Q2 2025 HubSpot Inc Earnings Call
Well, I came to the city.
I was running from.
Good afternoon, and welcome to the HubSpot Q2 2025 earnings call. My name is Gigi, and I'll be your operator. Today, at this time, I'll purchase line. Lines are in a listen-only mode and there will be an opportunity for questions and answers after Management's prepared remarks.
To enter the queue for questions, you may do so by dialing star, followed by 11, on your telephone keypad. I would now like to hand the conference over to the head of investor relations, Chuck Mlash. Please go ahead.
Thanks operator, good afternoon, and welcome to HubSpot second quarter 2025 earnings conference call. Today, we'll be discussing the results announced in the press release. That was issued after the market closed.
With me on the call this afternoon is Yamini Rangan, our Chief Executive Officer; Dharmesh Shah, our co-founder and CTO; and Kathryn Bueker, our Chief Financial Officer.
Before we start, I'd like to draw your attention to the safe harbor statement included in today's press release.
During this call, we'll make statements related to our business. That may be considered forward-looking within the meeting of section, 27A of the Securities Exchange Act of 1933 as amended.
In section 21e of the Securities, Exchange Act of 1934 as amended.
All statements that are in statements of historical fact are forward-looking statements, including those regarding management's expectations of future financial and operational performance, and operational expenditures.
Big growth.
FX movement and business Outlook, including our financial guidance for the third fiscal quarter, and full year 2025
Forward-looking statements reflected our views only as of today and are exempt from this requirement by law. We undertake no obligation to update or revise these forward-looking statements.
please refer to the cautionary language in today's press release into our form 10 Q, which will be filed with the SEC this afternoon for discussion of the risks and uncertainties that could cause actual results to differ materially from expectations.
During the course of today's call or refer to certain non-gaap Financial measures is defined by regulation G.
The GAAP financial measure most directly comparable to each non-GAAP financial measure used or discussed and a reconciliation of the differences between such measures can be found within our Second Quarter 2025 earnings press release and the Investor Relations section of our website. Now, my pleasure to turn over the call to HubSpot's Chief Executive Officer, Yamini Rangan. Yamini.
Thank you talk. And welcome everyone. Today, I'll share our Q2 2025 results and the key trends driving our momentum. Then I'll talk about the shifts in marketing and how that's opening up a big opportunity for HubSpot and our customers, I'll close with our progress and Ai and the momentum we're building.
Q2 was a solid quarter for HubSpot, with revenue growing 18% year-over-year in constant currency, accelerating nearly a point from Q1.
We delivered strong operating, leverage with a 17% operating margin.
Total customers grew to 268,000 customers globally, with over 9,700, net customer additions in the quarter.
I'm pleased with our consistent execution and the momentum. We're building at the customer platform of choice for scaling companies.
3 teams stand out in our Q2 results.
Platform strength up Market, momentum and down Market velocity.
First, our platform continues to be a major driver of our success.
It's simple new and existing customers are consolidating their go to market stacks on HubSpot to lower costs. Get a unified view of their customers and drive AI innovation.
61% of new Pro Plus customers. Now, land with multiple hubs up 4 points from last year.
More notably 42% of our install base by ARR. Now use all 3 core hubs
Marketing, sales, and service are also up 4 points.
This is a clear sign that our platform first approach is working.
Sales Hub and service Hub are cranking.
We've innovated rapidly with AI and made it easy for customers to buy feeds and grow when they see value.
Sales from feed upgrades are up 71% year-over-year with strong adoption of AI features, like deal intelligence for prioritizing deals, guided actions to recommend next steps and AI meeting assistance to streamline prep and follow-up.
Service of seat upgrades are up 110% year-over-year fueled by growing use of AI.
Another important part of our platform story. Is the growing impact of the core feed.
We launched core seeds in March, 2024, for customers who need edit, access to Smart CRM, the brains of our customer platform.
Since then we have layered in more value with Advanced reporting, workflows and admin capabilities.
Smart CRM is where the full power of our platform comes together and it's great to see customer adoption.
Second, our up Market momentum continues to accelerate.
Our Focus has been clear.
Build powerful features up Market, customers need while, keeping the ease of use that drive adoption work closely with our partner ecosystem to help customers, see value fast, and show tangible success.
To increase awareness.
That focus is delivering results.
Large deals are up and product, Innovation is resonating.
Our partner motion is fueling growth with coal selling with our sales team up, 29% year-over-year.
And awareness is at an all-time high supporting growth.
HubSpot is becoming the platform more up Market companies. Choose to grow with.
Third, we continue to see velocity in the down Market segment. Our Focus here has been to make the starter tier more valuable and easier to buy.
Free to start a conversions, are up driven by faster time to value and smarter AI powered onboarding.
The pricing changes we rolled out in 2024, lowering the entry price and removing seat minimums or delivering results.
Last year, we took half a step back to take several steps forward. And now, we're seeing the payoff.
More customers coming in upgrading when they see value and forming a stronger healthier customer base.
Okay, let's just curious and talk about what's happening in search marketing is going through. Its biggest shift in decades and that opens up big opportunities for HubSpot and our customers.
2. Massive Trends are unfolding.
First organic search traffic is declining globally.
