HubSpot, Inc.

for questions and answers after management's prepared remarks. If you would like to enter the queue for questions, you may do so by dialing star followed by 11 on your telephone keypad. I would now like to hand the conference over to Head of Investor Relations at HubSpot, Chuck McGlashing. Please go ahead.

Thanks, Operator.

Good afternoon and welcome to HubSpot's third quarter 2025 earnings conference call. Today, we'll be discussing the results announced in the press release that was issued after the market closed. With me on the call this afternoon is Yamini Rangan, our Chief Executive Officer, Dharmesh Shah, our co-founder and CTO, and Kate Bucher, our Chief Financial Officer. Before we start, I'd like to draw your attention to the Safe Harbor Statement included in today's press release. During this call, we'll make statements related to our business that may be considered forward-looking within the meaning of Section 27A of the Securities Exchange Act of 1933 as amended, In Section 21 of the Securities Exchange Act of 1934 as amended, all statements other than statements of historical fact are forward-looking statements, including those regarding management's expectations of future financial and operational performance and operational expenditures, expected growth, FX movement, and business outlook, including our financial guidance for the fourth fiscal quarter and full year 2025. Forward-looking statements reflect our views only as of today and Except as required by law, we undertake no obligation to update or revise these forward-looking statements. Please refer to the cautionary language in today's press release in our Form 10-Q, which will be filed with the SEC this afternoon for discussion of the risks and uncertainties that could cause actual results to differ materially from expectations. During the course of today's call, we'll refer to certain non-GAAP financial measures as defined by Regulation G. The GAAP financial measure most directly comparable to each non-GAAP financial measure used or discussed And reconciliation of the differences between such measures can be found within our third quarter 2025 earnings press release in the investor relations section of our website. Now, it's my pleasure to turn over the call to HubSpot's Chief Executive Officer, Yamini Rangan. Yamini?

