putting the stock on track for the largest single-day drop in the company's 12-year history on the New York Stock Exchange. The previous record was a 20.1% decline on May 8, 2026, after its first quarter report. The earnings prompted multiple analyst downgrades and price target cuts, with Piper Sandler downgrading to Neutral from Overweight and lowering its target to $220 from $250, Capital One moving to Equal-weight from Overweight with a $206 target, Bernstein cutting to Market Perform from Outperform with a $220 target, and Stifel slashing to Hold from Buy and reducing its target to $200 from $275. Some firms remained more positive, with BTIG retaining its Buy rating but lowering its target to $250 from $300, and RBC Capital Markets keeping its Outperform rating while cutting its target to $300 from $350, both citing elongated sales cycles and increased budget sensitivity. Competitors Salesforce and Oracle fell 5% and 3%, respectively.

HubSpot reversed a planned customer data enrichment program after strong backlash from clients and the public, shifting the feature to a fully opt-in model. The company cited concerns over data privacy and contract transparency. The reversal comes as HubSpot's stock has fallen 15.4% over the past week and 50.3% year to date, trading at $190.01. The episode adds reputational and operational risk to the existing price story, with investors now focused on whether the shift affects customer retention and sales cycles.

Rising consumption costs could slow enterprise adoption of generative and agentic artificial intelligence, Bernstein said in an analyst report. The phenomenon, dubbed "token shock," occurs when AI consumption grows faster than per-token prices decline, pressuring budgets as software providers shift to usage-based pricing. Agentic AI intensifies the strain, with one EY-reviewed project showing a roughly 30-fold cost increase per interaction when moving from direct large language model prompts to agentic workflows. Companies are already imposing spending controls: Uber exhausted its 2026 AI coding budget in four months and set a $1,500 per-employee cap per agentic coding tool, while a major French insurer reduced use of Anthropic's Claude and Walmart capped access to an internal AI agent. Many clients have postponed, scaled back, or cancelled AI projects, and one provider estimated fewer than one-quarter of pilots yielded positive returns. Inference expenses may account for about 80% of an AI model's lifetime costs, shifting focus from training to long-term operational spending.

HubSpot reported that second-quarter demand came in softer than expected, citing longer sales cycles, uncertainty around artificial intelligence, and broader economic headwinds, even as its sales pipeline, AI usage, and product performance improved. The company noted that the near-term risk is weaker SMB spending and slower deal timing, while the key catalyst is whether its expanding AI-driven pipeline can convert to closed revenue without meaningfully raising churn or discounting. Management plans to share a more detailed strategy and financial outlook at the upcoming Analyst Day at UNBOUND 26, which will be an important chance for investors to see how HubSpot frames AI adoption, new pricing and seat models, and sales pipeline trends against recent demand softness. HubSpot's narrative projects $5.1 billion revenue and $556.4 million earnings by 2029, requiring 15.6% yearly revenue growth and about a $456 million earnings increase from $100.3 million today. Some of the most pessimistic analysts were already assuming only about 14.5% annual revenue growth and $201.8 million of earnings by 2028, so this softer demand update could either validate their caution or prompt revisions.

HubSpot has filed a $419.773 million shelf registration for 2,300,000 common shares tied to its employee stock ownership plans, drawing attention after a sharp price decline. The stock recently saw a 4.1% one-day and 7.2% seven-day gain, but remains down 46.1% year to date with a 62.8% one-year total shareholder return decline. HubSpot now trades at $205.95, well below its analyst price target of $275.72 and a popular narrative fair value estimate of $329.51, which suggests the stock may be 37.5% undervalued. However, its price-to-earnings ratio of 105.2 times is more than triple the US software industry average of 29.3 times and roughly double the peer average of 51.3 times, raising questions about whether the business can sustain such a premium.

HubSpot and Salesforce have both seen significant year-to-date declines, with HubSpot down 54% and Salesforce down 40%, despite artificial intelligence acting as a catalyst rather than a headwind. HubSpot is growing revenue faster at 23% in the first quarter compared to Salesforce's 14% in its most recent fiscal quarter, but Salesforce boasts a 19% net profit margin versus HubSpot's 3.7%. Salesforce's Agentforce segment reached $1.2 billion in annual recurring revenue, a 205% year-over-year increase, while HubSpot's Breeze AI is included in broader subscription revenue. Salesforce trades at a price-to-earnings ratio of 17.7, offering a more generous margin of safety than HubSpot's 95.1 ratio, making Salesforce a promising value stock and HubSpot a riskier, higher-upside play.

Shares of Tenable, PagerDuty, and HubSpot declined in afternoon trading as a broader selloff hit communication-services and software stocks, triggered by high-profile AI talent departures from Alphabet and regulatory concerns. Alphabet fell roughly 6% and Microsoft also slipped, dragging sector indices lower, while persistent fears that AI agents could erode traditional enterprise software subscription models compounded the pressure. The previous week's near-20% single-day drop in Accenture, after the consulting giant cut its growth outlook citing AI compressing demand for IT services, reinforced the thesis that AI is disrupting the software industry. Tenable fell 2.5%, PagerDuty fell 3%, and HubSpot fell 2.7% as the market priced in cannibalization risks, though some analysts argue the selling has become indiscriminate, pointing to Salesforce's AI revenue growth and buyback program. PagerDuty, which is down 33.9% year-to-date and trading 52.3% below its 52-week high, has been particularly volatile, with 28 moves greater than 5% over the past year.

Freshworks reported first-quarter revenues of $228.6 million, up 16.5% year on year and exceeding analyst expectations by 2.3%, marking the biggest estimate beat among four tracked sales software stocks. The company added 326 enterprise customers paying more than $5,000 annually to reach a total of 25,088, and its stock has risen 2.6% since reporting. HubSpot posted the fastest revenue growth at 23.4% to $881 million, beating estimates by 2.1%, but its shares fell 24.5%. ZoomInfo grew revenues 1.5% to $310.2 million, missing full-year guidance expectations, and its stock dropped 53.1%. Salesforce reported $11.13 billion in revenue, up 13.3% and beating estimates by 0.8%, though it missed billings estimates and its shares declined 8.9%. Overall, the group exceeded revenue consensus by 1.5% while next-quarter guidance was in line, but average share prices are down 21% since earnings.