Summary
Rapid7 reported first quarter 2026 results on May 5, 2026. Total revenue was $209.7 million, flat year over year. Gross profit fell 3.9% to $144.9 million, and gross margin was 69.1%, down 2.6 percentage points. The operating loss widened to $0.6 million, and operating margin was -0.3%, down 0.2 percentage points. Net income fell 46.3% to $1.1 million. Diluted earnings per share was $0.02, down $0.01. The top line held steady, while gross margin declined and the operating loss widened.
Cash generation improved. Operating cash flow rose 33.8% to $39.8 million. Capital expenditures rose 52.9% to $2.1 million. Free cash flow was $33.4 million. Deferred revenue, current portion, fell 1.2% to $442.3 million. Annualized recurring revenue was $832 million, down 0.6% year over year. The customer count was 11,629, down 0.5% year over year. ARR per customer was $71.6, flat year over year. Recurring revenue was 97% of total revenue. The company ended the quarter with over 11,500 customers in 150 countries, including 35% of the Fortune 100, and no customer represented more than 1% of revenue.
Operational activity centered on the AI SOC and managed detection and response strategy. In March 2026, Rapid7 acquired Kenzo Security for an aggregate fair value of $25.5 million, consisting of $24.2 million in cash and $1.3 million of deferred cash payments. The company also released its 2026 Global Threat Landscape Report, which found a 105% surge in the exploitation of high and critical-severity vulnerabilities. Rapid7 expanded its Exposure Command platform with runtime validation and Data Security Posture Management. It updated its PACT Partner Program with a new Platinum tier. Rapid7 Labs published research on sleeper cells in global telecommunications networks. Non-GAAP operating income was $24.4 million. Management said it will focus on growing MDR and improving margins over the medium term.
For the second quarter of 2026, management guided ARR to approximately $820 million, non-GAAP income from operations to $24 million to $26 million, and non-GAAP net income per diluted share to $0.33 to $0.36. For full-year 2026, management guided non-GAAP income from operations to $112 million to $118 million, non-GAAP net income per diluted share to $1.52 to $1.60, and free cash flow to $125 million to $135 million. Full-year ARR guidance was not provided. The non-GAAP guidance excludes stock-based compensation, amortization of acquired intangible assets, amortization of debt issuance costs, acquisition-related expenses, impairment of long-lived assets, restructuring expense, induced conversion expense, changes in the fair value of derivative assets, non-ordinary course litigation-related expenses, and discrete tax items. The company also has a cloud services commitment of $125.0 million per year over the next five years, plus an additional $35.0 million, for an aggregate total commitment of $660.0 million. The 2027 Notes are due on March 15, 2027.
Risks include macroeconomic uncertainty, unstable market and economic conditions, and fluctuations in quarterly results. Rapid7 faces execution risk in growing cloud-based solutions and shifting to a consolidated platform sales approach. Renewal of customer subscriptions, competition, market growth, and innovation are ongoing concerns. The company must successfully develop and deploy AI and automation capabilities, and it faces risks related to performance, reliability, security, and customer adoption. Integration of Kenzo Security and achievement of expected synergies may not occur in a timely manner. Other risks include greater than anticipated tax liabilities, foreign currency fluctuations, and the accuracy, efficacy, and perceived reliability of threat intelligence, detection, and response capabilities, including undetected vulnerabilities, false positives, or system failures. The company maintains a substantially full valuation allowance for domestic and certain foreign deferred tax assets. It also refined liquidity management and restricted new investments to maturities of twelve months or less ahead of the 2027 Notes.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2026 | Q4 FY2025 | QoQ | Q1 FY2025 | YoY |
|---|---|---|---|---|---|
| Revenue | $209.7M | $217.4M | -3.5% | $210.3M | -0.3% |
| Gross profit | $144.9M | $149.9M | -3.3% | $150.8M | -3.9% |
| Gross margin | 69.1% | 68.9% | +0.2 pp | 71.7% | -2.6 pp |
| Research & development | $48.4M | $48.6M | -0.6% | $47.9M | +1.0% |
| Sales & marketing | $78.9M | $79.7M | -1.0% | $79.4M | -0.6% |
| General & administrative | $18.2M | $19.2M | -5.4% | $23.6M | -22.8% |
| Total operating expenses | $145.5M | $147.6M | -1.4% | $150.9M | -3.6% |
| Operating income (loss) | -$558.0K | $2.3M | -124.6% | -$101.0K | -452.5% |
| Operating margin | -0.3% | 1.1% | -1.3 pp | -0.1% | -0.2 pp |
| Net income (loss) | $1.1M | $3.1M | -63.9% | $2.1M | -46.3% |
| Net margin | 0.5% | 1.4% | -0.9 pp | 1.0% | -0.5 pp |
| Diluted EPS | $0.02 | $0.05 | -$0.03 | $0.03 | -$0.01 |
Risks
Growth has stalled: total revenue for FY2026 Q1 was flat versus the prior-year quarter at $209.69M (down 0.3%), annualized recurring revenue declined 0.6% year over year to $832.1M as of March 31, 2026, and the number of customers fell 0.5% year over year to 11,629. Professional services revenue decreased 10.7% for the quarter on less consulting testing performed.
Gross margin declined to 69.1% in FY2026 Q1 from 71.7% in the prior-year quarter (down 2.6 pp) as total cost of revenue rose 8.9%, driven by higher personnel costs supporting product delivery, cloud computing costs, and amortization of capitalized internally-developed software. Professional services gross margin fell sharply to 0.8% from 19.1%, and GAAP operating loss widened to $(0.56)M from $(0.10)M.
GAAP net income fell 46.3% to $1.13M in FY2026 Q1 from $2.10M in the prior-year quarter and diluted EPS declined to $0.02 from $0.03, while non-GAAP income from operations dropped to $24.4M from $32.4M and non-GAAP operating margin fell to 11.7% from 15.4%. Management expects operating expenses to increase as a percentage of revenue in the near term.
The company is preparing for repayment of the 2027 Notes due March 15, 2027, revising its investment policy to restrict new investments to maturities of twelve months or less. It also carries an aggregate $660.0M cloud services commitment at $125.0M per year for five years, and deferred revenue was down 1.2% year over year to $442.26M (current portion), which pressures near-term cash generation.
The 10-Q frames the market as shifting toward AI-driven and agentic security operations, and the company acquired Kenzo Security for $25.5M in March 2026 to move MDR from AI-assisted workflows to machine-speed operations. Failure to integrate and scale these AI SOC capabilities, or competition from new and existing rivals innovating in this area, could erode the SecOps consolidation positioning the strategy depends on.
Stock-based compensation expense fell to $19.9M in FY2026 Q1 from $27.2M in the prior-year quarter due to fewer awards granted and lower grant prices, even as research and development personnel costs rose with increased headcount. Reduced equity compensation could impair the company's ability to attract and retain the engineering and security talent needed to deliver its AI and managed-services roadmap.
SaaS KPIs
All quarters →Free Cash Flow
ARR per Customer
Number of Customers
Annualized Recurring Revenue (ARR)
Non-GAAP Operating Margin
Summary, forecast, risks and KPIs are extracted from Rapid7, Inc.'s SEC filings for Q1 FY2026 (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.