Thank you, Chuck, and welcome, everyone. Today, I'll share our Q3 2025 results and the key trends driving our performance. I'll then dive into what we launched at InBalance. where we are seeing AI momentum and how we are reimagining marketing for the AI era. I'll wrap with our growth formula and how both our current and emerging levers create a durable path to growth. Let's dive in. Q3 was another strong quarter for HubSpot. Revenue grew 18.4% year over year in constant currency, reaching 810 million. We delivered solid operating leverage with an operating margin of 20%, reflecting our ability to balance growth and profitability. Total customers increased by 10,900 in the quarter, bringing our global customer base to nearly 279,000. Our results were powered by three drivers that continue to show up quarter after quarter. Platform consolidation, multi-hub adoption, and upmarket momentum. These themes are consistent, compounding, and reinforce the strength of HubSpot as we scale. HubSpot is winning as a truly unified customer platform. Companies are consolidating their go-to-market stacks on HubSpot to reduce total cost of ownership, gain a unified view of their customers, and accelerate AI innovation. Multi-hub adoption has become the norm across both new and existing customers. 43% of ProPlus installed base by ARR now subscribe to our three core hubs, up four points year over year. And 39% own four or more hubs, up six points. This expansion shows the value customers see in growing with HubSpot, and it is clear proof that our platform-first strategy is working. Our upmarket segment is humming. Larger companies are choosing HubSpot for its power, sophistication, and speed to value. Deals over 5K monthly recurring revenue grew 35% year-over-year, reflecting the payoff from years of product investment, strong partner alignment, and rising brand awareness amongst upmarket position makers. A great example is QS, a global education services company with over 1,000 employees. They replaced a 20-year-old legacy CRM, and chose HubSpot to power their AI-first transformation, citing our AI strategy, approach to agents, and pace of product innovation as key reasons for signing a multi-year, multi-hub agreement. AI innovation took center stage this quarter. The highlight was, of course, our annual inbound conference. It was great to bring together 13,000 people in person another 550,000 online from across our ecosystem. We launched more than 200 new updates and products that were well received by our customers and partners. The energy and feedback from inbound reinforced that our AI strategy is resonating and customers see HubSpot as the platform to help them grow and win with AI. Our strategy is simple, embed AI into Hubs our customers use every day, build agents that do work, and create brief assistant and connectors that turn data into insights. At Inbound, we launch new features in every hub, from AEO strategy tools in Content Hub to AI-powered email in Marketing Hub and AI meeting assistance in Sales Hub. We introduce Data Hub, which helps customers bring their data together in one place to get more value from AI. We enhanced our featured agents, customer agents and prospecting agents, launched a new data agent, and opened up Breeze Studio so customers can build and customize their own agents. And we became the first CRM to connect directly with the three leading LLMs, ChatGPT, Cloud, and Gemini. These innovations are delivering real results for customers. Customers who use our embedded AI features in Marketing Hub get better results, higher click-through rates, and over 50% higher lead conversion. Similarly, customers who use AI features in Sales Hub are winning almost 10% more deals. Our agents are also gaining strong adoption. Customer agent now has over 6,200 customers, up 48% from last quarter. an average resolution rate in the 60s prospecting agent has been activated by 6400 customers up 94 from last quarter and customers have used it to engage over 1 million prospects data agent is new but already has 1700 customers who have activated it brief assistant is the digital assistant for every go-to-market employee, and we have seen weekly active usage increase by 56% in the past six months as customers use it to summarize records and uncover insights that drive performance. A key part of our AI strategy is our LLM connector approach, and the momentum we're seeing here is impressive. Our ChatGPT connector has been activated by more than 47,000 customers. with 55% of them being ProPlus customers. And our cloud connector is already being used by over 6,000 customers. We believe that LLMs and HubSpot are powerful together and complement each other. Why? Well, there are three reasons. First, LLMs create insights. HubSpot provides the context that makes insights possible for go-to-market teams. LLMs are great at generating ideas from public data or a user prompt, but HubSpot is where the full go-to-market context lives. Every interaction, sales conversation, support ticket, marketing campaign, that context is necessary to turn generic AI output into insights that are accurate, relevant, and actionable. Second, LLMs generate ideas. HubSpot turns them into action within a business context. On their own, LLMs can tell you what to do. With HubSpot, you can actually do it. HubSpot is where companies build sophisticated workflows, launch multi-channel campaigns, and take actions to drive growth. And third, LLMs are great at single-player tasks. And HubSpot is built for multiplayer teams. HubSpot remembers each user, their role, preferences, teams, what they have permissions to access, and where they can take action. Now, stepping back, HubSpot houses AI and is the customer platform where intelligence and context are applied, acted on, and shared across teams. Platforms were sticky pre-AI. They will be even stickier in the AI era. OK. Let's talk about how we are reimagining marketing for the AI era and the opportunity it creates for HubSpot. Marketing landscape is changing fast. Search traffic is declining globally as AI overviews provide answers. Customers are spreading their attention across channels and visiting fewer websites. At the same time, AI is creating entirely new opportunities via LLMs like answer engine optimization or AEO. At HubSpot, we saw these shifts coming early. We've been diversifying marketing channels and experimenting with AEO, and that strategy is working. At Inbound, we introduced the Loop, our new playbook for growth in the AI era. It gives customers clear step-by-step guidance on how to drive growth by combining human creativity with AI efficiency. And the response has been incredibly strong. with 270 million impressions on Loop content and over 100,000 views of the Loop playbook experience. We also launched new products to help customers put the Loop into action, including Data Hub, which makes it easy to build ideal customer profiles, and Marketing Studio, which helps marketeers personalize content based on buyer intent. A key part of the loop is helping customers show up in AI-generated answers. Our AEO Grader and AEO Strategy tools launched at Inbound make it easy for businesses to come up with a strategy and improve their visibility in LLM. And last week, we announced an agreement to acquire XFunnel, one of the first and most complete platforms for tracking and improving how brands appear across LLM. XFunnel shows when and how often your brand is mentioned in AI-generated answers and provides clear guidance on how to strengthen that presence. We'll natively build XFunnel into HubSpot, giving our customers even more ways to understand, improve, and grow their brand visibility in the AI era. Now let's talk about our growth formula and how we are unlocking new levers for HubSpot. Our core growth levers continue to perform. Platform consolidation, multi-hub adoption, and upmarket traction. At the same time, emerging levers are gaining momentum, including seats pricing change, core seats, and credits. We introduced the core seat last year to give customers edit access to the smart CRM, the unified record that powers our platform, and that strategy is working. At Inbound, we made the core seat even more valuable by adding AI and data capabilities like breeze assistant, smart starts, projects, and enrichment data, and by unbundling the smart CRM so customers can start right there. Our vision is to make the core seat essential with AI and data value for every go-to-market employee. Credits are another powerful emerging lever. They are our universal usage-based pricing system, covering AI agent actions and data hub sinks, and soon will extend across the entire platform. Credits tie our growth directly to customer value, and as customers use more data, use more ai and automation inside hubspot they'll grow with us together core seats and credits expand how hubspot captures value building on our durable foundation and creating a long runway for growth as a wrap-up i want to share our conviction that hubspot is positioned to lead in the ai era and drive durable long-term growth we are innovating rapidly transforming into an agentic customer platform and operating efficiently at AI speed. We have durable differentiators and growth levers, and we deeply understand our segment and what small and medium businesses need to grow with AI. We are uncovering new ways to drive efficiency and finding signals to show our customers what's possible with AI. I'm more confident than ever in our strategy, and our ability to deliver value for customers in this new era. Thank you to all our customers, partners, and shareholders for your continued support. And a huge thank you to all HubSpotters around the world for staying focused on solving for our customers every single day. With that, I'll turn the call over to Kate to take you through our Q3 financial results in more detail.