AI, overviews are giving answers and fewer people are clicking through to websites.
Second, AI search is rising more people are turning to llams for answers, instead of searching for information. And that means the way companies get found is changing rapidly.
We saw these shifts coming and moved early to adapt and Lead.
First, we diversify channels to reach customers where they are.
Just 10% of our leads come from blog, traffic.
The rest comes from a broader growing mix across channels.
We've built 10 YouTube channels with 1.8 million subscribers.
And Q2 was our best quarter ever for YouTube leads up, 96% year-over-year.
On social, we have grown to over 2 million followers on LinkedIn and 600,000 on Instagram. In newsletters and leads groups, we saw a 50% year-over-year increase powered by The Hustle. We acquired Minestream in 2021 and again in 2024.
and our podcast reached 5.2 million listeners in Q2 alone.
The investments we made in diversifying channels are delivering results.
Second, we're figuring out how to show up an AI answers.
When people ask questions in llms, they want specifics data quotes real insights.
That's what gets cited. Our marketing team is testing, innovating and leading here.
We're now cited in llm, more than any other CRM. And we are driving conversions from this emerging Channel.
This is a major shift in how companies get discovered and we're not just adapting we're helping our customers lead through it.
Inbound was all about bringing together our Playbook products and ecosystem to deliver real value to customers. Now, we're applying that same approach to help our customers grow in the AI era.
We'll share more on our Playbook our vision for the future of marketing. And the opportunity ahead at inbound
Okay.
Let's talk about AI Innovation and the momentum we're seeing there.
Our strategy is to be the best at applying AI to help small and medium businesses grow to deliver that we've evolved HubSpot into an AI powered customer platform.
AI is embedded across the entire platform. So customers get value from day 1 using the tools they already know,
Data.
That combination is what sets HubSpot apart?
And we're now turning AI into business results for our customers.
Customer agent is gaining traction, with over 4,000 customers having adopted it.
Resolution rates are now averaging 55% up more than 5 Points in just 1 quarter.
A great example is youth on course which cut response time by 17% and improved feedback even as ticket volume rows.
Just as every company needs a website today.
Every company needs a customer agent that can handle questions across Marketing sales and support with full context and that is exactly what we are enabling for our customers.
The prospecting agent is seeing strong early demand, with over 3,700 customers using it and 17,000 on the waitlist.
This agent watches for intent signals. Researchers prospects and sends personalized Outreach saving time for reps.
1 of our customers scrum.com shares. What used to take 10 BDS now? Takes 3? And more importantly, we're reaching people who knew of us but never engaged with us before.
And finally content agent has helped 12,000 plus customers create content over the last year with some generating, the majority of their content through AI.
All of this points to real momentum in AI adoption.
Our strategy to embed AI across all our hubs is delivering Real Results as well.
Content Hub or AI first Hub continues to show strong momentum, especially as part of the broader marketing Hub motion.
In Q2 the attached rate to marketing Hub was 48% up 5.0 over year.
That reflects a clear need: marketers want to create content across more channels and formats faster, and our AI features help them do that.
AI adoption and service Hub is also strong with more than 40% using AI features.
In Q2 we launched AI feedback summaries and AI ticket sentiment to help service teams, move faster, and respond, more intelligently and we are continuing to innovate at speed.
Also, in Q2, we became the first CRM to launch connectors with both chat, GPT and Claw.
Over 20,000 customers have already used it to access insights across 23 million CRM records.
Customers are already in lands asking questions and these connectors give them fast direct answers from HubSpot, and HubSpot Remains the platform where the data lives, where teams, collaborate and where actions to drive growth, get taken.
Together. It's a powerful combination.
Adoption has been strong among prop plus customers, especially for sales pipeline insights and executive decision making overall, we're pleased with the traction and value AI is delivering across the platform and we're just getting started.
Now, we're not just building AI into our platform, we're becoming an AI first company.
AI is transforming how we work, how we serve customers and how we grow.
Across the business, we're using AI to drive real innovation—from booking meetings to handling support—and it's working.
In Q2 alone, AI handled nearly half of our support chats and book thousands of meetings for our sales team.
We're also seeing a big impact on engineering productivity over. 90% of our Engineers, use AI every week to move faster and focus on higher impact innovation.
As we make this turn, we're making sure every HubSpot is ready for the AI era from companywide Innovation days to Hands-On pilots and hackathons teams are learning testing and pushing what's possible.
To close. We have a differentiated platform approach and we are executing with Clarity and momentum.
I'm confident in our strategy, proud of our pace of innovation and excited for what's ahead.
I look forward to seeing many of you at our Analyst Day in September.
With that.
I'll hand it over to our CFO, Kate, buker to walk through our financial and operating results, okay?
Thanks sham.
Let's turn to our second quarter 2025 financial results.
And 19% on an as reported basis.
The quarter over quarter increase in our Revenue, growth was driven by improving Core Business performance over the last 12 months.
And also benefited from the leap year headwind, that impacted q1.
Subscription Revenue, grew 19% year-over-year, while services and other Revenue increased 21% on an as reported basis.
Q2 domestic Revenue. Grew 18% year-over-year.
