Rubrik, Inc. (RBRK) Q3 2026 Earnings Call Transcript
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Overview
The earnings call summary shows strong financial performance, with a 48% revenue increase and improved gross margins. The Q&A section highlights positive sentiment from analysts, with Rubrik's strategic focus on AI, identity, and cyber resilience being well-received. Despite some vague responses, the raised guidance and strategic partnerships, especially in AI, suggest optimism. The stock is likely to react positively in the short term, given the strong growth projections and strategic advancements, despite the lack of specific market cap data.
Key Financial Performance
Subscription ARR $1.35 billion, growing 34% year-over-year. Growth attributed to strong adoption of Rubrik Security Cloud and expansion in customer base.
Net New Subscription ARR $94 million, a record amount for Rubrik. Growth driven by increased customer acquisition and expansion.
Subscription Revenue $336 million, growing 52% year-over-year. Growth supported by strong ARR growth and cloud transformation.
Subscription NRR Over 120%, indicating strong customer retention and expansion dynamics. Growth supported by adoption of additional security products.
Customers with $100,000+ in Subscription ARR 2,638 customers, growing 27% year-over-year. Growth driven by increased adoption among large accounts.
Subscription ARR Contribution Margin Improved by approximately 1,400 basis points year-over-year, reaching positive 10%. Improvement driven by higher sales, scale benefits, and cost management.
Free Cash Flow $77 million, compared to $16 million in the prior year. Growth driven by higher sales, operating leverage, and optimized capital structure.
Total Revenue $350 million, up 48% year-over-year. Growth primarily benefited from strong ARR growth and cloud transformation.
Non-GAAP Gross Margin 83%, compared to 79% in the prior year. Improvement due to revenue outperformance and efficiency in customer support.
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Operating Highlights
Rubrik Security Cloud: Expanded to include data protection across data center, cloud, and SaaS workloads, leveraging a preemptive recovery engine for risk and remediation capabilities.
Rubrik DevOps Protection: Launched for Azure, DevOps, and GitHub to protect intellectual property and development pipelines.
Rubrik Agent Cloud (RAC): Introduced as a product suite for AI agent lifecycle management, including agent monitoring, governance, and remediation. Integrated with Microsoft Copilot Studio and AWS Bedrock.
Legacy Vendor Replacements: Replaced legacy backup vendors for major enterprises, including a large Asian bank and a Fortune 250 professional services firm.
Cloud Protection Momentum: Secured wins with a health and wellness tech company and a Fortune 150 biopharmaceuticals company, offering cost reductions and enhanced cyber resilience.
Subscription ARR Growth: Achieved $1.35 billion in subscription ARR, growing 34% year-over-year.
Profitability Improvement: Subscription ARR contribution margin improved by 1,400 basis points year-over-year.
Free Cash Flow: Generated a record $77 million in free cash flow this quarter.
AI Transformation: Positioned Rubrik as a leader in AI enterprise transformation, focusing on AI agent adoption and resilience.
Identity Resilience Expansion: Launched identity resilience solutions, including integrations with Okta and CrowdStrike, achieving $20 million in subscription ARR within three quarters.
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Risk or Challenges
Cybersecurity Threats: The evolving cyber landscape, particularly with AI enabling threat actors to inflict significantly more damage in less time, poses a major risk to enterprises. Organizations face challenges in preparing for and recovering from inevitable cyber breaches.
AI Transformation Risks: The rise of AI agents introduces risks such as lack of guardrails to monitor and contain their activities, potential misuse by bad actors, and operational errors (e.g., hallucinations). These risks could disrupt business processes and impact mission-critical applications.
Cloud and SaaS Protection Challenges: Organizations face difficulties in recovering quickly and seamlessly from sophisticated cyberattacks across multiple workloads, tools, and interfaces, especially in hybrid and multi-cloud environments.
Identity Resilience Risks: The increasing reliance on identity systems (e.g., Active Directory, Okta) makes them a target for cyberattacks. Misconfigurations and malicious changes in identity systems can lead to operational failures and prolonged recovery times.
Economic and Market Pressures: While not explicitly detailed, the company’s focus on maintaining profitability and managing costs suggests sensitivity to economic uncertainties and competitive pressures in the cybersecurity and AI markets.
Regulatory and Compliance Risks: The need to comply with data protection and cybersecurity regulations, especially in industries like government and healthcare, adds complexity and potential risks to operations.
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Guidance & Outlook
Financial Outlook for Q4 FY 2026: Revenue is expected to be between $341 million and $343 million, representing a 33% year-over-year growth or approximately 30% when normalized for material rights. Non-GAAP EPS is projected to be between negative $0.12 and negative $0.10, based on approximately 201 million weighted average shares outstanding.
Full Year FY 2026 Financial Guidance: Subscription ARR is expected to range between $1.439 billion and $1.453 billion, reflecting a year-over-year growth rate of approximately 32%. Total revenue is projected to be between $1.280 billion and $1.282 billion, up approximately 44% or 35% when normalized for material rights. Non-GAAP subscription ARR contribution margins are expected to be approximately 9%. Non-GAAP EPS is forecasted to be between negative $0.20 and negative $0.16, based on approximately 197 million weighted average shares outstanding. Free cash flow is anticipated to be between $194 million and $202 million.
Fiscal Year 2027 Revenue Growth: Revenue growth on a reported basis is expected to lag subscription ARR growth by a few percentage points due to the reduction in material rights revenue. However, normalized revenue growth is anticipated to exceed subscription ARR growth.
Investment Plans: Rubrik plans to continue investing in R&D to drive innovation in data security and AI. Additionally, go-to-market investments will target high ROI regions and verticals, as well as scaling newer innovations like the identity resilience platform and Rubrik Agent Cloud.
