HubSpot Grew 17% in the Third Quarter. Now It Expects Net New ARR to Fall

HubSpot posted a strong third quarter, then forecast a slightly smaller fourth.

The customer relationship management software company reported third-quarter revenue of $947.6 million on November 4, up 17% from a year earlier. It then told investors to expect $945 million to $947 million in the fourth quarter. That's about 12% growth from a year earlier, and slightly less than the third quarter brought in.

CFO Kate Bueker said on the earnings call that net new ARR will decline in fiscal 2026. Net new ARR is the annual recurring revenue a company adds after subtracting what it loses. HubSpot didn't say how large the decline will be.

Why deals are taking longer

Part of the slowdown was HubSpot's own decision.

Customers now want to see AI work with their own data before they buy it, the company said. In the second quarter, HubSpot responded with free trials and pricing tied to outcomes.

"We knew this would extend buying cycles and create near-term headwinds," CEO Yamini Rangan said on the call.

Agent trials grew 64% from the previous quarter, according to the company. But HubSpot said customers need hands-on help to turn those trials into paid use.

Other pressures are outside its control. HubSpot said smaller customers are watching their budgets, and inbound demand is under pressure as AI changes how buyers find software. Larger deals now involve more people, including CEOs, CTOs and boards.

HubSpot said that in deals with at least five buying-committee members, win rates are nearly three times higher when its team engages several stakeholders.

The numbers that moved first

Revenue lags in a subscription business because it comes from contracts already signed, and other numbers at HubSpot have already slowed.

Calculated billings, a measure of what customers are being invoiced, rose 15% to $925 million, two points slower than revenue.

HubSpot added 5,300 net customers in the quarter, down from 7,000 in the second quarter. It expects fewer than 5,000 in the fourth, and ended September with more than 311,000 customers.

Most existing customers are staying, but they're spending less on extras. Customer dollar retention stayed in the high 80s, while net revenue retention, which also counts upgrades and add-ons, fell to 101%.

A pricing test with early wins

In pilots in the Nordics and Benelux, HubSpot charged customers for seats plus usage credits. Average selling prices were lower, but credit usage was two to three times higher than in other regions. Management said the pilots brought more customers and stronger new ARR.

The model reached all new customers in Europe, the Middle East and Africa in the fourth quarter. Rangan said there's no timeline for moving existing customers.

What this means for HubSpot investors

Bueker said the headwinds will carry into 2027. HubSpot hasn't issued 2027 guidance, and analysts are already asking about it. Jefferies asked on the call whether the 12% fourth-quarter rate is a good starting point for next year.

HubSpot isn't short on profit. Its non-GAAP operating margin rose three points to 23%. It also expects a $60 million to $70 million charge in the fourth quarter for severance from its October reorganization.

The company expects full-year revenue of $3.685 billion to $3.687 billion. Every number here is HubSpot's own.

We knew this would extend buying cycles and create near-term headwinds

HubSpot reports fourth-quarter results in February, when investors will see whether net adds fell below 5,000 and what it expects for 2027.

By Business of GTM