HubSpot, Inc. (HUBS) Q1 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call showed strong financial performance with significant revenue and ARR growth, particularly in high-value deals. The company highlighted successful AI integration and positive customer feedback on pricing changes. Despite some concerns about NRR data and longer sales cycles, management's optimistic guidance and focus on growth drivers like core seats and credits are promising. The Q&A reinforced confidence in strategic initiatives, and no major risks or uncertainties were emphasized. Overall, the sentiment is positive, expecting a stock price increase of 2% to 8%.
Key Financial Performance
Revenue Growth Q1 revenue grew 23% year-over-year as reported and 18% in constant currency. This growth was driven by strong performance in subscription revenue and services, as well as international revenue growth.
Non-GAAP Operating Margin Non-GAAP operating margin expanded by 4 points year-over-year, reaching 18%. This reflects disciplined hiring, favorable FX movements, and changes in the partner commissions program, offset by investments in AI initiatives.
Customer Count Total customer count reached nearly 300,000, a 16% year-over-year increase, driven by 10,800 net new customer additions in Q1, with particular strength in starter customer additions.
Average Subscription Revenue Per Customer (ASRPC) ASRPC was $11,700 in Q1, up 6 points year-over-year as reported and 2 points in constant currency. Growth was attributed to seat expansion and increased consumption of credits.
Net Revenue Retention Net revenue retention was 103%, up over 0.5 point year-over-year. This was driven by seat expansion and increased credit consumption.
Calculated Billings Calculated billings were $912 million, growing 19% year-over-year as reported and 17% in constant currency.
Non-GAAP Net Income Non-GAAP net income was $143 million, up 49% year-over-year. Non-GAAP net income per diluted share was $2.72, up 53% year-over-year.
GAAP Net Income GAAP net income was $33 million, with GAAP net income per diluted share at $0.62. This reflects a 7-point expansion in GAAP operating margin compared to the year-ago period.
Free Cash Flow Free cash flow was $154 million, representing 17% of revenue. This was supported by strong cash generation and a focus on investing in innovation and M&A.
Deals Over $60,000 ARR Deals over $60,000 annual recurring revenue grew 37% year-over-year, driven by larger customers consolidating on HubSpot to drive AI innovation and reduce total cost of ownership.
Deals Over $120,000 ARR Deals over $120,000 annual recurring revenue grew 64% year-over-year, reflecting strong upmarket momentum.
Active Core Seat Users Active core seat users grew 90% year-over-year, with over 25% of Pro+ customers purchasing additional core seats, up over 12 points year-over-year.
Credit Consumption Total credits consumed grew 67% quarter-over-quarter, with top use cases being Customer Agent (53%), Prospecting Agent (17%), Data Agent (16%), and intent monitoring (12%).
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Operating Highlights
AI Monetization: HubSpot introduced AI monetization levers such as core seats and credits, which are gaining traction. Active core seat users grew 90% year-over-year, and credit consumption increased by 67% quarter-over-quarter.
Spring Spotlight Innovations: Key AI innovations like Prospecting Agent, Smart Deal Progression, Data Agent, and Customer Agent were launched. These tools are driving significant customer outcomes, such as improved CRM update accuracy and increased lead generation.
AI-Driven Marketing: HubSpot launched HubSpot AEO to help marketers optimize their brand presence in AI tools. Early adoption is strong, driving trials and purchases of Marketing Hub Pro.
Upmarket Momentum: Deals over $60,000 ARR grew 37% year-over-year, and deals over $120,000 ARR grew 64% year-over-year. Larger customers are consolidating on HubSpot to drive AI innovation and reduce costs.
International Revenue Growth: International revenue grew 29% as reported and 18% in constant currency, representing 49% of total revenue.
Customer Growth: HubSpot's total customer count reached nearly 300,000 globally, with 10,800 net customer additions in Q1 2026.
Pricing Model Changes: HubSpot completed a shift to a new pricing model, with 90% of installed base customers migrated. This change is expected to continue driving growth.
