HubSpot Stock: Buy, Hold or Wait as Growth Meets Valuation Pressure

HubSpot, Inc. HUBS combines 20% second-quarter revenue growth with improving cash generation, expanding enterprise adoption and rising AI usage. At the same time, customer buying decisions are taking longer, net revenue retention has eased and pricing changes are creating near-term execution pressure. With a Zacks Rank #3 (Hold), the setup favors a measured approach as investors assess whether AI monetization and enterprise growth can support the valuation.

HUBS Shows Durable Revenue Growth

HubSpot reported second-quarter revenue of $911.7 million, up 20% year over year, while subscription revenue increased 20%. The company added more than 6,900 net customers, taking its customer base to 306,446, up 14% year over year. Average subscription revenue per customer increased 4% to $11,800.

Management expects full-year 2026 revenue of $3.678 billion to $3.686 billion, representing 18% reported growth. Non-GAAP operating income is expected at $762 million to $766 million, implying a 21% operating margin. Second-quarter non-GAAP operating income increased 44% to $185.3 million, while non-GAAP earnings rose 49% to $3.26 per share.

HubSpot Strengthens Cash Generation

Cash generation is supporting HubSpot’s investment plans and capital returns. Second-quarter operating cash flow rose 36% year over year to $222.8 million, while non-GAAP free cash flow increased 44% to $167.9 million. Management expects about $750 million of free cash flow in 2026.

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HubSpot repurchased $531.9 million of common stock during the second quarter and authorized an additional share repurchase program of up to $1 billion. Cash, short-term investments and long-term investments totaled $1.4 billion as of June 30, 2026. The balance sheet and cash flow profile give the company flexibility to continue investing in AI and its agentic customer platform.

HUBS Balances Growth With Valuation

HubSpot trades at 37.1X forward earnings, 3.0X sales and a 1.4 PEG ratio. Its Value Score of C is less favorable than its Growth Score of A, Momentum Score of A and VGM Score of A.

HubSpot’s valuation needs to be viewed alongside its 18% full-year revenue growth outlook. The stock has already fallen sharply from its 52-week high, but the lower share price does not eliminate the need for continued execution. Investors are still paying for future growth in AI, enterprise adoption and platform expansion.

Adobe Inc. ADBE and Datadog, Inc. DDOG offer useful comparison within the broader software sector. Adobe has a diversified portfolio spanning creative, document, and digital experience solutions, while Datadog focuses on cloud monitoring, observability, and security. Although both companies differ from HubSpot in terms of business model, product offerings, and target markets, they provide relevant benchmarks for investors evaluating growth-oriented software companies.

HubSpot Faces Execution Trade-Offs

Net revenue retention declined one percentage point year over year to 102%. Management expects net upgrade rates to remain pressured in the second half of 2026 as customers optimize budgets and take more time to evaluate AI investments.

HubSpot said larger buying committees, increased C-suite and Board approvals and longer sales cycles affected second-quarter demand. The company also changed product packaging and pricing, introduced trials and expanded outcome-based pricing to give customers greater predictability around AI costs. These changes may lower barriers to adoption over time, but they are extending the buying process in the near term.

Competition also remains a consideration. HubSpot expects to continue investing in AI and product development as established CRM vendors and AI-focused competitors compete for customer budgets. These investments could limit the pace of margin expansion even as management expects operating leverage to improve.

HUBS Rank Supports a Wait-and-See Case

HubSpot currently carries a Zacks Rank #3, with a Value Score of C, Growth Score of A, Momentum Score of A and VGM Score of A. The Zacks Style Scores are designed to complement the Zacks Rank, with Value, Growth, Momentum and VGM measuring different characteristics of a stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Style Score Education material emphasizes that the Zacks Rank remains the first step in stock selection because earnings estimate revisions are the most important factor affecting stock prices. It also notes that a Zacks Rank #3  can be held, while the Style Score grades provide additional context. For HUBS, the A Growth Score and A Momentum Score are constructive, but the C Value Score highlights the valuation trade-off.

HubSpot’s revenue growth, cash generation, enterprise expansion and AI adoption support the longer-term case. Yet slower buying decisions, lower net revenue retention, pricing changes and valuation risk make a more aggressive stance difficult to justify. The current Zacks Rank therefore supports waiting for clearer evidence that AI usage is translating into sustained incremental revenue and that customer expansion is stabilizing.

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This article originally published on Zacks Investment Research (zacks.com).

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