And International Revenue growth was 19% in constant currency and 21% as reported representing, 48% of total revenue.
We added over 9,700, net new customers in Q2 ending the quarter with 268,000 customers, growing 18% year-over-year.
Average subscription Revenue per customer was 11,300 in, Q2 flat year-over-year and constant currency and up a point on an as reported basis.
We expect net additions for Q3 and Q4 to be at the high end of our 9 to 10,000 range and asrp growth and constant currency to be up about a point.
Customer doll retention remained in the high 80s in Q2.
Net revenue retention was 103% up roughly a point, sequentially primarily driven by faster speed upgrades.
For the full year of 2025, we expect net revenue retention to be up a couple of points year over year. Again, due to the impact of the seats change.
Calculated Billings were 814 million in Q2 growing, 20%, year-over-year in constant currency and 26% on an as reported basis.
The name of the US dollar at the end of the quarter and its impact on deferred revenue, resulted in an overall 6-point FX Tailwind to as reported Billings growth.
The remainder of my comments will refer to non-gaap measures.
Q2 operating margin was 17%, flat compared to the year-ago period, and up 3 points sequentially.
Net income was 117 million in Q2 or $2.19 per fully diluted share.
Free cash flow was 116 million or 15% of Revenue in Q2.
Our cash and marketable securities totaled. 1.9 billion dollars at the end of June, including the impact of our convertible debt settlement, and Q2 Sheri purchases.
We bought back approximately 446,000 shares in Q2. And Q3 as part of our new share repurchase program and have 250 million of authorized purchases remaining under the program.
with that, let's dive into our guidance for the third quarter and full year of 2025
The macro environment remains uncertain and our expectation is that these volatile conditions will continue for the remainder of the year.
But we have a proven Playbook that works in an environment like this.
For the third quarter.
Total as reported revenue is expected to be in the range of 785 to 787 million up 16% year-over-year in constant currency and 17% on an as reported basis.
Non-GAAP operating profit is expected to be between $156 million and $157 million, representing a 20% operating profit margin.
Non-gaap diluted net income per share is expected to be between $2.56 and $2.58. This is assumed 53 million. Fully diluted shares outstanding.
and for the full year of 2025,
Total is reported revenue is now expected to be in the range of 3.08 to 3.088 billion dollars up. 17% year-over-year in both constant currency and on an as reported basis
We expect roughly a half Point currency Tailwind to as reported Revenue growth in 2025.
Non-gaap operating profit is now expected to be between 568 by 572 million.
Representing an 18% operating profit margin.
Non-gaap diluted. Net income per share.
Is now expected to be between $9.47 and $9.53.
This assumes 53.4 million fully diluted shares outstanding.
as you adjust your models, please keep in mind the following
Software expenses.
We now expect free cash flow to be about 580 million for the full year of 2025, with seasonally stronger, free cash flow and Q4
Before we open the call for questions, I want to invite you to join us for our annual Analyst Day at Inbound, taking place on September 3rd in San Francisco. We look forward to seeing you there.
With that, I will turn the call back over to the operator for questions.
Thank you. If you would like to ask a question, please dial Star. Followed by 1 1, on your telephone keypad. Now, if you change your mind, please dial Star. Followed by 1, 1 1 again, to exit the queue.
When preparing to ask your question, please, ensure your phone is unmuted and limit yourself to 1 question per person.
Please stand by while we compile the Q&A roster.
Our first question comes from the line of Samad Samano from Jeffrey's
Hi, good evening, and congrats on a, on a nice 2q. Um, Yami I wanted to to pull on the thread where you were talking about, maybe the, the changing nature of inbound. So it's good to hear about the traction of Agents, like, customer and prospecting and the value. They're adding for clients. But if I zoom out now that you see how customers are are deploying agents. Is it change?
Changing how inbound itself is being done. I asked because there's a big investor debate on inbound and an agentic AI world, and as even humans change their workflows or starting points for search. I would love to know how Hubs, which essentially created inbound, is pushing the agenda for this next phase shift as well.
Hey Samad. Uh,
thank you so much for that question. Uh, yes.
That's happening in the top of the funnel partly because of AI, but partly because of how buyer behavior is changing or organic, search is getting disrupted and people are clicking fewer Blue Links because AI overviews are providing the answers and then the second big shift that's happening is that people are now asking questions of llms rather than even searching for information. So those are 2, big changes and then you put that together SEO, which is kind of what we said with inbound is no longer working as it. Well was. So we moved very early to adapt to the strategy and I explained this in the earnings, um, and we have a big opportunity to help our customers navigate. A lot of these changes. Let me start with what we did internally.
And start with a few facts. A lot has been said about HubSpot blog traffic and I want to share that 10% of hubspot's leads comes from blog traffic. The other 90% comes from a diversified source of channels that are all growing. We recognized back in 2022, that overdependence on organic search was not sustainable and we started diversifying our demand engines across multiple channels. And as I mentioned in the prepared remarks, we Diversified to social channels YouTube, LinkedIn insta, that has paid off significantly, we grew our business podcast Network and that Network today reaches millions of audiences via podcasts every month and our investment in newsletters email, newsletters are paying off and we're seeing the leads coming from that Source, grow 50% year-over-year. So, all of this has helped
Us continue to grow demand, even when blog driven traffic has declined. So the net here is that block traffic is coming down, but 90% Diversified traffic is growing and that is a Playbook that we are helping our customers, execute as they navigate all of these changes.
