Cybersecurity software provider Rapid7 (NASDAQ:RPD) reported Q1 CY2026 results exceeding the market’s revenue expectations, but sales were flat year on year at $209.7 million. The company expects next quarter’s revenue to be around $208 million, close to analysts’ estimates. Its non-GAAP profit of $0.36 per share was 18.8% above analysts’ consensus estimates.
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Rapid7 (RPD) Q1 CY2026 Highlights:
- Revenue: $209.7 million vs analyst estimates of $207.9 million (flat year on year, 0.8% beat)
- Adjusted EPS: $0.36 vs analyst estimates of $0.30 (18.8% beat)
- Adjusted Operating Income: $24 million vs analyst estimates of $20.01 million (11.4% margin, 20% beat)
- The company reconfirmed its revenue guidance for the full year of $839 million at the midpoint
- Management slightly raised its full-year Adjusted EPS guidance to $1.56 at the midpoint
- Operating Margin: -0.3%, in line with the same quarter last year
- Free Cash Flow Margin: 15.9%, up from 14.9% in the previous quarter
- Annual Recurring Revenue: $832,000 vs analyst estimates of $830 million (99.9% year-on-year decline, miss)
- Billings: $198.6 million at quarter end, in line with the same quarter last year
- Market Capitalization: $440.2 million
"As frontier models reshape the cybersecurity landscape, Rapid7's AI SOC and preemptive security infrastructure are more essential than ever," said Corey Thomas, CEO of Rapid7.
Company Overview
With its name inspired by the need for quick responses to cyber threats, Rapid7 (NASDAQ:RPD) provides cybersecurity software and services that help organizations detect vulnerabilities, monitor threats, and respond to security incidents.
Revenue Growth
A company’s long-term performance is an indicator of its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Over the last five years, Rapid7 grew its sales at a 14.6% annual rate. Though this growth is acceptable on an absolute basis, we need to see more than just topline growth for the software sector, which can display significant earnings volatility. This means our bar for the sector is particularly high, reflecting the non-essential and hit-driven nature of the products and services offered. Additionally, five-year CAGR starts around Covid, when revenue was depressed then rebounded.
Long-term growth is the most important, but within software, a half-decade historical view may miss new innovations or demand cycles. Rapid7’s recent performance shows its demand has slowed as its annualized revenue growth of 3.7% over the last two years was below its five-year trend. We’re wary when companies in the sector see decelerations in revenue growth, as it could signal changing consumer tastes aided by low switching costs. 
This quarter, Rapid7’s $209.7 million of revenue was flat year on year but beat Wall Street’s estimates by 0.8%. Company management is currently guiding for a 2.9% year-on-year decline in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to decline by 2.2% over the next 12 months, a deceleration versus the last two years. This projection is underwhelming and implies its products and services will face some demand challenges.
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Annual Recurring Revenue
While reported revenue for a software company can include low-margin items like implementation fees, annual recurring revenue (ARR) is a sum of the next 12 months of contracted revenue purely from software subscriptions, or the high-margin, predictable revenue streams that make SaaS businesses so valuable.
Rapid7’s ARR came in at $832,000 in Q1, and it averaged 23.8% year-on-year declines over the last four quarters. This alternate topline metric underperformed its total sales, which likely means that the recurring portions of the business are growing slower than less predictable, choppier ones such as implementation fees. If this continues, the quality of its revenue base could decline. 
Customer Acquisition Efficiency
The customer acquisition cost (CAC) payback period represents the months required to recover the cost of acquiring a new customer. Essentially, it’s the break-even point for sales and marketing investments. A shorter CAC payback period is ideal, as it implies better returns on investment and business scalability.
Rapid7’s recent customer acquisition efforts haven’t yielded returns as its CAC payback period was negative this quarter, meaning its incremental sales and marketing investments outpaced its revenue. The company’s inefficiency indicates it operates in a highly competitive environment where there is little differentiation between Rapid7’s products and its peers.
Key Takeaways from Rapid7’s Q1 Results
We struggled to find many positives in these results. Its EPS guidance for next quarter missed and its annual recurring revenue fell short of Wall Street’s estimates. Overall, this was a softer quarter. The stock traded down 2.9% to $6.48 immediately following the results.
Rapid7’s latest earnings report disappointed. One quarter doesn’t define a company’s quality, so let’s explore whether the stock is a buy at the current price. When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here (it’s free).