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The call presents a mixed but constructive picture: Rapid7 reported a large ARR base with clear strength in its core DNR business (7% ARR growth) and beat profitability and cashflow guidance, while investing to capture AI-driven opportunities (acquisition and product releases). Offsetting these positives are near-term headwinds from declining standalone non-platform products, modest overall revenue declines, gross margin pressure from SOC staffing, and incomplete integration/upgrade cycles for exposure management. Management communicated confidence in margin expansion and a focused platform strategy, but several recovery and integration items remain to be proven out across the rest of 2026.
Rapid7 guided Q2 ending ARR of approximately $820M, Q2 revenue of $207–209M (≈ -2.9% YoY at the midpoint), non‑GAAP operating income of $24–26M (≈12% margin at the midpoint) and non‑GAAP EPS of $0.33–0.36 on ~78.3M fully diluted shares, noting core platform (DNR + exposure) ARR is expected to be roughly flat sequentially while non‑core standalone ARR declines. For full‑year FY26 the company raised its outlook to revenue of $836–842M (≈ -2.4% YoY at the midpoint), non‑GAAP operating income $112–118M (≈13.7% operating margin at the midpoint), non‑GAAP EPS $1.52–1.60 on ~79.4M diluted shares, and free cash flow of $125–135M (flat YoY at the midpoint) implying ~15.5% FCF margin. For context, Q1 outperformed guidance with ARR $832M, revenue $209.7M, non‑GAAP operating income $24.4M (11.7% margin), non‑GAAP EPS $0.36, FCF $33.4M, cash & short‑term investments of $670M, a $200M undrawn revolver, >11,500 customers and average ARR per customer of ≈$72k.
Total ARR of $832 million at quarter end; core platform solutions (detection & response and exposure management) now represent >80% of ARR and grew ~2% year-over-year, with detection & response (DNR) comprising ~55% of ARR and growing ~7% year-over-year.
Total revenue of $209.7 million (reported as $210M) with product revenue of $204 million (flat year-over-year); services revenue declined slightly, but overall revenue was only down ~0.3% year-over-year.
Non-GAAP operating income of $24.4 million (11.7% margin) exceeded guidance; non-GAAP EPS of $0.36; free cash flow of $33.4 million in Q1; full-year free cash flow guidance raised to $125–$135 million (flat with prior year at midpoint).
Cash, cash equivalents, and short-term investments of $670 million plus a $200 million undrawn revolver, providing liquidity to address the March 2027 convertible debt maturity and ongoing operations.
Acquisition of Kensile Security (referred to as Kenzo/Kinzo) to accelerate the AI SOC vision and autonomous investigation/remediation; management highlighted this as a direct accelerant to MDR efficiency and margin expansion.
Released two major Exposure Command capabilities: runtime validation for cloud environments and data security posture management (DSPM), which aim to surface exploitable exposures and prioritize remediation more effectively.
Multiple large customer deals in the quarter: one Fortune 500 seven-figure ARR MDR deal, a Fortune 500 mining seven-figure MDR deal, a Fortune 500 aviation manufacturer six-figure global Exposure Command expansion, and a leading health services provider large six-figure MDR deal — indicating enterprise traction.
Go-to-market changes implemented earlier in the year are beginning to show productivity improvements; management cites improved pipeline focus and stronger execution under the new commercial leadership.
Good day, everyone. My name is Kehaylani, I will be your conference operator today. At this time, I would like to welcome you to the Q1 2026 Rapid7, Inc. Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question during this time, and if you have joined by the webinar, please use the raise hand icon which can be found at the bottom of your webinar application. At this time, I would like to turn the call over to Matt Wells, Vice President of Investor Relations.
Thank you, operator, and good afternoon, everyone. We appreciate you joining us. Today, we will be discussing Rapid7, Inc.'s first quarter fiscal 2026 financial results. We have distributed our earnings press release over the wire, and it can be accessed on our investor relations website. With me on the call today are Corey Thomas, our CEO, and Rafe Brown, our CFO. As a reminder, all participants are in a listen-only mode, and a question and answer session will follow our opening remarks. Before I hand the call over to Corey, I want to note that certain statements made during this conference call may be considered forward-looking under federal securities laws. Such statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and include our outlook for the second quarter and fiscal year 2026, any assumptions for fiscal periods beyond that period, and our positioning, strategy, business plan, operational improvements, and growth drive...