Rate go up, and this is a new nent emerging channel. So both of these ships present, a huge opportunity for HubSpot, and for us to help our customers navigate, all of these changes. You mentioned inbound. Look, HubSpot wrote The Playbook on inbound, helping businesses grow through content. The importance of that content has not changed. What has changed is where people connect with that content. And as AI is reshaping the market. We're writing the next chapter, we're showing our customers how to thrive in that world Beyond search, and I'm so excited about this opportunity.
Thank you. 1 moment for our next question.
Our next question comes from the line of Elizabeth Porter from Morgan Stanley.
Great, thank you so much. I wanted to follow up on the comment about 25% of Pro. Plus customers, adding more core seats. I was curious if who are some of the types of personas that are getting access, and it may be a bit of a longer term view, but as you expand kind of personas across the platform. How do you think about building the opportunity to build any solutions or specific workflows, for those personas that may interact with HubSpot today, but may not be that core customer.
Elizabeth, I love this question. I think you're keying into 1 of our biggest growth lovers for the future which is the core seat. And uh maybe just to explain the core seat is what customers buy to get the full value of our smart CRM and think of the smart CRM, as the brains of our platform. This is where the unified customer record sits. This is where you get the full visibility of the customer and it provides customers the most value. And we've been investing heavily on this layer of our platform, and adding powerful capabilities for admins, powerful capabilities for extending our platform. And last year in March 2024, we launched the core seat. That value of that core seat is resonating within our customers. I shared that stat, which is 25% off our Pro Plus, customers are upgrading and buying more for seeds and they're doing this for a couple of reasons.
Because they get powerful edit capabilities, they get ability to provide more Automation and that does expand our core personas your right to point. That out in the question. The core Persona that we have for sales is sales Hub, fees for services service Hub seats, but then core seat, expands it beyond all of those to admins to us to finance, folks, and that expands our opportunity as we think about
About the future. We're going to add a ton of value into that core platform layer. This will have ai capabilities. It will have Smart properties and I think that we're going to be able to drive that as sustained growth going forward, pretty exciting opportunity for HubSpot.
Thank you. 1 moment for our next question.
Our next question comes from the line of Brad sales from Bank of America.
Oh wonderful. Thank you so much. And it's great to see some of the early traction with, with agents. I I did want to ask a question about that. Um,
Is there any, uh, data that you're looking at that, um, can illustrate for us?
The your engagement with those customers that are running agents. In other words, how often are they hitting the agent button coming back into HubSpot interactions. I know it's early but, you know, for some of those customers that might have been on for a couple of quarters here. What are you seeing with regards to that level of Engagement for, for those customers running agents. Thank you.
Oh, I'll start, uh, with the agents and then, you know, their mesh feel free to add to it. Um, I I so far, we have multiple featured agents that HubSpot has built. Customer, agent and prospecting, agent, content, agent. Those are the ones that are featured agents. And I'm really pleased with the momentum that we are seeing with.
Customers know that with agents they can actually get help in doing work. And that is a big shift. It's not just about delivering software to help people get productivity but it's actually delivering work. And so the use cases that we're seeing traction are deflecting support tickets. Setting up meetings, in terms of prospecting writing content that shows up in variety of channels. Those are all the early use cases that we're seeing traction and I'm pretty excited about the momentum overall.
Thank you.
1 moment for our next question.
Our next question comes from the line of Jackson, Adder, from keybanc, Capital markets.
Hey, good evening, guys. Thanks for taking our question. Um,
yeah. How many I'd like to follow up on the core seats? Those 25, the 25% of the customers that have, um, come back and purchase more core seats. I'm just curious. Um, on 2 things number 1 is it, are you putting so much featured like are the core seats? So feature-rich that you might be cannibalizing. A little bit of, you know people coming and buying full seats for sales or service Hub number 1, and number 2. Um you know in the future, or if there is a future state where do you think you'll delineate between these are the things that we're going to build into core seats versus these are the things that we are going to
Live or, or leave to those full seats for sales Hub, uh, service Hub and the like, thank you.
Those are.
Great questions.
The first part of the question, what goes into the Persona seats? And what goes into the core seat? It's really clear. The use cases are super distinct for sales. It is, how do you drive deals? How do you forecast, how do you manage that entire process? That's what goes into the sales Hub Persona feed. And then similarly for service, it's everything to do do with your customer success workspace, or your help desk workspace. And so it's very, very distinct in terms of what goes into Persona seats. See, let me take your direct question on. Are we cannibalizing courses? We don't think so. Um, we've always had this, you know, approach for pricing where we add a lot of value and then we monetize value and I think, the core seat value is resonating and we plan to continue to add value there. The second part of the question you asked is, uh, what goes into the core seat and what maybe gets into AI, uh, and so on,
And here's our early thinking on it: everything that goes into the daily flow, like a personal AI use case. So, if it's a co-pilot, it's going to belong to that core seat. Anything that is in the daily flow of work, that helps someone in the go-to-market organization do better work, will be either in the Persona seat or in the core seat. If AI is actually doing work for you, as in the case of a customer agent resolving a support ticket or a prospecting agent setting up a meeting, that will belong in agents and will be monetized through credits. And so, to step back, the core seat is a platform opportunity. Persona seats are functional opportunities, and AI credits will help us monetize the work that we get done. All of that provides durable ways for us to grow.
