HubSpot, the marketing and sales software company, delivered a solid third quarter, beating analyst estimates on both profit and revenue. But the good news was quickly overshadowed by a weaker-than-expected forecast for the current quarter, which sent shares lower and prompted Morgan Stanley to step to the sidelines.
On Wednesday, HubSpot reported adjusted earnings of $3.81 per share on revenue of $947.6 million for the third quarter. Both figures came in ahead of what Wall Street had been expecting, according to FactSet. The company's core business of selling customer relationship management and marketing tools to small and mid-sized businesses continues to grow, and the quarterly results showed no obvious cracks.
The trouble started with the company's outlook for the fourth quarter. HubSpot guided to revenue of $945 million to $947 million, below the $964.9 million analysts had penciled in. It also forecast adjusted earnings per share of $3.85 to $3.87, well short of the $4.09 consensus. In other words, the company is telling investors that the pace of growth is slowing more than expected, even as it remains profitable.
Why the guidance matters more than the beat
For subscription software companies like HubSpot, a single quarter's guidance miss can carry outsized weight. That's because investors tend to look past the immediate numbers and focus on what they signal about the longer-term trajectory. If a company guides lower, analysts often start trimming their forecasts for future years, not just the next few months.
Morgan Stanley, which had been more optimistic on the stock, moved its rating to equal-weight from overweight and cut its price target to $229 from $287. The bank argued that the softer outlook points to a sharper growth slowdown, undermining the idea that the company would see a quick reacceleration in growth. It also lowered its assumptions for 2026 net revenue retention—a measure of how much existing customers continue to spend—by about two percentage points year over year. And it said net-new annual recurring revenue, or the new subscription dollars added, looks set to decline.
Put together, those adjustments shift the conversation from “Did HubSpot beat Q3?” to “Can growth stabilize in 2026 and 2027?” That's a much harder question to answer, and it's why the stock is under pressure despite the headline beat.
What it means for investors
For everyday investors, the key takeaway is that a company can beat today's numbers and still disappoint if the future looks weaker. HubSpot's valuation, like that of many software firms, is built on expectations of strong future growth. When those expectations get dialed back, the multiple investors are willing to pay for each dollar of revenue tends to shrink.
That's the logic behind Morgan Stanley's move. The bank isn't saying HubSpot is a bad company—it's saying the risk-reward is less attractive at the current price. The downgrade to equal-weight is a neutral stance, not a sell signal. But the price target cut reflects a belief that the stock may not have much upside in the near term.
For those who own HubSpot shares, the message is to watch the company's ability to retain existing customers and add new ones. Those two metrics will be the key drivers of whether growth can reaccelerate or whether the slowdown becomes more entrenched. For those considering buying, the lower guidance and downgrade suggest waiting for more clarity on the 2026 outlook might be prudent.
HubSpot's situation is a reminder that in the world of subscription software, guidance is often more important than the quarter that just passed. The market is forward-looking, and when a company's own forecast points to a slower path, investors tend to react quickly.
As the company heads into 2026, the focus will be on whether it can stabilize its growth rate and convince investors that the slowdown is temporary. Until then, the stock may remain under pressure, and the debate will center on what the future holds rather than what happened in the past quarter.