Kate? Thanks, Jamini. Let's turn to our third quarter 2025 financial results. Q3 revenue grew 18% year-over-year in constant currency and 21% on an as-reported basis. Subscription revenue grew 21% year-over-year. Will services and other revenue increase 19% on an as-reported basis? Q3 domestic revenue grew 17% year-over-year. International revenue growth was 20% in constant currency and 25% as-reported. representing 49% of total revenue. We added 10,900 net new customers in Q3, bringing our total customer count to 279,000, growing 17% year over year. Average subscription revenue per customer was $11,600 in Q3, up a point year over year in constant currency, and up three points on an as-reported basis. While we're happy with the strong net ads in Q3, we continue to expect net additions to be in the range of 9 to 10,000 in Q4, and for ASRPC growth in constant currency to be up roughly a point. Customer dollar retention remained in the high 80s in Q3, and net revenue retention was flat sequentially at 103% as expected. As I shared last quarter, we expect to see a step up in net revenue retention in Q4. resulting in a couple-point improvement in net revenue retention for the full year of 2025. Calculated billings were $804 million in Q3, growing 19% year-over-year in constant currency and 18% on an as-reported basis. The remainder of my comments will refer to non-GAAP measures. Q3 operating margin was 20%, up one point compared to the year-ago period and three points sequentially. Net income was $140 million in Q3, or $2.66 per fully diluted share. Free cash flow was $147 million, or 18% of revenue in Q3. Our cash and marketable securities totaled $1.7 billion at the end of September. In Q3, we repurchased 780,000 shares of common stock under our share repurchase program, representing $375 million. With that, let's dive into our guidance for the fourth quarter and full year of 2025. For the fourth quarter, total as reported revenue is expected to be in the range of $828 to $830 million, up 16% year over year in constant currency and 18% on an as reported basis. Non-GAAP operating profit is expected to be between $183 and $184 million, representing a 22% operating profit margin. Non-GAAP diluted net income per share is expected to be between $2.97 and $2.99. This assumes 52.7 million fully diluted shares outstanding. And for the full year of 2025, total as reported revenue is now expected to be in the range of $3.113 to $3.115 billion, up 18% year-over-year in constant currency and 19% on an as-reported basis. Non-GAAP operating profit is now expected to be in the range of $574 to $575 million, representing an 18% operating profit margin. Non-GAAP diluted net income per share is now expected to be between $9.60 and $9.62, This assumes 53.2 million fully diluted shares outstanding. As you adjust your models, please keep in mind the following. We now expect CapEx as a percentage of revenue to be 6% for the full year of 2025, driven by higher capitalized software expenses. And we still expect free cash flow to be about $580 million for the full year of 2025. With that, I will turn the call back over to the operator for questions.

Thank you. If you would like to ask a question, please dial star followed by 11 on your telephone keypad now. If you change your mind, please dial star followed by 11 again to exit the queue. When preparing to ask your question, please ensure your phone is unmuted and limit yourself to one question per person. One moment for our first question. First question comes from the line of Samad Sumana from Jefferies.

