Summary
Rapid7 closed the second quarter of fiscal 2026 with revenue of $210.9 million, down 1.5% from the prior-year quarter. For the six months ended June 30, 2026, revenue of $420.6 million was down 0.9%. Annualized recurring revenue came in at $824.0 million, down 2.0% year over year, and ARR per customer slipped 3.0% to $70.0 thousand even though the customer count rose 1.1% to 11,772. Deferred revenue of $436.7 million was down 2.2% from the prior-year quarter. The company is adding accounts, but each one is worth less than it used to be, and the backlog sitting behind the top line is shrinking at the same time.
Profitability compressed faster than revenue. Gross profit of $145.3 million was down 3.8%, and gross margin fell to 68.9% from 70.6%, a decline of 1.6 percentage points. Over six months, gross margin of 69.0% was down 2.1 percentage points from 71.1%. Operating income of $3.0 million was down 13.6% in the quarter, and operating income of $2.5 million for the six months was down 27.5%. Operating margin of 1.4% was down 0.2 percentage points. Net income of $6.1 million was down 27.2%, and net income of $7.2 million for the six months was down 31.0%. Diluted earnings per share of $0.09 was down from $0.13 in the prior-year quarter, and $0.11 for the six months was down from $0.16.
The non-GAAP view looks considerably healthier. Non-GAAP income from operations was $28.9 million and non-GAAP net income was $33.0 million, or $0.44 per diluted share. Adjusted EBITDA reached $35.8 million. Stock-based compensation and amortization of acquired intangibles account for most of the distance between the two sets of numbers, and both stay large enough that the gap deserves attention.
Cash generation slowed. Net cash provided by operating activities was $37.0 million for the quarter, down 22.2% from $47.5 million a year earlier, while free cash flow was $31.9 million. For the six months, operating cash flow of $76.8 million was down 0.6%. Capital expenditures of $1.2 million rose 21.7% in the quarter and 40.1% to $3.2 million for the six months. Total cash, cash equivalents, and government securities stood at $702.6 million as of June 30, 2026.
Management is moving quickly on costs. A limited restructuring in June 2026 produced a $1.7 million restructuring charge in the quarter, and on August 7, 2026 the board approved a broader plan that affects roughly 12% of the workforce. The company expects charges of approximately $10 million to $11 million from that plan, substantially all paid in the third and fourth quarters of 2026. Wael Mohamed became chief executive on June 1, 2026, with Corey Thomas moving to executive chairman. The stated goal is to go deeper in detection and response and exposure management rather than wider, which means a tighter product set and a leaner cost base.
Guidance points down. For the third quarter of 2026, Rapid7 guides revenue to $208 million to $210 million, ARR of approximately $812 million, non-GAAP income from operations of $34 million to $36 million, and non-GAAP diluted earnings per share of $0.44 to $0.47. For the full fiscal year 2026, revenue is guided to $837 million to $841 million and non-GAAP diluted earnings per share to $1.78 to $1.83, with free cash flow of approximately $130 million.
The risks are concrete. Revenue is falling while headcount drops by roughly 12%, and restructuring plans often take longer or cost more than first estimated. Rapid7 also flags macroeconomic uncertainty, competition, and the challenge of getting customers to adopt its AI and agentic security capabilities. The $600 million of 2027 Notes mature on March 15, 2027, and the company has already restricted new investments to maturities of twelve months or less. A cloud services agreement carries a commitment of $125.0 million per year over five years, an aggregate of $660.0 million. Cash flow has to hold while the business gets smaller.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2026 | Q1 FY2026 | QoQ | Q2 FY2025 | YoY |
|---|---|---|---|---|---|
| Revenue | $210.9M | $209.7M | +0.6% | $214.2M | -1.5% |
| Gross profit | $145.3M | $144.9M | +0.3% | $151.1M | -3.8% |
| Gross margin | 68.9% | 69.1% | -0.2 pp | 70.6% | -1.6 pp |
| Research & development | $47.1M | $48.4M | -2.6% | $47.2M | -0.3% |
| Sales & marketing | $76.2M | $78.9M | -3.5% | $79.2M | -3.9% |
| General & administrative | $17.4M | $18.2M | -4.5% | $21.2M | -17.9% |
| Total operating expenses | $142.3M | $145.5M | -2.2% | $147.6M | -3.6% |
| Operating income (loss) | $3.0M | -$558.0K | +641.0% | $3.5M | -13.6% |
| Operating margin | 1.4% | -0.3% | +1.7 pp | 1.6% | -0.2 pp |
| Net income (loss) | $6.1M | $1.1M | +437.4% | $8.3M | -27.2% |
| Net margin | 2.9% | 0.5% | +2.3 pp | 3.9% | -1.0 pp |
| Diluted EPS | $0.09 | $0.02 | +$0.07 | $0.13 | -$0.04 |
Risks
Total revenue declined 1.5% year over year in the quarter ended June 30, 2026 and 0.9% year to date, with ARR down 2.0% to $824.0M and ARR per customer down 3.0% at June 30, 2026. Management attributed the decline to lower non-core standalone products, only partially offset by growth in managed detection and response.
Rapid7 executed a limited restructuring in June 2026 concentrated in sales and marketing, and on August 7, 2026 the board approved a 2026 Restructuring Plan reducing the workforce by approximately 12%, expected to be completed by the end of fiscal 2026. These actions create execution risk around simplifying operations and reinvesting in the core platform while sustaining revenue.
Total gross margin fell to 68.9% in the quarter ended June 30, 2026 from 70.6% a year earlier (down 1.6 pp), and to 69.0% year to date from 71.1%. Total cost of revenue rose 6.3% year to date, driven by a $6.1 million increase in wages and wage-related expenses, a $1.1 million increase in cloud computing costs, and higher facilities and amortization expense.
Effective June 1, 2026, Wael Mohamed was appointed Chief Executive Officer, Corey Thomas became Executive Chairman, and Marc Brown became Lead Independent Director. A CEO transition during a period of declining revenue, ARR contraction, and a 12% workforce reduction adds execution and continuity risk.
The company must repay $600 million of 2027 Notes due March 15, 2027, and in preparation refined cash management and restricted new investments to maturities not exceeding twelve months, which is expected to reduce cash received from interest income. It also carries a cloud-services agreement with an aggregate $660.0 million commitment, including $125.0 million annually over the next five years.
Other (expense) income, net widened to a $0.9 million expense year to date from $5.8 million of income in the prior-year period, primarily from realized and unrealized losses on foreign currency transactions in the British Pound Sterling, the Euro, and the Israeli Shekel.
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 Q2 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.