Thank you. 1 moment for our next question.
Our next question comes from the line of Mark Murphy from JP Morgan.
Kate when we look at the Billings group of 20%, uh, constant currency and that that is outpacing revenue growth by a couple of points. Do you think it's fair to conclude that the worm has, uh, turned here? In other words, the leading indicators or your, your net new uh, bookings are outperforming the lagging indicator of Revenue or just just wondering if you think
Fair uh, to to consider that that equation. Maybe has inverted a little from where it was 4 to 6 quarters ago.
Higher billing terms. So longer months upfront, which means an extension of duration. And this helps, uh, create a, a bit of a gap, a positive gap for constant currency. Billings growth relative to constant currency Revenue growth
Um, if you just think about kind of the next couple of quarters, anyway, our expectation is that the revenue and billings growth will track each other, but we will still see this small benefit from duration over the next couple of quarters.
Thank you.
1 moment for our next question.
Our next question comes from the line of our June Bhatia, from, William Blair,
Perfect. Um thank you so much. Uh yam I had 1 for you. Um going back to agentic AI. Uh I I think Brad maybe touched on this a little bit, but I want to follow up. It seems like you're getting great adoption right? In terms of the pure number of customers that are adopting, HubSpot agents. Um, I'm curious where you are in terms of consumption, um, in the consumption model for for your agent, to capabilities, or customers, kind of still burning through their initial credits. Are you seeing that and kind of come back to the well, uh, buy more credits, where are we in that Journey? Or, you know, should we expect that to be more of a 2026 plus Dynamic? Thank you. Yeah, thank you, archon for the question. Uh, look, we have had a clear and consistent
In philosophy. When it comes to monetization which is we focus on value before monetizing and the signal that we very specifically look for in terms of monetizing is predictable value for customers and that is exactly what we're seeing with customer agent. We're seeing predictable value really good resolutions and good adoption by customers and that's why we added it to our credit space pricing model. And you can assume that we will take a similar approach as the rest of the Agents. Come into GA and continue to deliver value. So very excited about the progress that we are making in agent adoption and delivering value. Now, uh, specifically on credits, we launched credit at inbound last year and added customer agent to credits in June and it's rolling into our install base of customer agent customers this week. So, uh, it's super early and there's not
not that much in terms of very clear monetization patterns that we can say. But we feel very confident that the usage and value that we are delivering translates into monetization. So overall, uh, very happy with the progress we're making, it'll have impact in 2026 but uh, all of the leading indicators are very positive.
Thank you. 1 moment for our next question.
Our next question comes from the line of Michael Trinh from Wells Fargo securities.
Hey great. Uh thanks appreciate you taking the question and and hitting the the search topic head on in the prepared remarks. And also, uh, stands out, you're 1 of the few in software calling out growth contribution from seeds, and a few different flavors with the new model. So I was just wondering if you could expand on, whether you're finding the more patient, monetization strategy, you've taken there are competitive advantage and this is environment, and then just moving forward, you've touched on it with a few of the answers, but just how you're thinking about Ai. And, and the puts and takes of monetizing. Some of the value, you're delivering their early versus waiting. And during some of the durable growth like you've done with the uh, with the seat model here. Thank you.
Yeah uh definitely a lot of uh puts and takes their in terms of it and look. Um, we are very disciplined when it comes to pricing and monetization and it does pay off. We really focus on delivering value before monetizing. And you mentioned the seats, uh, growth we've seen it consistently. We've seen it in sales tub, seat upgrades, we're seeing it in service Hub, seat upgrades and it comes down to how our philosophy is all the focus on value. Um, last year, you know,
Seats that monetizes, the core value that we deliver. For all of the personas that we support and we have credits that will help us monetize the value. That is not tied to seats. And the combination of these 2 we think is going to be really useful as the AI kind of adoption wave continues. Now, everybody talks about, you know, P times q and they talk about quantity going down. But the more important part of it is the quantity goes down, only when the value goes up, and we have a very clear mechanism to monetize that value. So, overall feel very good in terms of the approach that we have taken, uh, patience pays off and it is paying off for us.
Thank you. 1 moment for our next question.
Our next question comes from the line of Brent bracelin from Viper Sandler.
Good afternoon. Thanks for taking the question. Um, I, you know, you owe me. I think you could spend, uh, the next 45 minutes talking about core seat, seems super important. I'm sure we'll touch about more on that at the, uh, at the event here next month, but Kate, I wanted to go back to the quarter. Um, the America's growth accelerated by a point, even if I back out FX, it looks like Q2 was the highest dollar sequential increase in in Revenue that we've ever seen. It looks like it's the highest percent sequential increase.