Hi, good evening, and thanks for taking my question. So, Yamini, my question is for you. I think the core focus of investors is HubSpot getting back to 20% growth, and I think investors are pretty excited, and myself included, seeing that accelerating ARR slide at the analyst day, we might have gotten ahead of ourselves, but how do you think about the path to get back to 20% growth? Can the current focus on that 2000 and below segment support that level of growth? Or do you think that hitting the gas on enterprise is necessary? Maybe just help us think through that. And again, as always, appreciate you taking my question.

Yeah, thanks a lot, Samad. I appreciate it. Look, we believe we can grow faster than where we are today, and we are focused on doing it in a durable, disciplined way. The thing I would point out is that net new ARR is the leading indicator that we shared with you, and revenue is the lagging indicator which will flow through. Now, if I step back and look at the foundation, our core growth drivers are strong and they are proven. We have a playbook that works which is platform consolidation, moving up market, and multi-hub momentum. And you can see that in our customer retention numbers, the seat upgrades that are consistent and the large deal momentum that are compounding quarter after quarter. And we're going to continue to expand our sales capacity as well as the productivity across all of our segments to capture that opportunity. We have a set of emerging growth drivers that strengthen that outlook further and put us on a path of durable growth. And we shared that at Analyst Day, but I'll kind of walk through it. The pricing changes that we drove last year is a tailwind. We are seeing seat upgrades pick up. And as the change rolls through our install base this year and next year, we'll continue to see growth from that. And AI... is a multi-year tailwind. We are in the very early stages of this whole innovation cycle playing out, and we are acting with urgency to cement a leadership position and set ourselves up for long-term growth. And specifically with AI, we see the opportunity to monetize both through seats as well as credits. Now, core seats, which we talked about at Analyst Day, it's becoming more valuable. And it is embedded with AI data platform value. And that opens up a large opportunity. Credits. gives us a new way to monetize usage for customers as they consume more AI and agent-driven actions. So look, we are very excited about the emerging drivers, the strengths that we see within the emerging drivers, and we're really excited about the upmarket momentum. We think we have plenty of time to be able to drive and grow faster than where we are. Most importantly, we have a track record of consistent execution and helping our customers grow, and that gives us confidence that HubSpot can be a durable growth business for years to come.

Thank you. One moment for our next question. Our next question comes from the line of Mark Murphy from J.P. Morgan.

Thank you. Yamini, several of your partners have said that they're passionate pretty encouraged about their own growth potential moving into 2026. I'm curious if you see any signs that Google's AI overviews are actually driving an extra wave of interest for HubSpot to try to use your loop concept and your answer engine optimization tools so that they can gain their own kind of visibility in AI-generated answers. Is there anything tangible there that you can speak to?

Mark, thanks a lot for the question, and thanks, Aldous, for talking to our partners to uncover the underlying trends. Look, I would say marketing and the trends that we are seeing within marketing is a big opportunity for our customers and for HubSpot to grow. And specifically, you talked about what is happening within marketing, but really we see it as a couple of things. One, AI overviews are providing answers, which means website visits are declining. And that means there is a need for a new playbook to diversify the channels that you're present in, including AEO. And that is exactly what we launched at Inbound. At Inbound, we launched the playbook, which you referenced, which is the loop. And I would say that the response from customers and partners have exceeded our expectation across every metric in terms of impressions. We had 270 million impressions, playbook impressions, number of conversations it's generating. And specifically, there are three parts of the playbook that are resonating with customers as well as partners. The first one is diversifying channels. And the number one thing that you can do to counter SEO volume decline is to diversify your channels into YouTube and Insta and podcasts and newsletters, and that is resonating. The second is, how do you actually use AI for deeper segmentation and personalization? Look, there's just a lot of talk about AI driving disruption, but the bigger story is how ai can be helpful in using intent data to drive better conversion and that is resonating and then of course building visibility in lms through answer engine optimization that you mentioned and all of that is resonating and we're seeing you know lots of conversations within aeo aeo is early We got in earlier and we have an AEO grader out in the market that has been used by 70,000 customers already. Our AEO strategy tools are getting used in order to look at this nascent channel. And last week we announced XFunnel, which completes our platform of providing visibility to customers on which LLMs they're showing up and how to improve their presence within that. And so, look, if I step back, SEO is a big disruption, but this is also one of the biggest opportunities for our customers to figure out how to grow, and it is one of the biggest opportunities for HubSpot, which is why we have the playbook, we have products, and we have the whole partner ecosystem activated to deliver on that, and we're super excited about the opportunity.

