Summary
Rapid7's first quarter of fiscal 2025 produced modest top-line growth but a GAAP operating loss. Total revenue was $210.25 million, up 2.5% from the prior-year quarter. Gross profit was $150.77 million, up 4.6%, and gross margin was 71.7%, up 1.4 percentage points. The bottom line flipped negative at the operating line: GAAP operating loss was $0.1 million, a swing from operating income a year earlier. Net income still came in positive at $2.1 million, up 49.7%, and diluted EPS was $0.03, up from the prior-year quarter. Operating cash flow was $29.76 million, down 4.2%. Capital expenditures were $1.36 million, up 119.5%. Deferred revenue, current portion, was $447.8 million, up 2.3%.
On the non-GAAP side, Rapid7 reported income from operations of $32.4 million and a non-GAAP operating margin of 15.4%. That compared with non-GAAP income from operations of $40.3 million in the prior-year quarter. Non-GAAP gross profit was $157.46 million, with a non-GAAP gross margin of 75%. Non-GAAP net income was $35.6 million, or $0.49 per diluted share, compared with $39.4 million, or $0.55 per diluted share, a year earlier. Adjusted EBITDA was $38.9 million, down from $46.6 million. Free cash flow, which deducts capital expenditures and capitalized internal-use software costs from operating cash flow, was $24.7 million. The company ended the quarter with ARR of $837.2 million, an increase of 4% year over year. Customer count was 11,685, up 2%, and ARR per customer was $71.6, up 2%. Management said it had a slower start to 2025 than anticipated but pointed to a clear strategy and strong conviction in the long-term opportunity. It highlighted investments in MDR, Exposure Command, and the go-to-market engine, and said those steps should position the company for improved ARR in the second half of the year and beyond.
Guidance for the second quarter of 2025 calls for ARR of $850 to $880 million, year-over-year growth of 1% to 5%. Non-GAAP income from operations is guided to $30 to $32 million, and non-GAAP net income per share is guided to $0.43 to $0.46. For the full year 2025, non-GAAP income from operations is guided to $125 to $135 million, non-GAAP net income per share to $1.78 to $1.91, and free cash flow to $125 to $135 million. The second-quarter guidance excludes any potential impact from foreign exchange gains or losses. The guidance is forward-looking and excludes stock-based compensation, amortization of acquired intangible assets, amortization of debt issuance costs, and certain other items.
The quarter came with several risk signals. Rapid7 flagged growing macroeconomic uncertainty, unstable market and economic conditions, and the challenge of sustaining revenue growth. It also noted the execution risk around its shift to a consolidated platform sales approach, renewal of customer subscriptions, competition, and market growth. The MD&A disclosed a January 2025 cloud-services agreement with a minimum annual commitment of $125.0 million per year over five years, for a total commitment of $660.0 million. On May 1, 2025, the company paid $46.5 million to redeem the outstanding portion of the 2025 Notes. Its credit facility matured on December 22, 2024, and the company said it intends to execute a credit facility to enhance liquidity and capital resources. Rapid7 also revised prior-period financial information to correct an immaterial error related to stock-based compensation expense, a reminder that accounting adjustments remain part of the story.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2025 | Q4 FY2024 | QoQ | Q1 FY2024 | YoY |
|---|---|---|---|---|---|
| Revenue | $210.3M | $216.3M | -2.8% | $205.1M | +2.5% |
| Gross profit | $150.8M | $150.0M | +0.5% | $144.2M | +4.6% |
| Gross margin | 71.7% | 69.4% | +2.3 pp | 70.3% | +1.4 pp |
| Research & development | $47.9M | $47.5M | +0.8% | $41.0M | +16.8% |
| Sales & marketing | $79.4M | $73.7M | +7.8% | $72.8M | +9.1% |
| General & administrative | $23.6M | $25.2M | -6.3% | $19.8M | +18.9% |
| Total operating expenses | $150.9M | $146.4M | +3.1% | $133.6M | +12.9% |
| Operating income (loss) | -$101.0K | $3.6M | -102.8% | $10.6M | -101.0% |
| Operating margin | -0.1% | 1.7% | -1.7 pp | 5.2% | -5.2 pp |
| Net income (loss) | $2.1M | -$1.5M | +242.1% | $2.3M | -6.8% |
| Net margin | 1.0% | -0.7% | +1.7 pp | 1.1% | -0.1 pp |
| Diluted EPS | $0.03 | $0.40 | -$0.37 | $0.03 | ±$0.00 |
Risks
GAAP operating income swung to a loss of -$0.10 million in FY2025 Q1 from $9.72 million in FY2024 Q1, and GAAP operating margin fell to -0.0% from 4.7% (down 4.8 pp). Total operating expenses rose to $150.9 million from $134.4 million, with R&D up 15.8%, sales and marketing up 8.6%, and G&A up 18.4%, so expenses grew faster than the 2.5% revenue increase.
Total revenue grew 2.5% year over year in FY2025 Q1, down from 12.0% in the prior-year period. ARR growth slowed to 3.7% from 10.9%, customer growth slowed to 1.9% from 3.9%, and revenue from new customers decreased by $2.9 million.
In January 2025, Rapid7 entered a cloud-services agreement with minimum spend commitments of $125.0 million per year over five years plus an additional $35.0 million obligation, for an aggregate total commitment of $660.0 million. This fixed obligation could pressure liquidity if revenue growth remains slow.
The MD&A highlights a customer-driven shift to consolidated security platforms and Rapid7's focus on SecOps consolidation, including moving away from cloud security as a specialized function. Failure to effectively restructure and execute this transition could weaken its competitive position.
Professional services revenue decreased 22.8% year over year in FY2025 Q1 to $6.3 million, and professional services gross margin decreased to 19.1% from 23.5%, showing weakness outside the core product subscription business.
The MD&A cites a rapidly evolving IT environment, the proliferation of cyberattacks leveraging AI and targeted automation, and increased competition and innovations by new and existing competitors. Rapid7 must continue to adapt its Command Platform and AI-infused technology to avoid losing share.
The company's credit facility matured on December 22, 2024, and as of the filing it intends to execute a new credit facility to enhance liquidity and capital resources. A delay or failure to secure replacement financing could reduce financial flexibility.
Operating cash flow decreased 4.2% year over year to $29.76 million in FY2025 Q1, and free cash flow declined to $24.7 million from $27.5 million, while capital expenditures increased 119.5% to $1.36 million. Slower cash generation could limit internal funding for investments.
Rapid7 identified an immaterial error related to stock-based compensation expense for RSUs and PSUs granted in fiscal 2023 and 2024, resulting in an understatement of stock-based compensation expense in those years. The company revised previously reported comparative financial information.
SaaS KPIs
All quarters →Free Cash Flow
ARR per Customer
Number of Customers
Annualized Recurring Revenue (ARR)
Non-GAAP Operating Margin
Non-GAAP Income from Operations
Summary, forecast, risks and KPIs are extracted from Rapid7, Inc.'s SEC filings for Q1 FY2025 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 6, 2026.