Summary
Rapid7 closed fiscal 2025 with flat growth and a much thinner operating profit. Fourth quarter revenue was $217.4 million, up 0.5% from the prior-year quarter, and full-year revenue was $859.8 million, up 1.9%. Gross profit of $149.9 million in the quarter was flat year over year. Operating income did not hold up. It came in at $2.3 million in the quarter, down 68.8%, and $11.6 million for the full year, down 67.0%. Operating margin of 1.0% in the quarter was down from 3.4% a year earlier, and the full-year operating margin of 1.3% was down from 4.2%. Gross margin slipped to 68.9% from 69.5%. Net income of $3.1 million in the quarter rose 44.1%, while full-year net income of $23.4 million was down 8.4%. Full-year diluted EPS of $0.36 was down from $0.40.
The recurring revenue base has stalled. Annual recurring revenue was $840 million, flat year over year, and the company ended the year with 11,674 customers, down 0.5% from a year earlier. ARR per customer of roughly $72,000 was also flat. Management points to customer demand for consolidated security platforms, and the full-year revenue increase came from renewals, upselling and cross-selling to existing accounts, while revenue from new customers declined. Deferred revenue, current portion, was $451.2 million as of December 31, 2025, down 2.2% from a year earlier. A base of more than 11,500 organizations across 150 countries, including 36% of the Fortune 100, is a real asset, but it is not expanding.
Cash flow and profit quality deserve attention. Operating cash flow was $37.6 million in the quarter, down 41.1%, and $153.8 million for the full year, down 10.4%. Free cash flow, which Rapid7 reports as a separate non-GAAP measure, was $32.3 million for the quarter and $130.1 million for the year. Capital expenditures of $7.6 million for the full year were up 121.9%. Non-GAAP operating income of $30.1 million for the quarter sits well above the GAAP result, with stock-based compensation and amortization of acquired intangibles making up most of the gap. Total cash, cash equivalents and government securities were $659 million as of December 31, 2025.
Guidance for the first quarter and for the full fiscal year points to a smaller business. First quarter ARR guidance of approximately $830 million sits below the $840 million exit rate, with management describing a year-over-year decline in that metric. First quarter non-GAAP income from operations guidance is $19 million to $21 million, with non-GAAP net income per share of $0.29 to $0.32, and free cash flow was not provided for the quarter. For the full fiscal year, management guided to non-GAAP income from operations of $108 million to $116 million, non-GAAP net income per share of $1.50 to $1.60, and free cash flow of $125 million to $135 million. Revenue guidance for both the first quarter and the full fiscal year calls for a year-over-year decline, which would extend the flat-to-slow growth seen over the past year.
Rapid7 also carries heavy fixed obligations. It signed a cloud services agreement with an annual commitment of $125.0 million per year over five years, plus an additional $35.0 million, for an aggregate commitment of $660.0 million. That is a large load for a business that grew revenue 1.9% for the year. The 2027 convertible notes mature in March 2027, and management says cash management procedures and a tighter investment policy have been put in place ahead of that repayment. Product and partner news during the period included general availability of MDR for Microsoft, a partnership with ARMO for runtime security, a partnership with HITRUST for compliance automation, curated intelligence rules for AWS Network Firewall, and recognition as a Leader in the 2025 Gartner Magic Quadrant for Exposure Assessment Platforms. Risk factors cited in the release include macroeconomic uncertainty, unstable market conditions, renewal of customer subscriptions, competition, sales cycles, the ability to sustain the revenue growth rate, integration of acquired companies and greater than anticipated tax liabilities.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q4 FY2025 | Q3 FY2025 | QoQ | Q4 FY2024 | YoY |
|---|---|---|---|---|---|
| Revenue | $217.4M | $218.0M | -0.3% | $216.3M | +0.5% |
| Gross profit | $149.9M | $153.0M | -2.0% | $150.0M | -0.1% |
| Gross margin | 68.9% | 70.2% | -1.3 pp | 69.4% | -0.4 pp |
| Research & development | $48.6M | $46.9M | +3.7% | $47.5M | +2.3% |
| Sales & marketing | $79.7M | $79.3M | +0.5% | $73.7M | +8.2% |
| General & administrative | $19.2M | $20.9M | -7.8% | $25.2M | -23.5% |
| Total operating expenses | $147.6M | $147.1M | +0.4% | $146.4M | +0.8% |
| Operating income (loss) | $2.3M | $5.9M | -61.5% | $3.6M | -37.3% |
| Operating margin | 1.1% | 2.7% | -1.7 pp | 1.7% | -0.6 pp |
| Net income (loss) | $3.1M | $9.8M | -68.1% | -$1.5M | +311.3% |
| Net margin | 1.4% | 4.5% | -3.1 pp | -0.7% | +2.1 pp |
| Diluted EPS | $0.05 | $0.15 | -$0.10 | $0.40 | -$0.35 |
Risks
Total revenue for FY2025 increased 1.9% year over year to $859.79 million, while MD&A reports ARR of $839.9 million was flat year over year and customer count declined 0.5% to 11,674; current quarter deferred revenue declined 2.2% versus the prior-year quarter.
GAAP operating income for FY2025 decreased 67.0% year over year to $11.57 million and operating margin declined 2.8 percentage points to 1.3%; the risk factor notes an accumulated deficit of $964.7 million and that the company may not maintain profitability.
The risk factor states growth depends substantially on customers renewing and expanding subscriptions; MD&A says FY2025 product subscription revenue growth was driven by renewals, upsell, and cross-sell, while revenue from new customers declined.
The risk factor warns competitors may more successfully incorporate AI, gain superior access to AI technologies, or accelerate feature parity and commoditization, which could increase pricing pressure and reduce differentiation; MD&A highlights a customer-driven shift to consolidated security platforms.
Customers are increasingly consolidating security vendors and standardizing on fewer strategic platforms, which the risk factor says can cause longer sales cycles, greater pricing pressure, and a higher risk that customers reduce or eliminate spend on our products.
Revenue derived through channel partners increased to approximately 73% in FY2025 from 68% in FY2024 and 62% in FY2023, and those partner agreements are non-exclusive, so partners may favor competing products or fail to effectively market our offerings.
Prolonged economic uncertainty, inflation, tariffs, and trade restrictions may cause delays in the sales cycle, failures to renew at anticipated scope, requests for payment term deferrals, and pricing or bundling concessions, which the risk factor says have occurred and may continue.
The company has significant debt including $600.0 million aggregate principal amount of 2027 Notes due March 15, 2027; MD&A says measures were implemented to prepare repayment without additional indebtedness and investment policy now limits new investments to maturities of twelve months or less.
Operations outside North America generated 25% of FY2025 revenue and 21% of FY2025 expenses were incurred in foreign currencies, primarily British pound sterling and euro, exposing results to exchange rate fluctuations and international expansion execution risk.
JANA Partners Management reported approximately 10.1% beneficial ownership as of August 2025 and Kevin Galligan has served on the board since April 2025; activist actions could disrupt strategy, divert management attention, and create perceived uncertainty.
MD&A disclosed an immaterial correction of an error related to stock-based compensation for RSUs and PSUs granted in fiscal 2023 and 2024, with prior-period comparative information revised; risk factors note that failure to maintain effective internal controls could harm investor confidence.
SaaS KPIs
All quarters →Free Cash Flow
ARR per Customer
Number of Customers
Non-GAAP gross margin
Adjusted EBITDA
Recurring revenue (% of total revenue)
Summary, forecast, risks and KPIs are extracted from Rapid7, Inc.'s SEC filings for Q4 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.