On Tuesday, Guggenheim maintained a Buy rating on Rubrik Inc (NYSE:RBRK) with a steady price target of $48.00. The firm highlighted Rubrik's impressive performance, noting that the company has become the fastest-growing entity within their enterprise software coverage. This growth is backed by significant strides towards achieving positive free cash flow (FCF), which is anticipated next year.
Rubrik's cloud Annual Recurring Revenue (ARR) surged 80% to $678 million, surpassing consensus estimates by approximately 7%. This contributed to the Subscription ARR reaching $887 million, a 40% year-over-year increase and 3.5% above consensus.
Following these results, Rubrik raised its full-year guidance more substantially than the second quarter's upside, suggesting a cautious but potentially reachable 6% year-over-year decline in second-half Subscription New ARR, which compares favorably to the 17% growth in the first half.
The company's management attributes the robust performance primarily to the uptake of security modules. Over half of the new logos adopted Rubrik's RSC Enterprise Edition, which includes comprehensive security features, and there was a strong attachment to DSPM products like Laminar. Growth was also driven by the expansion of workloads within existing customers and the cross-selling of SaaS and cloud data protection solutions.
Rubrik's second quarter total revenue increased by 35%, and the company reported a free cash flow loss of $32 million, both exceeding consensus expectations. Full-year guidance for these metrics was also revised upwards beyond the quarter's beat. The third quarter revenue guidance is set higher as well. Notably, Rubrik achieved a 1700 basis point increase in non-GAAP operating margin year-over-year, which was largely due to sales and marketing efficiency, including leverage from selling more products, higher returns on investment in international and federal markets, lower customer acquisition costs, and high-margin renewals.
Guggenheim suggests that Rubrik's sales and marketing expenses are reasonable when compared to new ARR, and encourages continued investment to capitalize on the vast market opportunity. The firm believes that there is nothing in Rubrik's business model that would prevent it from reaching the free cash flow margins expected of a typical software company at scale, potentially over 35%.
However, the firm notes that the upcoming expiration of the post-IPO lockup period on September 11, which will make approximately 87 million of the total 180 million shares available for sale, could temporarily put pressure on the stock.
In other recent news, Rubrik Inc has been the subject of several analyst assessments following strong earnings and revenue results. The company's revenue outperformed the FactSet consensus by 4.5%, with subscription annual recurring revenue (ARR) exceeding forecasts by 3.4%. Rubrik's industry-leading Cloud Subscription ARR saw an 80% year-over-year increase to $678 million, while its Subscription ARR grew by 40.3% year-over-year to $919 million.
The company's net retention rate (NRR) stands at over 120%, indicating that customers continue to expand their spending with Rubrik. In response to these results, various investment firms including Cantor Fitzgerald, Barclays (LON:BARC), and KeyBanc have maintained their positive ratings on Rubrik. Piper Sandler initiated coverage of Rubrik, assigning an Overweight rating and setting a price target of $42, citing the company's effective go-to-market strategy.
Rubrik has also announced data protection support for Salesforce (NYSE:CRM), marking the third major Software-as-a-Service (SaaS) application now supported by the company. This expansion was not anticipated by investors and is seen as a positive move for Rubrik. Meanwhile, Mizuho Securities adjusted its outlook on Rubrik, reducing its price target to $43.00 but maintaining its Outperform rating.
InvestingPro Insights
As Rubrik Inc (NYSE:RBRK) navigates its growth trajectory, the latest insights from InvestingPro shed light on some key financial metrics and analyst sentiment. With a market capitalization of $5.77 billion, Rubrik's financial health is underpinned by the fact that it holds more cash than debt on its balance sheet, an indicator of financial stability that may reassure investors. In addition, the company's revenue growth remains robust, with a 15.98% increase over the last twelve months as of Q1 2025, and an even more impressive quarterly revenue growth of 38.0% for the same period.
Despite these positive signs, Rubrik's path to profitability appears challenged, as reflected in its negative P/E ratio of -5.79 for the last twelve months as of Q1 2025. This aligns with the sentiment of analysts who do not anticipate the company will be profitable this year, and note that Rubrik was not profitable over the last twelve months. Furthermore, the company is trading at a high revenue valuation multiple, which could suggest that the market has high expectations for future growth.
Investors should also consider that Rubrik does not pay a dividend, which may influence investment decisions for those seeking income. For those looking to delve deeper into Rubrik's financials and future prospects, there are additional InvestingPro Tips available that can provide more comprehensive analysis. Understanding these metrics in the context of the broader market and Rubrik's strategic initiatives is essential for making informed investment decisions.
For a more detailed analysis and further InvestingPro Tips, investors can visit the InvestingPro platform, which offers additional insights into Rubrik's financial health and growth prospects.
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