Summary
Rapid7 entered FY2025 Q3 with a modest top line. Total revenue was $217.96 million, up 1.5% from the prior-year quarter. Annualized recurring revenue was $838 million, up 2% year over year. The customer count was 11,618, essentially flat against 11,619 a year earlier, while ARR per customer rose to $72.1 from $70.8. Management pointed to renewals, upselling, and cross-selling as the main drivers of the nine-month revenue increase, partly offset by a decline in revenue from new customers. The company continues to push its AI-driven Command Platform and a consolidated security operations message, but the customer base is not expanding. Growth is coming from existing accounts and higher spend per account.
Profitability narrowed. Gross profit was $152.98 million, up 1.0%, and gross margin was 70.2%, down 0.4 percentage points. Operating income fell to $5.90 million, down 53.9%, and operating margin was 2.7%, down 3.3 percentage points. Net income was $9.81 million, down 36.3%, and diluted EPS was $0.15, down 28.6%. On a non-GAAP basis, operating income was $36.9 million and non-GAAP operating margin was 16.9%. Non-GAAP net income was $41.9 million, and non-GAAP diluted EPS was $0.57. Adjusted EBITDA was $43.5 million. The spread between GAAP and non-GAAP results reflects the company's continued use of non-GAAP adjustments, but the GAAP trends show real margin pressure.
The nine-month picture is similar. Revenue was $642.41 million, up 2.3%. Gross profit was $454.88 million, up 2.8%, and gross margin was 70.8%, up 0.3 percentage points. Operating income was $9.30 million, down 66.5%, and operating margin was 1.4%, down 3.0 percentage points. Net income was $20.25 million, down 13.3%, while diluted EPS was $0.31, flat. Operating cash flow was $116.25 million year to date, up 7.7%, even though current-quarter operating cash flow fell to $38.95 million, down 11.4%. Capital expenditures were $4.14 million in the quarter, up 208.3%, and $6.45 million year to date, up 187.5%. Free cash flow was $30.1 million in the quarter and $97.8 million year to date. Deferred revenue, current portion, was $422.94 million, flat with a decrease of 0.2%.
The balance sheet and liquidity disclosures add context. The company had no outstanding borrowings under its $200.0 million revolving credit facility as of September 30, 2025, and it had $6.0 million in letters of credit outstanding. In January 2025, Rapid7 entered a cloud services agreement with an annual commitment of $125.0 million per year over five years and an additional $35.0 million obligation, for an aggregate total commitment of $660.0 million. Those commitments raise the fixed cost base at a time when revenue growth is slow and the customer count is flat.
Guidance points to a slow finish. For the fourth quarter, Rapid7 expects ARR to be approximately flat compared with Q3 2025, non-GAAP income from operations of $25 million to $30 million, and non-GAAP diluted EPS of $0.37 to $0.44. For full-year 2025, the company guided non-GAAP income from operations to $130 million to $135 million, non-GAAP diluted EPS to $2.02 to $2.09, and free cash flow to $125 million to $135 million. The company also announced Rafe Brown as CFO effective December 1, 2025, succeeding Tim Adams. Recent business announcements included an expanded Microsoft partnership, new AI-generated risk intelligence in the Command Platform, a seventh consecutive year in the Gartner Magic Quadrant for SIEM, and an expansion into the UAE. Risks include macroeconomic uncertainty, competition, the shift to a consolidated platform sales approach, renewal of customer subscriptions, the ability to sustain revenue growth, integration of acquisitions, and potential tax liabilities. The prior-year period also reflects an immaterial correction of an error. For a company with $838 million in ARR and a flat customer count, the central question is whether platform consolidation and AI features can lift expansion enough to offset slower new customer additions.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2025 | Q2 FY2025 | QoQ | Q3 FY2024 | YoY |
|---|---|---|---|---|---|
| Revenue | $218.0M | $214.2M | +1.8% | $214.7M | +1.5% |
| Gross profit | $153.0M | $151.1M | +1.2% | $151.6M | +0.9% |
| Gross margin | 70.2% | 70.6% | -0.4 pp | 70.6% | -0.5 pp |
| Research & development | $46.9M | $47.2M | -0.7% | $44.6M | +5.3% |
| Sales & marketing | $79.3M | $79.2M | +0.1% | $74.5M | +6.4% |
| General & administrative | $20.9M | $21.2M | -1.4% | $18.6M | +12.2% |
| Total operating expenses | $147.1M | $147.6M | -0.4% | $137.7M | +6.8% |
| Operating income (loss) | $5.9M | $3.5M | +68.9% | $14.0M | -57.7% |
| Operating margin | 2.7% | 1.6% | +1.1 pp | 6.5% | -3.8 pp |
| Net income (loss) | $9.8M | $8.3M | +17.6% | $16.6M | -40.7% |
| Net margin | 4.5% | 3.9% | +0.6 pp | 7.7% | -3.2 pp |
| Diluted EPS | $0.15 | $0.13 | +$0.02 | $0.22 | -$0.07 |
Risks
Total revenue rose only 1.5% in FY2025 Q3 and 2.3% year to date, while revenue from new customers declined $8.5 million for the nine months ended September 30, 2025 compared with the prior-year period. ARR growth was 1.8% and customer count was flat year over year at 11,618 as of September 30, 2025.
Professional services revenue decreased 13.8% in FY2025 Q3 and 19.6% year to date, and professional services gross margin fell to 14.0% in the quarter from 29.6% and to 12.7% year to date from 26.4%. This contributed to total gross margin decreasing 0.4 percentage points in FY2025 Q3.
GAAP operating income decreased 53.9% in FY2025 Q3 and 66.5% year to date, with operating margin decreasing 3.3 percentage points to 2.7% in the quarter and 3.0 percentage points to 1.4% year to date. The company continues to invest in growth while profitability compresses.
Research and development expenses increased 12.0% year to date, sales and marketing increased 5.3% year to date, and general and administrative increased 5.8% year to date, each outpacing total revenue growth of 2.3% year to date. Management expects near-term operating expenses to increase as a percentage of revenue.
The June 2025 Credit Agreement contains affirmative and negative covenants, including a minimum interest coverage ratio and a maximum net leverage ratio, and matures on the fifth anniversary or 91 days prior to certain convertible note maturities if specified liquidity conditions are not satisfied. As of September 30, 2025, no borrowings were outstanding under the $200.0 million revolver, but covenant noncompliance could impair liquidity.
In January 2025, Rapid7 entered a cloud-services agreement with minimum spend commitments of $125.0 million per year over the next five years plus an additional $35.0 million obligation, for an aggregate total commitment of $660.0 million. This fixed obligation could pressure cash flow if cloud usage or demand does not meet expectations.
Rapid7 corrected an immaterial error related to stock-based compensation expense for RSUs and PSUs granted in fiscal years 2023 and 2024 due to an improper valuation, which understated stock-based compensation expense in those periods and required revising prior-period comparative financial information. This may raise concerns about equity award valuation and financial reporting controls.
Other income (expense), net changed to $0.2 million of expense in FY2025 Q3 from $2.8 million of income in FY2024 Q3 due to unfavorable foreign exchange rates, primarily the British Pound Sterling, while it increased to $5.6 million of income year to date from $0.7 million. Currency volatility can make results less predictable.
SaaS KPIs
All quarters →Free Cash Flow
ARR per Customer
Number of Customers
Non-GAAP Operating Margin
Recurring revenue (% of total revenue)
Summary, forecast, risks and KPIs are extracted from Rapid7, Inc.'s SEC filings for Q3 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.