HubSpot earnings on deck: AI pivot faces SMB demand test

HubSpot is set to release its third-quarter earnings on Wednesday, prompting investors to assess the impact of the company's shift towards an AI-driven agentic platform amid declining demand from small businesses. Analysts anticipate earnings per share of $3.27 and revenue of $925.31 million, marking year-over-year growth of 22% and 14%, respectively.

These projections represent a modest uptick from the second quarter, where HubSpot reported $3.26 per share in earnings on $911.7 million in revenue. Analysts have assigned a "buy" rating to the stock, with a mean price target of $257.67, suggesting a 14% increase from the present share price of $226.17. Despite stable EPS and revenue estimates, Wall Street's sentiment has been tempered by four firms—UBS, Barclays, JPMorgan, and Raymond James—downgrading HubSpot in October over execution risk concerns.

HubSpot's substantial workforce reduction, announced in early October, affects around 660 employees, demonstrating the urgency to streamline resources around Breeze AI agent offerings. The company's transition to AI has been met with mixed reception, with UBS pointing to uneven small-business demand, stiffer competition, and early AI monetization as contributing factors to the downgrade.

Cantor Fitzgerald noted that HubSpot is experimenting with different pricing and packaging, with a new model under test in Europe. Customer acquisition trends will be closely monitored following the company's revised quarterly net customer additions guidance to 5,000-6,000, down from the previous range of 9,000-10,000. Stifel analyst J. Parker Lane expects a modest beat of 1-2 percentage points with a quarter-over-quarter slowdown, highlighting the near-term risks introduced by the pricing evolution.

Margin improvement stemming from the workforce reduction will also be under scrutiny. Jefferies estimates that the restructuring could lower operating expenses by approximately $126 million annually, although the company will record $65 million to $75 million in related charges, negatively impacting GAAP earnings. Despite beating revenue expectations in the second quarter by 1.5%, the modest outperformance failed to impress investors accustomed to larger beats.

HubSpot reaffirmed its third-quarter and full-year 2026 guidance during the announcement of the workforce reduction, indicating management's confidence in stabilizing the business. With shares plummeting over 50% from their 52-week high of $476.63, the earnings report will determine if HubSpot's proactive transformation, hailed by some analysts as crucial for long-term competitiveness, can revive investor confidence amidst a challenging landscape for software companies catering to small and mid-sized businesses.