Stay in over a year or so as we just think about the fundamental drivers here of The Upside in the quarter, um, was there any sort of 1 time anomalies that we should think about outside of FX or or is that just broad-based strength that you're seeing in the business driving that acceleration in America's? And again, pretty strong sequential increase in overall Revenue.
And an appreciate your positive, uh, commentary on their performance in the quarter. Um, we were, you know, happy with the performance, uh, in Q2, it came in largely, as we expected, uh, you know, the sequential growth, um, you know was nice, we beat by 21 or 21 million dollars. Uh, had a little bit of help there from FX. Uh, probably another probably 5 of the 21, but we had a nice solid, um, beat based on Core Business performance. Look, I think that, um, what you should hear from us, um, in in sort of the performance in Q2 and how we set our guidance, for the full year is you know, a few things 1 is, you know, the business is performing well. Um, you know, yamini mentioned the strength that we're seeing up Market, our continued velocity down Market, you know our overall attraction and platform consolidation like this is driving. Nice business momentum and we saw Revenue growth.
It's in constant currency improved, q1 to Q2. Um, the team's executing well, um, we had a strong execution through the first half of the year, you know, even though the, you know, external environment does remain a bit choppy and then you're right, we saw some favorability in FX, um, you know, between q1 and Q2 the dollar has weakened. It's a Tailwind for us. Um, and we included um an additional 20 million dollars of FX Tailwind in the back half of the year and, um, the guidance that we put forward,
Thank you. 1 moment for our next question.
Our next question comes from the line of Tyler radkey from City.
Thank you for taking the question. Uh, Kate on the uh, improved Outlook uh, for for new customer adds. And then I, I believe also ASR PC, uh, for for the back half. Could you just unpack the the key drivers of that? I mean, it sounds like a lot of great momentum, uh, as yam was alluding to in terms of the the non-class non-b blog. Um, excuse me, traffic sources. But is this is this simply a, a macro, uh, you know, slightly better macro view. Or are you seeing kind of some incremental kind of organic uh improvements in in lead generation just giving the Diversified Channel approach you're taking
Yeah, I mean, I guess I wouldn't overreact to quarter-over-quarter changes to net additions. Like, you know, we see that move from one quarter to the next. We are happy to see net ads come in above our 9,000 expectation for Q2. Um, we saw a nice performance across both the starter tier and also the professional and enterprise tiers.
You know, in starter what we saw was like a nice uplift in the free to starter conversion rate, uh, and we saw some positive impacts from an annual pricing promotion that we put in place at the beginning of June.
And Enterprise side, it's just really consol uh, really consistent momentum quarter of a quarter. Um, and so like our expectation here, over the next couple of quarters, um, is that we continue um, to be in that 9 to 10, uh, thousand range at the top end of that range. And then, ASPC expectations is up, uh, roughly a point in constant currency in Q3 and Q4
Thank you. 1 moment for our next question.
Our next question comes from the line of Keith Bachmann from BMO.
Hi, good evening, good afternoon. I'd like to invite daresh on if he's if he's available. And the question is, you you've seen a number of Trends in your uh, technology career. And there is a lot of cross-currents associated in particular with the marketing Hub and as you think about, you know what the marketing Hub is today, HubSpot is adding agentic capabilities, whether part of that solution as an additional add-on. But what is what is the solution look like? In 2, 3 years that customers are buying. Is it still through the marketing Hub, or are you buying agents that are supported by it? I'm just trying to understand how you think. The actual Advent of agentic technology is going to change the construct of of what a marketing Hub is. And then secondly, is how do you think
I think the and maybe this is for cater Yemen, but how do you think the the evolution of what customers are paying for May evolve? I know there's been a lot of talk about seats.
To this day, which is, which is candidly great to see, uh, or hear rather. But how does that evolved in other words, do you think consumption grows, uh, over time as a percent of your Revenue? So thanks very much. Yeah, I I'll start out. Thanks for the question. Um, in terms of things where most excited about, um, we are excited about this kind of emerging new
Operating system. This is, uh, this AI operating system that's happening now. And so you saw us earlier this year, released these connectors for both chat GPT and Claude. And the idea behind these connectors is that uh in this kind of new age uh users are going to be spending some time in these kind of Frontier AI applications and the reason we're excited is that now this gives us a another point of Leverage which is how can we use the platform that we have and deliver more user and customer value? And as people spend more time there, we think we can take what we've done in the past and say, oh, we'll add apis. We'll add ways for customers to get benefit from being on the HubSpot, uh, customer platform with this kind of new agentic world. Uh, we we're going to see more and more use cases emerge on the frontier apps. And we can build these connectors to kind of create more value for, for our customers. I'll give you an example. If you're sitting inside chat, gbt which by the way, now has 700 million weekly, active users. Write lots and lots of usage there. Um, someone could type in and say, oh, uh, what was my
Best performing, um, go in Europe, last quarter.
