Rapid7 Inc (NASDAQ:RPD) reported financial results for the fourth quarter and full year 2025 that presented a mixed picture for investors, leading to a sharp negative reaction in after-hours trading. While the cybersecurity firm edged past analyst expectations for the quarter, its guidance for the coming periods fell short, raising concerns about near-term growth momentum.
Quarterly Results vs. Expectations
For the fourth quarter of 2025, Rapid7 delivered a slight top-line beat with revenue of $217.4 million, marginally above the consensus estimate of approximately $217.2 million. This represented a modest year-over-year increase of 1%. The company's profitability, as measured by non-GAAP earnings per share (EPS), also exceeded forecasts.
- Reported Q4 Revenue: $217.4 million
- Analyst Estimate for Q4 Revenue: ~$217.2 million
- Reported Q4 Non-GAAP EPS: $0.44
- Analyst Estimate for Q4 Non-GAAP EPS: $0.41
On a full-year basis, revenue reached $860 million, a 2% increase from 2024. The company also highlighted strong cash generation, with free cash flow for the year of $130.1 million.
Guidance Disappoints, Sparking Sell-Off
The primary driver behind the stock's significant after-hours decline appears to be the company's outlook for 2026. Management's revenue forecast for both the first quarter and the full year came in below current analyst expectations, indicating a potential period of slower growth or contraction.
- Q1 2026 Revenue Guidance: $207 to $209 million (implies a year-over-year decline of 1-2%)
- Analyst Estimate for Q1 2026 Revenue: ~$215.8 million
- Full-Year 2026 Revenue Guidance: $835 to $843 million (implies a year-over-year decline of 2-3%)
- Analyst Estimate for Full-Year 2026 Revenue: ~$879.4 million
Furthermore, the company's key metric for future recurring revenue, Annualized Recurring Revenue (ARR), was reported at $840 million for the end of 2025, flat compared to the previous year. The guidance for Q1 2026 ARR is approximately $830 million, suggesting a sequential decline.
Market Reaction and Strategic Context
The market's reaction was decisively negative, with the stock falling sharply in after-hours trading following the report. This sell-off reflects investor disappointment with the growth trajectory implied by the guidance, overshadowing the modest quarterly beat.
In its release, CEO Corey Thomas pointed to the company's "differentiated approach to AI security operations" and stated Rapid7 is entering the new year with a focus on "driving innovation and scaling up our execution." The press release also detailed several recent business highlights, including product integrations with Microsoft and AWS, new partnerships, and industry recognitions like being named a Leader in the Gartner Magic Quadrant for Exposure Assessment Platforms.
However, these strategic developments were not enough to offset concerns about the immediate financial forecast. In a competitive cybersecurity market, flatlining ARR and projected revenue declines signal potential challenges in customer expansion or retention, which investors are weighing heavily against the company's operational achievements.
Conclusion
Rapid7's fourth-quarter earnings presented a tale of two narratives: a satisfactory conclusion to 2025, but a cautious and below-expectations forecast for 2026. The company continues to invest in its AI-powered platform and has secured notable industry validation, yet the immediate financial outlook has prompted a significant reassessment of its near-term growth potential by the market. Investors will likely focus on management's execution against its guidance and any signs of re-accelerating ARR growth in the coming quarters.
For a detailed look at Rapid7's historical earnings and future analyst estimates, you can review the data here.
Disclaimer: This article is for informational purposes only and does not constitute financial advice, nor does it recommend buying or selling any securities. Investors should conduct their own research and consult with a qualified financial advisor before making any investment decisions.
