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HUBS Benefits From Strong Cash Flow Growth: Will the Momentum Last?
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Key Takeaways
HubSpot's operating cash flow rose 36% and free cash flow jumped 44% year over year in Q2.
Stronger revenue growth and wider margins are supporting HubSpot's cash generation.
AI products, core seats and credits, multi-hub adoption and upmarket deals are boosting cash flow.
HubSpot, Inc. (HUBS - Free Report) is steadily strengthening its financial profile through robust revenue growth, expanding operating profitability and stronger cash generation. The company generated $222.8 million in cash from operating activities in the second quarter, up from $164.4 million in the year-ago quarter. Non-GAAP free cash flow increased 44% year over year to $167.9 million compared with $116.2 million in the prior-year period.
The improvement in cash generation is backed by stronger operating performance. In the second quarter, revenues increased 20% year over year to $911.7 million, with subscription revenues rising 20% to $894 million. At the same time, non-GAAP operating income climbed 44% to $185.3 million, while the non-GAAP operating margin expanded to 20.3% from 17% in the year-ago quarter.
HUBS generates substantial revenues from its subscription, which is recurring in nature. Revenue growth doesn’t necessarily translate into higher operating expenses. Scalability of its cloud platform allows revenue to grow faster than certain operating expenses. Hence, incremental revenues lead to stronger growth in operating profit and cash generation.
Strong operating cash flow is also boosting free cash flow. HUBS’ non-GAAP free cash flow stood at $167.9 million in the second quarter. Growing adoption of its AI native products, monetization through core seats and credits, multi-hub adoption and larger upmarket deals are also boosting cash generation.
How are Competitors Faring?
In the CRM space, HubSpot faces competition from Salesforce, Inc. (CRM - Free Report) , one of the world’s leading Customer Relationship Management companies. Salesforce continues to generate cash that supports product investment and capital return. In the second quarter of fiscal 2027, operating cash flow increased 71% year over year to $1.27 billion and free cash flow rose 81% to $1.1 billion. For the first six months, operating cash flow reached $7.97 billion and free cash flow was $7.65 billion.
Microsoft Corporation (MSFT - Free Report) is also witnessing strong traction in the Productivity & Business Processes segment, which includes the Office and Dynamics CRM businesses. Heavy infrastructure spending is absorbing a growing share of Microsoft’s operating cash generation. Cash flow from operations rose about 30% year over year to $55.4 billion in fourth-quarter fiscal 2026, but free cash flow fell 23% to $19.6 billion as investment accelerated. Management expects free cash flow to return to positive growth during fiscal 2027, so execution on that recovery matters as capital expenditures remain elevated.
HUBS’ Price Performance, Valuation and Estimates
HubSpot has declined 52.3% over the past year compared to the industry’s decline of 10.9%.
Image Source: Zacks Investment Research
Going by the price/book ratio, the company's shares currently trade at 7.48 book value, higher than 5.08 of the industry average.
Image Source: Zacks Investment Research
HUBS’ earnings estimates for 2026 and 2027 have improved over the past 60 days.
View the Zacks #1 Rank List
Image: Bigstock
HUBS Benefits From Strong Cash Flow Growth: Will the Momentum Last?
Key Takeaways
HubSpot, Inc. (HUBS - Free Report) is steadily strengthening its financial profile through robust revenue growth, expanding operating profitability and stronger cash generation. The company generated $222.8 million in cash from operating activities in the second quarter, up from $164.4 million in the year-ago quarter. Non-GAAP free cash flow increased 44% year over year to $167.9 million compared with $116.2 million in the prior-year period.
The improvement in cash generation is backed by stronger operating performance. In the second quarter, revenues increased 20% year over year to $911.7 million, with subscription revenues rising 20% to $894 million. At the same time, non-GAAP operating income climbed 44% to $185.3 million, while the non-GAAP operating margin expanded to 20.3% from 17% in the year-ago quarter.
HUBS generates substantial revenues from its subscription, which is recurring in nature. Revenue growth doesn’t necessarily translate into higher operating expenses. Scalability of its cloud platform allows revenue to grow faster than certain operating expenses. Hence, incremental revenues lead to stronger growth in operating profit and cash generation.
Strong operating cash flow is also boosting free cash flow. HUBS’ non-GAAP free cash flow stood at $167.9 million in the second quarter. Growing adoption of its AI native products, monetization through core seats and credits, multi-hub adoption and larger upmarket deals are also boosting cash generation.
How are Competitors Faring?
In the CRM space, HubSpot faces competition from Salesforce, Inc. (CRM - Free Report) , one of the world’s leading Customer Relationship Management companies. Salesforce continues to generate cash that supports product investment and capital return. In the second quarter of fiscal 2027, operating cash flow increased 71% year over year to $1.27 billion and free cash flow rose 81% to $1.1 billion. For the first six months, operating cash flow reached $7.97 billion and free cash flow was $7.65 billion.
Microsoft Corporation (MSFT - Free Report) is also witnessing strong traction in the Productivity & Business Processes segment, which includes the Office and Dynamics CRM businesses. Heavy infrastructure spending is absorbing a growing share of Microsoft’s operating cash generation. Cash flow from operations rose about 30% year over year to $55.4 billion in fourth-quarter fiscal 2026, but free cash flow fell 23% to $19.6 billion as investment accelerated. Management expects free cash flow to return to positive growth during fiscal 2027, so execution on that recovery matters as capital expenditures remain elevated.
HUBS’ Price Performance, Valuation and Estimates
HubSpot has declined 52.3% over the past year compared to the industry’s decline of 10.9%.
Image Source: Zacks Investment Research
Going by the price/book ratio, the company's shares currently trade at 7.48 book value, higher than 5.08 of the industry average.
Image Source: Zacks Investment Research
HUBS’ earnings estimates for 2026 and 2027 have improved over the past 60 days.
Image Source: Zacks Investment Research
HubSpot currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.