Rapid7, Inc. 2025 Annual Report (10-K) Summary
Business Context and Reporting Period
This filing covers the fiscal year ended December 31, 2025. Rapid7, Inc. is a global cybersecurity operations software and service provider focused on unifying exposure management with threat detection and response via its Command Platform. The company serves over 11,500 customers in 150 countries, including 36% of the Fortune 100. The business model is heavily subscription-based, with recurring revenue comprising 96% of total revenue in 2025.
Key Financial Metrics
| Metric | 2025 | 2024 | 2023 |
|---|---|---|---|
| Total Revenue | $859.8 million | $844.0 million | $777.7 million |
| Net Income (Loss) | $23.4 million | $25.5 million | ($152.8 million) |
| GAAP Operating Income | $11.6 million | $35.0 million | ($84.3 million) |
| Non-GAAP Operating Income | $135.7 million | $163.5 million | $102.2 million |
| Free Cash Flow | $130.1 million | $154.1 million | $84.0 million |
| Annualized Recurring Revenue (ARR) | $839.9 million | $839.8 million | N/A |
| Cash & Investments | $658.8 million | $521.7 million | N/A |
| Convertible Debt Outstanding | $900.0 million | $946.0 million | N/A |
Note: Debt figures represent principal amounts. As of Dec 31, 2025, the company held $246.7 million in cash and cash equivalents and $412.1 million in investments.
Material Changes vs. Prior Period
- Revenue Growth Deceleration: Total revenue grew only 1.9% year-over-year (YoY) in 2025, a significant slowdown from 8.5% growth in 2024. This was driven by a decline in revenue from new customers, partially offset by expansion within the existing base.
- Profitability Decline: GAAP net income decreased to $23.4 million from $25.5 million in 2024. Operating income dropped significantly to $11.6 million from $35.0 million due to increased operating expenses.
- Expense Increases: Research and Development (R&D) expenses rose 10.1% to $190.7 million, and Sales and Marketing (S&M) expenses increased 6.3% to $317.7 million. These increases were driven by personnel costs and cloud infrastructure investments.
- Debt Repayment: The company fully repaid its $46.0 million 2025 Convertible Senior Notes at maturity in May 2025. Remaining debt consists of $600 million in 2027 Notes and $300 million in 2029 Notes.
- Customer Count: The total number of customers decreased slightly by 0.5% to 11,674, indicating a shift in growth dynamics from customer acquisition to retention and upselling.
Guidance, Outlook, Risks, and Unusual Items
- Strategic Focus: Management is prioritizing "SecOps consolidation," aiming to unify fragmented security tools into a single platform. Investments in AI-driven detection and response capabilities are central to this strategy.
- Capital Commitments: In January 2025, the company entered a five-year cloud services agreement with a minimum annual commitment of $125 million, totaling $660 million over the term. This represents a significant future cash outflow.
- Key Risks:
- Tax Contingency: The company received an initial assessment from the Israel Tax Authority of approximately $102 million (324 million ILS) related to fiscal year 2021. Rapid7 intends to defend its position and has not recorded a liability, but an adverse outcome could materially impact financial results.
- Activist Investor: JANA Partners Management, LP holds approximately 10.1% of the company's stock and has a representative on the Board. The company notes risks associated with activist stockholder actions.
- Debt Maturity: The 2027 Convertible Senior Notes ($600 million) mature in March 2027. Management is refining cash management procedures to ensure liquidity for repayment without incurring additional debt.
- Accounting Correction: The company corrected an immaterial error related to stock-based compensation expense in 2023 and 2024. Comparative financial information has been revised to reflect this correction.
Investor Verification Checklist
- Revenue Quality: Verify the sustainability of the 1.9% revenue growth rate and the specific drivers behind the decline in new customer revenue.
- Cloud Commitment Impact: Assess the impact of the $660 million cloud services commitment on future free cash flow and operating margins.
- Tax Liability Exposure: Monitor the status of the $102 million Israel Tax Authority assessment and any potential accruals.
- Debt Refinancing: Evaluate the company's ability to refinance or repay the $600 million 2027 Notes given current market conditions and cash flow projections.
- Non-GAAP Adjustments: Review the reconciliation of GAAP to Non-GAAP metrics, specifically the $104.3 million stock-based compensation expense, to understand core operational performance.