And I want to send them an email, right? So now it goes through the connector because chat gbt knows that there's a native connector for HubSpot. A data comes back from HubSpot that says here, where your best performing goes. Now, these are approved, the email being sent, so the interactions happening in chat, gbt the action to be able to take on that Insight. That just came back happens. Inside of HubSpot. Now, this is a very novel use case because now chatbot knows about the world, right? It knows about the web. Everything that's on the the internet and HubSpot knows about your customers and we can bring all those 3 things together to say, oh I want to bring this data back from HubSpot intersected with what we know of the world and then take this action back within the customer platform and actually do things, I'm really excited about this this new operating system and we're sort of very kind of early to this Market. Um and we believe in this kind of open platform that says, okay, well, we want to kind of pipe those insights in that data through um, and and the action continues to happen in HubSpot. So that's that's what I'm most excited about.
And uh, and I think Keith, uh, you know, there's also a lot of excitement in terms of what we can do within marketing Hub to help our customers, uh, you know, just adapt and navigate through all of the changes. And you know, 1 thing, I want to make very clear search is getting disrupted which means, SEO is not as effective as it is before, but here's the key content matters, even more in the new world, the content.
Content, agent, helps marketers generate high-quality content. The work that we've been doing to innovate on content Hub, which is content, remix podcast remix. What it does is actually helps our customers diversify, uh, because SEO is 1 piece of the broader marketing strategy, we support. And what we really support with is how we power our customers ability to diversify channels across emails ads, social Journey, analytics, and so on. And so, uh, I think, you know, we're pretty excited about the broader opportunity to help our customers with marketing. And as we do that, and as we evolve our pricing strategy, you know, we'll have a balance of seats and credits, uh, where we provide value in this seat to help our customers get productivity seats, will grow where we do the work for customers. Like, you know, customer agent credits will go and I think, uh, that opens up a lot of opportunity for us.
Thank you. 1 moment for our next question.
Our next question comes from the line of Alex zukin from Wolfe research.
Hey guys, thanks for taking my question. I you you you guys both you have any other measures getting such great thoughtful answers uh to these kind of higher altitude questions. I maybe kind of in a similar vein. Why are you given the disruption happening in and around marketing? Are you seeing customers? Um, pause and evaluate and sales Cycles either take longer or or budgetary decisions be a little bit more? Uh, interspersed or are you actually seeing this a call to action, where to your point content, is more important than ever, you're seeing more engagement and time in app, uh, around, you know, putting
Broadening the surface area of where people are marketing and and their mesh for you. If, if the ux layer, if the OS is now the llm to some extent in in however many years, that, that reality happens. As you move up Market, it feels like the monetization path with some of your competitors as to monetize data access.
Right or monetize uh actions when you think about monetizing not at the ux layer. But at this process, uh, layer. How, how does that change visa V your competitors? Uh, and how do you see that evolving?
Alex, you just sneaked in multiple part question there. But I will, I will take the first part, which is on marketing Hub, and what we're seeing look, uh, there's a lot shifting within marketing and marketeers are not pausing to evaluate. They're really focused on driving growth driving leads and diversifying their sources. And that is what we see. I talked to CMOS all the time and we talk about what is working today, what is not working? They're looking to HubSpot because they trust HubSpot, we've brought playbooks together. We've brought product together that can help them execute on the Playbook. And we have a ecosystem of partners that we have activated to help them. And so they're coming to us and it's actually causing a new CTA within marketing teams to evaluate their playbooks and re-imagine, what they need to do in the world Beyond search. So, uh, that's why I think it's a big opportunity and you know, I can't wait to share much more about the
Vision at inbound next month.
And darm. Yeah, 1 thing, I'd like to add. I'm going to add on to the the marketing since we've talked a lot about marketing and inbound, um, kind of intersected with agents 1 of the, the new things we've learned recently, I'll kind of catch you guys up. So, you know, we launched a product called agent.ai at inbound. Last year, we had 47,000 users at that time. Uh, we just crossed the 2 million user Mark, uh, but 1 of the things I was kind of surprising, was this kind of, uh, emerging use case that was unexpected, which is people using agents.
The question you asked but that's the question I wanted to answer. So, um, here we are.
Thank you. 1 moment for our next question.
Our next question comes from the line of Gabriella boars from Goldman Sachs.
Hey, good afternoon. Thanks for taking my question. This 1 is for Dar mesh as well Dar mesh. I'd love your perspective from a Frontier Model standpoint. As we see Frontier models, add more agents and agentic applications to their platform layer. How do you think about that being a source of competition longer term and how important is the domain experience in the workflow experience that you have at HubSpot in that context? Thanks so much. Yeah. Um, I think a lot of the and what we're seeing now and I think we're going to continue to see for a while, is the agent development that's happening, within the frontier models, it's going to be 1 of 2 things. We're going to be very horizontal consumer-facing agentic capabilities, right? That says, oh, um, you know, we're going to build something for a calendar, and there's something that's kind of very broad-based, uh, versus kind of vertical. Uh, B2B focused things. And the other thing they're doing is kind of extending their platforms, uh, to allow third parties, like HubSpot to be able to build more agentic capabilities, with better reasoning models and better tooling uh than tool calling. So those are the things that are happening in terms of um you know, the value of the domain.
Expertise, um, within and I'm, I'm biased here but within Industries, like CRM and Erp and others, there's just so much embodied in its not, just the data and the data models and things that we're passing back the LM. It's, you know, our case, you know, 19th of domain expertise, that's embodied in millions of lines of code. That a capture, what a salesperson does all day. Uh, and what a, uh, service rep might do all day, and I think that is going to be hard and, and sort of messy for Frontier models to try and, and they have bigger fish to fry. In my mind, they're going after the kind of trillion dollar opportunities, not the kind of individual vertical opportunities 1 at a time, but that, that that's my piece is
Thank you for the thoughts.
