Rapid7 — Third Quarter 2026 Earnings Summary

Financial Performance:

• Total revenue was $212.4 million, a decrease of 2.5% year-over-year; product subscriptions revenue was $206.1 million, a decrease of 1.9% year-over-year.
• Annualized recurring revenue (ARR) was $819.7 million, a decrease of 2.2% year-over-year.
• GAAP income from operations was $9.0 million; Non-GAAP income from operations was $46.2 million.
• GAAP net income was $3.5 million ($0.05 per diluted share); Non-GAAP net income was $47.4 million ($0.60 per diluted share).
• Net cash provided by operating activities was $30.1 million; free cash flow was $26.5 million.
• Total cash, cash equivalents, and government securities were $731.6 million as of September 30, 2026.
• For the nine months ended September 30, 2026, total revenue was $633.0 million, GAAP income from operations was $11.4 million, and GAAP net income was $10.7 million.

Guidance and Future Outlook:

• Fourth Quarter 2026 ARR is anticipated to be approximately $812 million, representing a 3% year-over-year decrease.
• Fourth Quarter 2026 revenue is guided to be between $208 million and $210 million, representing a 4% to 3% year-over-year decrease.
• Full Year 2026 revenue is guided to be between $841 million and $843 million, representing a 2% year-over-year decrease.
• Fourth Quarter 2026 Non-GAAP income from operations is guided to be between $40 million and $42 million.
• Full Year 2026 Non-GAAP income from operations is guided to be between $140 million and $142 million.
• Fourth Quarter 2026 Non-GAAP net income per share is guided to be between $0.53 and $0.55.
• Full Year 2026 Non-GAAP net income per share is guided to be between $1.94 and $1.96.
• Fourth Quarter 2026 free cash flow is anticipated to be approximately $130 million.
• Management stated the cash generation outlook for the year remains on track.

Business Segments and Product Lines:

• Rapid7 launched Rapid7 Intelligence in October, a unified engine combining threat intelligence, vulnerability research, and Rapid7 Labs to drive AI-powered action.
• Rapid7 previewed Autonomous SOC at its customer summit in Boston, a governed system integrating security experts and AI agents to move customers from detection to resolution.
• Hundreds of customers are utilizing Kenzo-powered capabilities as the company builds toward Autonomous SOC.
• At Black Hat USA 2026, Rapid7 showcased three innovations: Rapid7 AI-Accelerated Exposure Discovery & Visibility (generally available), Preemptive MDR Alerts, and Agentic SOC.
• The company serves approximately 11,800 customers worldwide.

Market and Competitive Landscape:

• Research by Omdia found that 97% of security professionals report AI has a positive impact on security operations, and 86% believe MDR providers integrating AI hold an advantage over traditional MDR services.
• The Q2 Threat Landscape Report found that 62% of newly exploited vulnerabilities could be exploited over a network without authentication or user interaction.
• High and critical vulnerability disclosures doubled year-over-year to 8,539.
• 92% of security professionals agree that human oversight remains essential despite AI adoption.

Risks and Challenges:

• Revenue and ARR declined year-over-year in the third quarter, with full-year guidance also reflecting year-over-year decreases.
• Management noted that turning execution into durable growth is the work ahead, indicating a multi-quarter journey to stabilize the core business.
• Risks include macroeconomic uncertainty, potential failure to meet guidance, and the ability to successfully execute the restructuring plan and AI-first service model.
• Risks also include the possibility that the restructuring plan may not achieve intended benefits, take longer than anticipated, or result in charges greater than estimated.

Management Commentary and Tone:

• CEO Wael Mohamed stated the company took decisive action last quarter to focus resources on its core business and delivered on early goals in this quarter.
• Management described the core business as becoming more stable and operating with greater discipline.
• The CEO emphasized that "one quarter of stability is just a start" and the company is "building proof" rather than declaring victory.
• The strategy focuses on an AI-first service model where the platform, AI agents, and security experts work as one system.

Other Key Points:

• The company incurred $9.988 million in restructuring expenses during the third quarter of 2026.
• The company recorded a $5.5 million impairment of strategic equity investment in the third quarter of 2026.
• Convertible senior notes are reflected in the balance sheet with a current portion of $598.8 million and a non-current portion of $296.4 million as of September 30, 2026.
• Stock-based compensation expense for the quarter was $23.2 million.
• The company hosted a conference call on November 4, 2026, to discuss results.