Rubrik published its second-quarter report for fiscal 2027, and it is a good report on almost every measure: revenue growing 38%, a loss narrowed by about 36%, and a crossing into non-GAAP earnings per share.
And yet there is one line in it that stopped me, and it is in the guidance rather than the results.
Errors or inaccuracies are possible. Spotted something that looks wrong? Write to me and I will correct it.
What This Company Does
Rubrik sells backup and recovery from cyber incidents.
And the distinction between backup and security is what defines the company, and it is worth pausing on.
Classic security tries to prevent intrusion. That is what CrowdStrike and SentinelOne do - they guard the gate.
Rubrik operates on the assumption the gate will be breached. Its product keeps a clean copy of the data, identifies exactly when malware was installed, and returns the organisation to the point before
- quickly.
And that became a large product for one reason: ransomware. An attacker who encrypts an organisation's data sells the key back to it. An organisation that can restore within hours does not need to buy a key.
And the new layer the company is building is security for AI agents - because an organisation running autonomous agents needs to know what they did, and be able to undo it.
The Quarter
| $ thousands | The quarter | Year ago | Change |
|---|---|---|---|
| Subscription revenue | 407,156 | 296,957 | +37.1% |
| Other revenue | 20,104 | 12,903 | +55.8% |
| Total revenue | 427,260 | 309,860 | +37.9% |
| Cost of revenue | 92,137 | 63,559 | +45.0% |
| Gross profit | 335,123 | 246,301 | 78.4% |
| Research and development | 126,863 | 92,107 | +37.7% |
| Sales and marketing | 224,453 | 181,985 | 52.5% of revenue |
| General and administrative | 55,709 | 66,672 | -16.4% |
| Operating loss | -71,902 | -94,463 | -16.8% |
| Net loss | -61,777 | -95,929 | -14.5% |
| Loss per share | -$0.30 | -$0.49 |
And the subscription metrics, which are the real measure in a business like this:
| The quarter | Growth | |
|---|---|---|
| Subscription ARR | $1.66 billion | +33% |
| Cloud ARR | $1.48 billion | +39% |
| Customers with $100,000 or more | 3,084 | +23% |
| Cash flow from operations | $76.8 million | 18% of revenue |
| Free cash flow | $65.7 million | 15% of revenue |
What Is Good in the Report, and There Is Plenty
The first - the operating leverage is real.
The operating loss fell from 30.5% of revenue to 16.8%. The net loss fell from 31.0% to 14.5%.
And the explanation is not cuts but pace: revenue rose 38%, sales costs rose 23%, and general and administrative fell 16.4% in absolute terms. When revenue runs faster than expense, the margin opens by itself.
The second - cash flow is positive and meaningful. $76.8 million from operations, $65.7 million free. A company losing money on the accounting line while generating positive cash flow is a company whose loss is not cash - it is mostly stock compensation and revenue deferral.
And the third - the crossing into non-GAAP earnings per share. From a loss of $0.03 to earnings of $0.20. The company guides the full year to $0.47 to $0.53, and free cash flow of $323 to $333 million.
And the Line That Stopped Me
Revenue in the quarter: $427.3 million. Guidance for next quarter: $429 to $431 million.
That is growth of 0.4% to 0.9% on this quarter.
And at a company reporting 38% annual growth, that is a gap requiring explanation.
And it has several possible explanations, all of them legitimate:
| Revenue recognition timing | Part of the revenue is recognised at points in time rather than rateably |
| "Material rights" | The quarter included $4.7m of them, against $14.2m a year earlier |
| Conservative guidance | Companies guide to a number they are confident of beating |
| Seasonality | The fourth quarter is the big one in software |
And the full-year guidance - $1,685 to $1,693 million - implies the fourth quarter carries the weight.
What I take from this is not "the business is slowing", but something more careful: accounting revenue and ARR are not the same thing, and they can diverge for a period. ARR continues to grow 33%; quarterly revenue is reported under recognition rules. And anyone reading only one of them sees half a picture.
And the Gross Margin, Which Fell Here Too
GAAP gross margin: 78.4%, against 79.5%. Non-GAAP: 81.0%, against 81.6%.
And the explanation is in the cost line: cost of revenue rose 45.0% while revenue rose 37.9%.
And the split reveals where that happens:
| Revenue | Cost | Margin | |
|---|---|---|---|
| Subscription | $407.2m | $74.1m | 81.8% |
| Other | $20.1m | $18.0m | 10.5% |
The "other" part - services and professional work - grew 55.8% in revenue and 138.9% in cost. Its margin fell from 41.6% to 10.5%.
It is small, so the impact is limited. But the direction is clear, and this is exactly the pattern I saw last night at Marvell and SentinelOne too - three entirely different companies, and at all three cost of revenue grew faster than revenue.
Two Accompanying Announcements Worth Noting
The first, and it has local interest: Rakefet Russak-Aminoach was appointed to the company's board. The announcement describes her as a leader in financial services and a venture investor, bringing experience in digital transformation and enterprise governance.
And the second: Rubrik launched Rubrik Agent Cloud for Anthropic's Claude Code, alongside an alliance with large integrators for enterprise deployment. And that is a concrete example of what management calls "security for AI" - not marketing, but a product against a named platform.
In addition the company acquired Strata.io in the identity space, and announced a £375 million investment in the United Kingdom, with London as its regional headquarters.
What I Will Check Next Quarter
| Revenue against the guide | $429-431m - whether it is beaten by a meaningful margin |
| The ARR run rate | 33% today - that is the predictive measure, not quarterly revenue |
| Subscription ARR contribution margin | 14.0% today, guided to 15.5% for the year |
| Sales and marketing | 52.5% of revenue - whether the ratio keeps falling |
| The "other" segment | A margin of 10.5% - whether it stabilises |
| Free cash flow | Guidance of $323-333m for the year |
הזווית שלי
דעה אישית של אילן אברמוב - לא ייעוץ ולא המלצה
Rubrik is an excellent example of a software company at the stage I find most interesting to read: the moment it stops burning and starts generating.
The numbers show it clearly. A year ago the operating loss was 30.5% of revenue; today 16.8%. A year ago non-GAAP earnings per share were negative; today $0.20. That is not a marginal improvement - it is a change of direction.
And what drives it is not magic but simple arithmetic: revenue grew 38%, sales costs 23%, and general and administrative fell. In a subscription business, when customer acquisition cost grows more slowly than the recurring revenue base, the margin opens by itself - and that is exactly what is happening here.
What I do hold on the other side is two things.
The first - sales and marketing is still 52.5% of revenue. More than half of every dollar goes to acquiring the next dollar. That ratio is normal in this sector, and it is also why the company still loses money.
And the second - the guidance for next quarter. $429 to $431 million against $427.3 reported. I do not conclude from this that the business is slowing - ARR says the opposite. But I do take from it that reported quarterly revenue is not a good measure for this business, and that anyone wanting to track it should look at ARR and at free cash flow - both, not one of them.
And what I would look for on the earnings call is an explanation of precisely that gap. It does not appear in the press release, and it is the most important question in the report.
(It is important to stress: this is my personal opinion only, and nothing herein constitutes a recommendation to take any action.)