AI-Driven Operational Efficiency: 100% of engineers now use AI tools, leading to a 73% increase in lines of code updated per engineer. HubSpot is also leveraging AI for institutional productivity.
AI-First Transformation: HubSpot is transforming into an AI-first company, focusing on AI innovation, agent-first go-to-market strategies, and institutional productivity.
Outcome-Based Pricing: HubSpot introduced outcome-based pricing for AI agents, aligning pricing with customer outcomes to drive adoption and usage.
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Risk or Challenges
Back-end-loaded bookings cadence: As the company moves upmarket, there is a shift in linearity in quarters to a more back-end-loaded bookings cadence, which could impact revenue recognition and financial predictability.
AI-driven sales motion transformation: Customers are demanding pricing tied to outcomes and proof of value earlier in the sales process, which may extend sales cycles and impact short-term revenue growth.
Sales capacity reduction: Deliberate investment in training sales reps on new AI innovations and credit-based pricing reduced sales capacity in April, leading to a slow start in Q2.
Outcome-based pricing challenges: The shift to outcome-based pricing for AI agents and the introduction of free trials may delay revenue realization as customers evaluate the value of these offerings.
Customer retention and net revenue retention: Net revenue retention was 103%, down sequentially, and customer dollar retention remained in the high 80s, indicating potential challenges in retaining and expanding customer accounts.
Legacy Clearbit business impact: The legacy Clearbit business is expected to be a 40 basis point headwind to full-year 2026 revenue growth.
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Guidance & Outlook
Financial Guidance for Q2 2026: Total as-reported revenue is expected to be in the range of $897 million to $898 million, up 18% year-over-year on an as-reported basis and 16% in constant currency. Non-GAAP operating income is expected to be between $173 million and $174 million, representing a 19% margin. Non-GAAP diluted net income per share is expected to be between $3 and $3.02.
Financial Guidance for Full Year 2026: Total as-reported revenue is now expected to be in the range of $3.7 billion to $3.708 billion, up 18% year-over-year on an as-reported basis and 17% in constant currency. Non-GAAP operating income is now expected to be in the range of $762 million to $766 million, representing a 21% margin. Non-GAAP diluted net income per share is now expected to be between $13.04 and $13.12.
Margin Expansion: Non-GAAP operating margin is expected to expand to 21% for the full year 2026, reaching the 2027 target range of 20%-22% a year ahead of schedule. Stock-based compensation as a percentage of revenue is expected to decline by approximately 3 points to 14% in 2026.
Customer and Revenue Growth: Quarterly net customer additions are expected to remain in the range of 9,000 to 10,000, with low to mid-single-digit average subscription revenue per customer (ASRPC) growth in constant currency. Full-year net revenue retention is expected to expand by 1 to 2 points year-over-year, driven by seat expansion and increasing consumption of credits.
Capital Expenditures and Free Cash Flow: CapEx as a percentage of revenue is expected to be 5%-6% for the full year 2026, with free cash flow projected to be approximately $750 million.
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Shareholder Return Plan
Share Repurchase Program: During the quarter, we bought back $211 million of stock under our current $1 billion share repurchase program. Our continued strong cash position provides us with the flexibility to return capital to shareholders while maintaining our focus on investing in organic innovation and opportunistic M&A, underscoring our conviction in our long-term opportunity.
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Key Q&A
Q:How has the pricing model change for AI credits impacted customer adoption and utilization?
A:The pricing model change for AI credits, including a 28-day trial for key use cases and tying pricing to outcomes, has been positively received by customers. Early feedback, though limited to three weeks, has been clearly positive. The changes aim to remove blockers to AI adoption and drive outcomes for customers.
Q:What is the net revenue retention (NRR) for customers consuming AI credits?
A:Management did not provide specific cohortized NRR data but stated confidence in expanding NRR by 1-2 points in 2026, driven by core seats and credit adoption.
