HubSpot (NYSE:HUBS) reported 17% third-quarter revenue growth and expanding profit margins, but executives said customers’ changing approach to artificial intelligence and tighter budgets are slowing purchases and weighing on demand.
The company expects those pressures, which emerged in the second quarter and intensified in the third, to persist through the rest of 2026 and into 2027. Its fourth-quarter outlook calls for revenue growth of 12%, while management expects net new annual recurring revenue to decline for the full year.
Chief Executive Officer Yamini Rangan said customers increasingly want to test AI products with their own data before committing to a purchase. HubSpot has introduced trials and pricing tied more closely to outcomes, a strategy she said can lengthen buying cycles but supports longer-term adoption.
“Early indicators of our plays are encouraging, but this is going to take time for the changes to translate into stronger growth,” Rangan said.
Customer Growth and Retention Face Pressure
HubSpot added 5,300 net customers in the third quarter, down from 7,000 in the second quarter. Total customers exceeded 311,000, up 12% from a year earlier. Chief Financial Officer Kate Bueker said the company expects fourth-quarter net additions to be below 5,000 but did not provide a specific estimate.
Bueker said the net-additions metric is disproportionately affected by smaller customers, where HubSpot is seeing demand pressure and greater price sensitivity. Larger customers, meanwhile, are bringing more executives into purchasing decisions, extending sales cycles.
Net revenue retention was 101%, down about one percentage point from the prior quarter. Bueker said customer dollar retention remained stable in the high 80s, but upgrades were pressured by budget optimization. Seat upgrades remained a positive factor, she said, while cross-selling, contact-tier and edition upgrades faced headwinds.
For full-year 2026, HubSpot expects net revenue retention to decline about two percentage points year over year. Rangan said inbound demand remains under pressure as AI changes how buyers discover software, while newer demand sources have not yet offset that shift.
AI Adoption and Pricing Pilot
Rangan pointed to rising use of HubSpot’s AI products as evidence of progress. Agent trials grew 64% sequentially in the third quarter, while monthly credit consumption was up nearly 2.5 times from the beginning of the year. Twenty percent of Pro+ customers used HubSpot Agents, up 11 percentage points since the start of 2026.
The company is adding support from partners and solution consultants to help larger customers turn trials into paid use. For smaller customers, Rangan said HubSpot is focusing on simpler onboarding and pricing rather than deploying consultants.
HubSpot is testing a pricing model that combines seats with credits for usage-based features. In pilots in the Nordics and Benelux, credit consumption was two to three times higher than in regions outside the pilot. Pro+ customer volume was higher, while average selling prices were lower, Rangan said.
The pilot expanded across Europe, the Middle East and Africa in the fourth quarter for new customers. Rangan said HubSpot will evaluate adoption, credit usage, retention and new annual recurring revenue before deciding when to roll it out more broadly. The company has not set a migration timeline for existing customers.
Margins Rise as Company Reinvests Savings
Third-quarter subscription revenue grew 18% year over year, while services and other revenue fell 3%. Calculated billings rose 15% to $925 million.
Non-GAAP operating margin expanded three percentage points to 23%, helped by disciplined hiring and partially offset by AI costs. GAAP operating margin rose six points to 8%. Non-GAAP net income was $189 million, or $3.81 per diluted share, while GAAP net income was $83 million, or $1.67 per diluted share.
HubSpot generated $188 million in free cash flow during the quarter and ended September with $1.3 billion in cash and marketable securities. It repurchased more than $237 million of stock in the quarter, bringing year-to-date repurchases to nearly $1 billion.
Following an October reorganization that reduced headcount, Bueker said HubSpot is reinvesting a significant portion of the savings in employee retention, selective AI hiring and AI product investments. The company expects a $60 million to $70 million severance charge in fourth-quarter GAAP operating income. Bueker reaffirmed HubSpot’s target for a 23% to 24% non-GAAP operating margin in 2027.
Fourth-Quarter and Full-Year Outlook
For the fourth quarter, HubSpot projected revenue of $945 million to $947 million, non-GAAP operating income of $216 million to $217 million and non-GAAP diluted earnings of $3.85 to $3.87 per share.
For 2026, the company expects revenue of $3.685 billion to $3.687 billion, representing 18% reported growth and 16% growth in constant currency. It forecast non-GAAP operating income of $772 million to $773 million, non-GAAP diluted earnings of $13.59 to $13.61 per share and approximately $720 million in free cash flow.
Bueker declined to provide formal 2027 guidance, saying HubSpot plans to issue it when it reports fourth-quarter results in February.
About HubSpot (NYSE:HUBS)
HubSpot, Inc is a cloud-based customer relationship management (CRM) platform provider serving businesses that want to attract, engage and retain customers. Its platform brings together tools for marketing, sales, customer service, content management, operations and commerce, helping organizations manage customer interactions across the customer lifecycle.
The company’s offerings include marketing automation, email marketing, lead generation, website and content management, sales pipeline and engagement tools, customer support and help-desk capabilities, reporting and analytics, and payment and commerce features.
