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SEC filingRubrik's Q2 FY26 subscription revenue surged 55% YoY, driving a 64% gross profit increase and positive free cash flow.
Rubrik's Q2 FY26 results demonstrate strong momentum in its transition to a subscription-based data security platform. Total revenue for the three months ended July 31, 2025, was $309.9 million, a 51% increase compared to $204.9 million in the same period last year. This growth was primarily driven by a 55% increase in subscription revenue, which reached $297.0 million and now represents 96% of total revenue. The increase in subscription revenue was fueled by strong Subscription ARR growth (36% YoY to $1.25 billion) and a 7 percentage point benefit from non-recurring revenue related to customers exercising or forfeiting Subscription Credits. Maintenance revenue continued its expected decline, falling 61% to $2.0 million, as customers migrate to subscription offerings. Other revenue increased 27% to $10.9 million, driven by higher professional services.
Gross profit increased 64% to $246.3 million, with total gross margin expanding to 79% from 73% in the prior year. Subscription gross margin improved to 81% from 76%, benefiting from lower stock-based compensation expense in the current period, partially offset by higher hosting costs. Operating expenses grew at a slower pace than revenue, with total operating expenses increasing 7% to $340.8 million. Research and development expenses rose 7%, sales and marketing expenses increased 8%, and general and administrative expenses grew 4%. This operating leverage resulted in a significant improvement in loss from operations, which narrowed to $(94.5) million from $(168.3) million. Net loss improved to $(95.9) million from $(176.9) million, and net loss per share improved to $(0.49) from $(0.98).
The subscription segment is the primary growth engine, with revenue of $297.0 million (+55% YoY). This segment's performance is underpinned by strong Subscription ARR growth and a high average subscription dollar-based net retention rate (over 120%). The number of customers with $100,000 or more in Subscription ARR grew 27% to 2,505. Cloud ARR, a subset of Subscription ARR representing cloud-based subscriptions, grew even faster at 57% to $1.06 billion, highlighting the accelerating adoption of the RSC platform. The maintenance segment is in structural decline as expected, with revenue falling 61% to $2.0 million. The other segment, while smaller, grew 27% to $10.9 million, driven by professional services. The company expects other revenue as a percentage of total revenue to continue to decrease.
Management's outlook focuses on the continued transition to the RSC platform and the associated revenue recognition dynamics. The company expects subscription revenue to continue benefiting from customers exercising or forfeiting Subscription Credits for the remainder of fiscal 2026, though the magnitude may fluctuate quarterly. These benefits are expected to significantly decline after fiscal 2026. The transition of existing maintenance customers to subscription offerings is expected to be largely completed by the end of fiscal 2026. The company anticipates that the combination of these factors will limit and cause fluctuations in subscription revenue growth through fiscal 2027. Management highlighted that the improvement in free cash flow to $90.9 million (from $(69.1) million) was driven by higher sales, improved operating leverage, and optimizing its capital structure. The company believes its existing cash and cash equivalents ($1.52 billion as of July 31, 2025) will be sufficient to fund operating and capital needs for at least the next 12 months. Key strategic priorities include continuous innovation in the data security market, expanding the sales force, and increasing marketing efforts to capture market share.
As of July 31, 2025, Rubrik held $322.7M in cash and cash equivalents and $1,200.3M in short-term investments, totaling $1,523.0M in cash and marketable securities. The company reported a stockholders' deficit of $564.3M, reflecting accumulated deficits of $3.0B offset by additional paid-in capital of $2.5B. Total debt consisted solely of $1,128.5M in net convertible senior notes (principal $1.15B less unamortized discount and issuance costs of $21.5M), issued in June 2025 with a 0.00% coupon and maturing in 2030. The prior term loan of $327.9M was fully repaid and terminated, resulting in a $6.7M loss on extinguishment.
Total purchase commitments were $634.0M as of July 31, 2025. The largest component is a hosting service contract amended in June 2025, which extended the term to April 2029 and increased minimum spending by $375M to $595M, with $428.3M remaining. Other commitments of $205.7M primarily relate to hosting costs and software/subscription services. The company also has operating lease liabilities of $39.3M, with weighted-average remaining lease term of 3.3 years.
In the six months ended July 31, 2025, capital expenditures totaled $13.5M (2.3% of revenue), consisting of $6.3M for property and equipment and $7.1M for capitalized internal-use software. The company did not repurchase any shares or pay dividends. The $1.15B convertible note issuance (net proceeds $1.13B) was used to repay the $327.9M term loan and purchase $88.6M in capped call options to reduce potential dilution. No new buyback authorization was announced.
Rubrik operates as a single reportable segment: software and services. Segment revenue for the three months ended July 31, 2025 was $309.9M, up 51.2% YoY. Geographically, the Americas generated $225.3M (73%), EMEA $73.0M (24%), and APAC $11.5M (4%). The U.S. alone accounted for $216.6M (70% of total revenue). The chief operating decision maker uses consolidated net loss and functional expense ratios to allocate resources.
Operating cash flow (CFO) of $104M significantly improved from -$58M in the prior period, reflecting a turnaround driven by a $166M increase in deferred revenue and controlled operating expenses. Despite a net loss of $198M, non-cash charges (stock-based compensation $162M, depreciation $16M, amortization of deferred commissions $51M) and working capital dynamics (accounts receivable increase of $40M, deferred commissions increase of $49M) were managed effectively.
Capex (property and equipment and capitalized software) totaled $13M, up from $11M, representing a modest 12% of CFO, indicating low capital intensity. Free cash flow (not explicitly stated) would be approximately $91M, covering all financing outflows.
Investing activities were heavily negative at -$702M, primarily due to net purchases of investments ($678M) and a business combination ($10M). Financing activities generated $727M, largely from the issuance of convertible senior notes ($1,130M), partially offset by repayment of debt ($330M) and purchase of capped calls ($89M).
Anomalies: The large swing in deferred revenue (+$166M) suggests strong upfront collections, while accounts receivable grew, possibly indicating extended payment terms. No significant one-time tax payments were noted; interest paid was $12M. Overall, cash generation quality is solid with operating cash flows covering capex and investing needs, though heavily reliant on financing proceeds.