AI and Cybersecurity Market Opportunity: Rubrik aims to capitalize on the growing demand for AI and cybersecurity solutions, focusing on enterprise AI transformation and cyber resilience. The company plans to expand capabilities and investments in these areas to enable confident enterprise AI adoption.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:How additive can identity be to an average data protection deal, and is identity replacing any established tools or creating new budgets?
A:Identity is completely additive to the deal and represents a net new buyer for Rubrik, specifically targeting the CISO organization. In some cases, it replaces legacy or new-gen identity recovery vendors, while in others, it addresses white space. The product, launched in December last year, has seen 40% of new customers being net new to Rubrik.
Q:Can you comment on the non-SaaS ARR line and how it should be modeled going into Q4 and next year?
A:Rubrik is predominantly a cloud SaaS business, with cloud ARR at 87% of subscription and growing 53%. The non-cloud run contributes to cloud ARR growth but is declining and will continue to do so as the cloud business grows.
Q:What is driving the acceleration in bookings from legacy replacement?
A:The acceleration is driven by modernization ahead of AI and the growing threat of cyberattacks. Rubrik's unique platform for cyber recovery and its speed of recovery are key factors influencing CIOs and CISOs to replace legacy systems.
Q:How has the platform's expansion influenced Rubrik's overall sales strategy, and is there consideration for consumption-oriented models?
A:Rubrik's strategy has always been to provide a comprehensive platform where adopting multiple products increases value. The platform now includes Rubrik Security Cloud and Rubrik Agent Cloud. Rubrik is exploring ways to make it easier for customers to adopt and consume its products, focusing on customer delight and end-to-end cyber resilience.
Q:Why is Rubrik well-positioned to capture the opportunity in securing AI agents, and what else do customers need beyond Rubrik?
A:Rubrik focuses on data, identity, and business applications, which are essential for AI. Rubrik's platform provides operational guardrails, observability, and remediation for AI agents. It also offers secure data lakes and tools for fine-tuning AI models, making it a natural fit for managing AI agents.
Q:How are partnerships with AI platforms like Amazon Bedrock and Copilot Studio structured, and how will Rubrik monetize Rubrik Agent Cloud?
A:Rubrik has prebuilt go-to-market partnerships with hyperscalers, leveraging existing infrastructure and expanding into AI. Rubrik Agent Cloud is a separate product suite, currently in beta, with plans for monetization as a distinct offering.
Q:Why does the Q4 guide show a seasonally stronger growth rate than Q3, and what dynamics are driving this?
A:The Q4 guide reflects a 3%+ raise in net new ARR, driven by strong Q3 results and confidence in the pipeline. Rubrik plans on an annual basis, and quarterly movements are influenced by deal timing and pipeline dynamics.
Q:What are the penetration rates and future potential for Identity Recovery and Identity Resilience?
A:Identity Recovery is a widely applicable horizontal platform, and Identity Resilience adds capabilities to understand and remediate risks. Rubrik sees both as essential for full cyber resilience, with strong early adoption and customer excitement.
Q:Is Rubrik's platform playing a role in lowering cyber insurance premiums, and is the convergence of identity and data security a differentiator?
A:Rubrik's platform helps lower cyber insurance premiums by providing identity resilience and cyber recovery. Insurance companies have even become resellers of Rubrik's solutions, highlighting its importance in cyber resilience.
Q:What is the outlook for the agent market, and how does Rubrik plan to address it?
A:Rubrik focuses on operationalizing agents with governance controls and confidence. The market is early, but Rubrik plans to go GA soon and sees the CIO/CTO organization as the primary buyer. Rubrik aims to lead customers on the agentic journey.
Q:How should we think about the durability of Rubrik's NRR with the addition of new modules like Identity Resilience and Agent Cloud?
A:Rubrik's NRR remains strong at 120%+, driven by gross retention and multiple expansion vectors. While NRR may moderate at scale, it will remain strong due to the business drivers. Identity Resilience is expected to provide a price uplift, but more data is needed to quantify it.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the uplift from Identity Resilience compared to Identity Recovery, stating that it is early and more data points are needed. Additionally, while discussing the agent market, management acknowledged its early stage and provided limited specifics on competitive landscape and go-to-market strategies.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
CIO
CSOs
DevOps
Identity identity
Number agent
Okta
RAC
UK
activity
agency identity
agent adoption
agent transformation
application identity
backup solution
backup vendor
cloud cyber
cloud protection
customer win
cyber breach
effort
enterprise agent
enterprise transformation
fact
gratitude
identity resilience
innovation
landscape threat
mission application
momentum cloud
product suite
protection Azure
protection center
record subscription
recovery identity
recovery solution
remediation
state agency
technology cloud
threat actor
today Bipul
vendor gen
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The earnings call summary shows strong financial performance, with a 48% revenue increase and improved gross margins. The Q&A section highlights positive sentiment from analysts, with Rubrik's strategic focus on AI, identity, and cyber resilience being well-received. Despite some vague responses, the raised guidance and strategic partnerships, especially in AI, suggest optimism. The stock is likely to react positively in the short term, given the strong growth projections and strategic advancements, despite the lack of specific market cap data.
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The earnings call reveals strong financial performance, with significant revenue and ARR growth, improved cash flow, and enhanced margins. The strategic focus on cyber resilience and AI initiatives is promising. Despite some concerns about contract duration and unclear guidance in specific areas, the overall sentiment is bolstered by optimistic guidance and a strong competitive position. The Q&A session supports this with positive analyst sentiment and strategic insights. The stock is likely to see a positive reaction over the next two weeks.
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