Thank you. 1 moment for our next question.
Our next question comes from the line of Brett Huff from Steven zinc.
Good evening. Congrats on a nice quarter and thanks for squeezing me and I appreciate it. Um, mine's a little bit higher, level question. Um, given all the changes going on in AI, moving up Market, you know, new products Etc. Can you just remind us if there's been a reshuffle in sort of the the stack rank of where you see growth coming. First, most biggest sort of however you want to sort of rank them for us which ones you're going after first, which ones might be bigger just to help reframe the debate or reframe sort of the growth Pie as you guys think about it going forward with with all the Dynamics going on. Thank you.
Absolutely. Um, that's a very good question. Look, we have a current Playbook that is working and you can see it from the consistency of delivery of results from those. This is platform consolidation moving up market and delivering compelling customer value in all of the fees and that Playbook is working. You see it in strong customer dollar retention, you see you see upgrade momentum and the large deal. Momentum, those existing growth, levers will continue going in the forward.
In addition to that, there are a few durable growth drivers. We've always been able to thoughtfully and intentionally add reps in very specific segments and geographies. And we see continuing to do that. The other lever, which we've talked about a lot in this call and previous calls, is the pricing change that we drove last year. What we did was to lower seat, minimums, remove the friction and provide us an opportunity for growth. That's obviously paying through this year. But we'll continue to see that role through our install base into next year. That'll be a durable lever for growth. And then, finally AI, this is a multi-year Tailwind. We are taking a super patient and very strategic approach to AI, which is we are embedding it into the platform and delivering work through agents.
And we have the ability to monetize both of those, but first by focusing on the value. So to net it out. Current Playbook is working, will continue to drive value, uh, through the current Playbook, we have rep driven growth, we have pricing changes that adds to durable lever and AI, which is the multi-year Tailwind. We feel very confident about that.
Thank you. 1 moment for our next question.
Our next question comes from the line of Taylor mcginness from UBS.
Just a function of the pricing model change or are you seeing any unlock or Improvement in other uh, expansion, motion areas? And then I know the guide implies an improvement as we move throughout the year, but maybe you could just give a little bit of more color in terms of where you think that could go and what would need to happen to get well into the 105 110, you know, type range range again. Thanks
yeah, thanks Taylor for
um, it was nice to see the sequential Improvement in net revenue retention. Um, as we talked about in the prepared remarks, it was about a point, um, increase quarter of a quarter, uh, when you think about the drivers of the net revenue, retention that, like, they're very much the same as the ones that we've been talking about for a number of quarters now, like it starts again with the healthy customer dollar retention at the foundation. Um, it's been really stable in the high 80s now for a number of years. Um, you're right this, the
Primary reason for the expansion of net revenue retention is the strong seat, upgrade performance. Um, that is
A combination of the core seat. Adoption that yams talking about as well as, um, increased rates of seat upgrades across Sales and Service. Most of that, I would say, all of, that is a result of the seats, bottle pricing change that we rolled out last year.
Outside of seats. Um, we continue to see challenges and the other, net upgrade motions. Um, customers remain very value focused. Um, and we have not seen that unlock, um,
that said, uh, we do still expect that net revenue retention is going to be up a couple of points. Year-over-year with call it flat into Q3, and then a nice Step Up in Q4 as we start to see, um, more of the migrated customers come up for Renewal. So, um, again, largely driven by the, the seed expansion, motions, um, in the pricing change.
Thank you.
1 moment for our next question.
Our next question comes from the line of Brian Peterson from Raymond James.
Thanks for taking the question and congrats on a really strong quarter yam. I I want you to follow up on your answer to efforts to diversify the sources at the top of the funnel. I'm curious. Have you seen any material changes into how you're bringing in leads specifically for Enterprise? And I'm also curious, how was your channel influenced business, trended this year versus your expectations and and what is their role as AI becomes much more important. Thanks guys.
Yeah, uh, great question. Look, I think on the diversification of, uh, you know, our lead sources that has been, uh, play that has been multiple years in the way making, and it's working and it's working across our segments. We have our small business, mid-market and Corp segments. It's working across all of those segments. And so, we're going to continue on that diversification strategy and we're going to educate our customers to continue on that diversification strategy. Now, specifically about our partner channel, uh, Partners you know are, uh, influencing about 40% of our ARR and that has continued, they are co-selling as well as sourcing. And I mentioned this in the earnings prepared, remarks that we're seeing partner Source model. And they're also course, selling with our reps more and they are a good way for us to uh deliver higher wind rates higher, ASP deals within the up market and more important.
Importantly, when they deliver that value customers stay longer with us and they buy more into the future. So partner Channel continues to be a good mode for HubSpot and has expanded into co-selling and sourcing.
Thank you for that question.
Thank you, this concludes, the HubSpot Q2 2025 earnings call. Thank you to everyone who was able to join us today. You may now disconnect your lines.