Q:How often do customers use the Customer Agent instead of hiring more staff, and how does this impact credit consumption?
A:Customers commonly use Customer Agent for after-hours support, Tier 1 support tickets, and augmenting their support teams. Some customers have significantly increased credit consumption, moving from 100,000 to 300,000 credits monthly, which exceeds what would have been earned from traditional subscriptions.
Q:Why was the sales organization retrained in April instead of earlier in the year?
A:The retraining was tied to the Spring Spotlight innovation and changes in pricing mechanisms. The focus was on enabling the sales team to drive proof of value earlier in the sales process and establish agent use cases for expansion. This timing aligned with the launch of new agents and pricing changes.
Q:How should we think about the growth of credit consumption and the next big breakout agent?
A:Credit consumption grew 67% quarter-over-quarter, with balanced growth across use cases like Customer Agent, Prospecting Agent, and Data Agent. The focus is on improving quality and expanding channels for existing agents. AEO is also seen as a significant opportunity, with over 15,000 Pro+ customers activating trials.
Q:Is there a shift in focus from top-line growth to margin delivery?
A:Management emphasized that there is no shift away from growth to profitability. They remain committed to balancing both. While Q1 net new ARR growth was below constant currency revenue growth, they expect net new ARR to exceed constant currency revenue growth for 2026.
Q:What is HubSpot's approach to headless and agent-first platforms?
A:HubSpot supports both human and agentic experiences, with an open platform strategy. They provide APIs for data and intelligence layers, enabling both first-party and third-party agents to leverage HubSpot's growth context. The pricing model aligns with the value delivered through these integrations.
Q:How does HubSpot view the risk of not meeting growth expectations in the second half of the year?
A:Management is confident in their guidance, which does not require net new ARR acceleration in the second half to meet targets. They believe their core growth drivers and emerging levers like core seats and credits will support durable growth.
Q:What are the key growth drivers for HubSpot in 2026?
A:The key growth drivers are upmarket momentum, multi-hub adoption, pricing, and emerging levers like core seats and credits. Core seats serve as a gateway for AI features, while credits drive agent adoption. The combination of these drivers supports durable growth.
Q:What is the impact of longer sales cycles on HubSpot's performance?
A:Longer sales cycles are attributed to customers wanting proof of value for AI capabilities, the need for sales enablement, and adapting to new pricing models. Management believes these factors are short-term and reflected in their guidance.
Q:How has HubSpot managed to add new customers despite challenges in the software industry?
A:HubSpot's diversified top-of-funnel strategy, including acquisitions like The Hustle and Futurepedia, and the use of AEO for lead generation, has helped maintain strong customer acquisition. AEO leads convert at 3x the rate of other leads.
Q:Review of Unclear Management Responses
A:Management avoided providing specific cohortized net revenue retention (NRR) data, instead offering general confidence in expanding NRR by 1-2 points in 2026. This lack of detail leaves questions about the exact performance of customers consuming AI credits unanswered.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AEO
AI context
AI monetization
AI tool
AI value
CRM update
Customer Agent
Customer Agents
HubSpot agent
HubSpot context
Jotform
Officer today
Prospecting Agent
Prospecting Agents
Spring Spotlight
agent HubSpot
agent work
campaign
closing deal
context platform
core lever
engineer
foundation market
lever core
life
margin expansion
monitoring
outcome pricing
platform context
point margin
pricing AI
pricing tailwind
process
product update
profitability AI
trial
value outcome
work outcome
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The earnings call showed strong financial performance with significant revenue and ARR growth, particularly in high-value deals. The company highlighted successful AI integration and positive customer feedback on pricing changes. Despite some concerns about NRR data and longer sales cycles, management's optimistic guidance and focus on growth drivers like core seats and credits are promising. The Q&A reinforced confidence in strategic initiatives, and no major risks or uncertainties were emphasized. Overall, the sentiment is positive, expecting a stock price increase of 2% to 8%.
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