Rapid7 (R7D) Q2 2026 Earnings Report

The call presents a balanced picture: clear operational progress on profitability, cash generation, margin guidance upgrades, and focused strategic direction (AI-first, core platform) are offset by near-term revenue/ARR declines, exposure management weakness, gross margin compression, and a meaningful restructuring that impacts ~12% of employees. Management beat guidance for the quarter and raised margin targets, but growth challenges and transformation timing create uncertainty. Overall, there is cautious optimism—improved financial discipline and cash position, but the company must execute over multiple quarters to translate investments into durable ARR growth.

Rapid7 guided ending Q3 FY26 ARR of approximately $812M (core D&R + exposure management roughly flat Q/Q, declines expected from non‑core), Q3 revenue of $208–210M (≈‑4% YoY at midpoint), Q3 non‑GAAP operating income of $34–36M (~16.7% margin at midpoint) and non‑GAAP diluted EPS of $0.44–0.47 on ~80M fully diluted shares. For full‑year FY26 they guided revenue of $837–841M (≈‑2% YoY at midpoint), non‑GAAP operating income of $129–133M (~15.6% margin at midpoint with an implied ~20% non‑GAAP operating margin in Q4), non‑GAAP EPS of $1.78–1.83 on ~79M shares, and free cash flow of about $130M (~15.5% FCF margin). Management expects restructuring charges of ~$10–11M (mostly cash in Q3–Q4) with roughly 12% of the workforce impacted; the company exited Q2 with ARR $824M, Q2 non‑GAAP operating income $28.9M, Q2 FCF $31.9M, cash & short‑term investments ≈$703M, and a $200M undrawn credit facility while planning to address $600M of convertible notes due March 2027.