A month has gone by since the last earnings report for HubSpot (HUBS Quick QuoteHUBS - Free Report) . Shares have added about 14.5% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is HubSpot due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

HubSpot's Q3 Earnings Beat Estimates on Solid Revenue Growth

HubSpot reported impressive third-quarter 2024 results, with both the top and bottom lines surpassing the Zacks Consensus Estimate. The company reported a top-line expansion year over year, backed by growing user engagement across all segments. The integration of advanced AI tools across its product suites and customer platform drives growth. However, cautious spending decisions by clients stemming from an unfavorable macro environment is a headwind.

Net Income

On a GAAP basis, the company recorded a net income of $8.1 million or 16 cents per share against a loss of $3.6 million or 7 cents per share in the year-ago quarter. The improvement is primarily attributable to solid net sales growth. 

Non-GAAP net income was $116.6 million or $2.18 per share, up from $84.9 million or $1.62 per share in the prior-year quarter. The bottom line beat the Zacks Consensus Estimate by 29 cents.

Revenues

Quarterly revenues improved to $669.7 million from $557.6 million reported in the year-ago quarter. The top line beat the Zacks Consensus Estimate of $647 million. HubSpot is witnessing steady multi-hub adoption from professional and enterprise customers in the premium market. Demand for marketing and sales hubs is the primary growth driver. Service hub is also gaining momentum. Healthy net customer adds in the starter edition and pricing optimization drove net sales in the lower tier of the market spectrum.

The company has integrated HubSpot AI across the entire platform, enabling users to leverage AI features at no additional cost. AI native tools such as GPT-powered chatbots, real-time recommendations and call summaries are gaining popularity. Clients are leveraging this advanced feature for multiple use cases, such as crafting marketing emails, blogs, personalized content generation and more.

HubSpot added 10,000 net new customers during the quarter, which increased the total customer count by 23% year over year to 238,128. 

Subscription revenues rose to $654.7 million from $545.8 million in the year-ago quarter. Average subscription revenues per customer declined 2% year over year to $11,235. 

Professional services and other revenues totaled $15 million, up 28% year over year.

Other Details

Gross profit in the quarter was $570.4 million, up from $471.9 million in the year-ago quarter. Operating loss, on a GAAP basis, was $9.6 million compared with $18.6 million in the year-earlier quarter. Non-GAAP operating income improved to $125.2 million from $92.1 million, with respective margins of 18.7% and 16.5%.

Cash Flow & Liquidity

In the third quarter of 2024, the company generated $159.5 million in cash from operating activities compared with $89 million in cash generated in the year-ago quarter. As of Sept. 30, 2024, HubSpot had $410.1 million in cash and cash equivalents and $457.7 million in convertible senior notes.

Outlook

For the fourth quarter of 2024, the company expects revenues in the range of $672-$674 million. It expects non-GAAP operating income in the range of $128-$129 million. Non-GAAP earnings are projected to be in the range of $2.18-$2.20 per share.

Backed by solid momentum, management has raised its guidance for 2024. Revenues are now projected to be between $2.597 and $2.599 billion, up from the previously estimated figure of $2.567-$2.573 billion. 

Non-GAAP operating income is expected to be within $455-$456 million, up from $437-$441 million expected earlier. Non-GAAP net income per share is likely to be in the range of $7.98-8.00 per share, up from $7.64-7.70 estimated previously.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates revision.

The consensus estimate has shifted 106.19% due to these changes.

VGM Scores

At this time, HubSpot has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. However, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise HubSpot has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.

Performance of an Industry Player

HubSpot is part of the Zacks Internet - Software industry. Over the past month, Meta Platforms (META Quick QuoteMETA - Free Report) , a stock from the same industry, has gained 2.9%. The company reported its results for the quarter ended September 2024 more than a month ago.

Meta Platforms reported revenues of $40.59 billion in the last reported quarter, representing a year-over-year change of +18.9%. EPS of $6.03 for the same period compares with $4.39 a year ago.

Meta Platforms is expected to post earnings of $6.76 per share for the current quarter, representing a year-over-year change of +26.8%. Over the last 30 days, the Zacks Consensus Estimate has changed +0.6%.

Meta Platforms has a Zacks Rank #2 (Buy) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of B.