Rapid7 reported third‑quarter 2025 revenue of $218 million, a 2% year‑over‑year increase, and annualized recurring revenue of $838 million, up 2% from $823 million in Q3 2024. Non‑GAAP earnings per share rose to $0.57, beating the consensus estimate of $0.45 by $0.12 or 26.7%. GAAP net income per share was $0.15, and operating income was $5.9 million, while free cash flow reached $30 million and net cash from operations was $38 million. The revenue beat was driven largely by continued demand for Rapid7’s AI‑driven Command Platform, which expanded its customer base and upsold higher‑margin services, offsetting a modest decline in the legacy vulnerability‑management segment.
The 2% revenue growth represents a deceleration from the 8% year‑over‑year increase seen in Q3 2024, reflecting a slowdown in new customer acquisition and a shift in the mix toward higher‑margin AI services. ARR growth mirrored revenue, rising 2% YoY, but the flat guidance for the full year signals management’s concern that the pace of new ARR will not accelerate beyond the current level. The company’s core vulnerability‑management business, which historically contributed a larger share of ARR, has been under pressure from competitive pricing and a shift toward managed detection and response services.
Margin compression is evident: operating margin fell to 2.7% from 6% in the same quarter last year, and free‑cash‑flow margin dropped to 13.8% from 19.7% in Q3 2024. The decline is attributable to higher operating expenses associated with scaling the AI platform and investing in new product capabilities, as well as a lower mix of high‑margin services. Despite the margin squeeze, the company maintained profitability and generated $30 million in free cash flow, underscoring disciplined cost management.
Guidance for the remainder of the fiscal year reflects a cautious outlook. Management projected Q4 revenue of $214 million to $216 million and adjusted EPS of $0.37 to $0.44, both below analyst expectations. Full‑year revenue guidance of $856 million to $858 million remains in line with consensus, but the adjusted EPS guidance of $2.02 to $2.09 per share is above the consensus estimate of $1.97, indicating confidence in profitability. The flat ARR guidance for the year, a shift from the previously projected 1%‑to‑3% growth, signals concerns about near‑term demand and the performance of the vulnerability‑management segment.
On December 1, 2025, Rafe Brown will assume the role of Chief Financial Officer, succeeding Tim Adams who retired in August 2025. Brown brings extensive financial and operational expertise and is expected to help Rapid7 navigate the current growth slowdown, maintain profitability, and strengthen financial controls. CEO Corey Thomas welcomed Brown, noting that his experience will be instrumental in “scaling our growth and profitability in the years ahead.”
Analysts expressed concern over the reduced guidance and execution challenges, particularly in the vulnerability‑management business. Jefferies downgraded Rapid7 to “Hold” from “Buy,” citing the flat ARR outlook and the company’s difficulty meeting its own growth targets. The market reaction was negative, reflecting investor unease about the company’s near‑term growth trajectory and the impact of a slower‑growing core segment.
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