Rapid7 Q2 Earnings Call Highlights

Rapid7 exceeded its Q2 fiscal 2026 guidance, reporting $210.9 million in revenue, $28.9 million in non-GAAP operating income, $31.9 million in free cash flow and $824 million in ARR. Core platform ARR grew about 1% year over year, led by 5% growth in Detection and Response, while non-core products declined. The company is restructuring to focus on Detection and Response, Exposure Management and AI, including a workforce reduction affecting approximately 12% of employees. Rapid7 plans to reinvest savings in its core platform, product engineering and AI capabilities, including technology from its Kenzo acquisition. Rapid7 raised full-year non-GAAP operating income guidance to $129 million-$133 million and maintained its approximately $130 million free cash flow outlook. The company expects restructuring and efficiency measures to lift fourth-quarter non-GAAP operating margin to about 20%, while preparing to repay $600 million of convertible notes due in March 2027. Rapid7 NASDAQ: RPD reported second-quarter fiscal 2026 results that exceeded its guided metrics, while outlining a restructuring and strategic reset centered on Detection and Response, Exposure Management and artificial intelligence-driven platform capabilities. The cybersecurity company ended the quarter with $824 million in annual recurring revenue, non-GAAP operating income of $28.9 million and free cash flow of $31.9 million. Revenue totaled $210.9 million, down about 1.5% from a year earlier, while non-GAAP diluted earnings per share were $0.44. Rapid7 is seeking to concentrate resources on areas where it believes it has a stronger right to win rather than attempting to compete across its entire portfolio. Rapid7’s core platform solutions, consisting of Detection and Response and Exposure Management, represented more than 80% of total ARR and grew about 1% year over year. Detection and Response, which includes managed detection and response services and represented roughly 55% of ARR, increased approximately 5% from the prior-year period. However, overall Exposure Management results offset some of the Detection and Response growth. The company continued to adopt its Exposure Command offering from both new customers and customers upgrading from older vulnerability management products. Non-core products, which represent less than 20% of ARR, declined during the quarter and drove the sequential decline in total ARR. The company sees opportunities to improve margins on standalone non-core offerings and migrate customers toward core platform solutions. Rapid7 finished the quarter with more than 11,500 customers and average ARR per customer of about $70,000. Non-GAAP gross margin was 71.7%, down about 215 basis points year over year, reflecting higher staffing at global security operations centers and increased cloud usage tied to product improvements. The company announced a restructuring that will affect approximately 12% of its workforce. Rapid7 first sought to eliminate non-headcount spending before making workforce reductions. The restructuring is intended to align costs and investment with the core platform while creating capacity for additional in.