Thank you. One moment for our next question. Our next question comes from the line of Parker Lane from Stifel.

Hi, good afternoon. Thanks for taking the question. Yamini, you continue to point to platform consolidation as one of the key drivers of the business. Traditionally, cost savings were one of the things that drove people towards that consolidation. How often are you seeing with the launch of Breeze and these new agents you brought to the platform that a desire to really embrace agents and have a unified data source is the reason for consolidation versus just traditional cost savings?

Yeah, that's a fantastic question. I think equal parts. I would say three reasons why customers talk to us about consolidating on a platform. The first one, as you said, is Total cost of ownership. And remember, we've come from a period of people buying a lot of point solutions and tools and TCO kind of like bloating up. And that continues to be the number one reason. The second reason is actually getting all of the customer data and context into a unified platform. Whether they're leveraging AI or they're just, you know, getting their whole digitization journey going, you need data and you need customer context across the whole journey. And if you have a lot of point solutions and a lot of point agents, you just do not have the visibility to drive insights. And then I would say the third reason is really AI and wanting to adopt AI. And while AI is not always the primary driver, it is a clear pool in terms of the conversations. And what we hear from prospects, from customers is that they want one platform that has all of the data. And they want to be able to have a clear roadmap so that they can future-proof their investments. And they like what we are doing with our AI strategy, which is embedding AI across all of the hubs and making it easier for our customers to build on that roadmap. So I see all three reasons probably kind of split equally.

Thank you. One moment for our next question. Our next question comes from the line of Alex Zukin from Wolf Research.

Hey, guys. Thanks for taking the question. I guess, Yami, I'll be a little bit direct. If I look at the magnitude of the beat this quarter, it was a little bit lower than I think some people were thinking about. But at the same time, the raise for Q4 is, I think, the strongest raise on a constant currency basis that you guys have ever done. So is there any moving pieces that you can comment on? And Billings, I think, was a little bit of a decel. But then net new ARR, as you showed us that slide at the analyst day, was really, really strong in the first half and seemingly in Q2. So any commentary on a forward-looking metric basis around how net new ARR performed in 3Q maybe to disentangle some of the in-quarter versus guide confidence dimensions?

Yeah, Alex, it's Kate. Maybe I'll take this, and if Yamini has more to add, she's welcome to do at the end. You know, we did outperform in Q3. We executed really well. And the outperformance was driven by all the things you heard Yamini talk about, continued strength of market, continued strength with multi-hub, and continued strong seed expansion. We also saw some incremental FX tailwind versus what we expected when we guided last quarter, and we fully flowed that through our revised 2025 guidance. I think you heard from Yamini, and I've talked about it in the past, as well as at Analyst Day. It will take some time for our strong net new AR growth to translate into an inflection in revenue growth, just given the scale and size of our install base. but we've seen stability here over the last few quarters. All that said, our approach to guidance was consistent this quarter.

Thank you. One moment for our next question. Our next question comes in the line of Keith Bachman from BMO.

Yes, thank you very much. Actually, it's a good segue from Alex. I wanted to ask a similar question, but I'll phrase it differently in that billings growth is one metric, but the consequence in billings growth is generally in the last six quarters been in a range of the highs 21%, the lows 19%. So in that range for six straight quarters. And so, A, you've talked about a lot of goodness that's coming through the model, but what's the offset? What's been constraining, and particularly this quarter with 19%, which was a little bit lower beat than you've had in the past quarter? What's not going as well that's constraining it? And then also, Kate, per your last comment, you've mentioned that net new ARR has been strong, but it takes a while. But maybe you could put a little more context around that in that the stock's down pretty materially here in the after hours. How should investors think about when will the net new be fulfilling enough, if you will, to then translate or show up into the revenue growth? Any timing expectations that we should put in consideration? Thank you very much.

Yeah, maybe I'll start with the billings question because I want to make sure that we are sort of aligned with the metric and our expectations for billings. My baseline expectation is that constant currency revenue growth and constant currency billings growth are going to track each other really closely. And that's because more than 90% of our billings come from revenue in period. Billings, as you know, is a bit noisier. It shows impacts of FX. It shows impacts of the mix of net new ARR. And it shows duration pretty acutely. And when you kind of look at what's happening in these factors this quarter versus last quarter, like we had a bit of a mixed shift towards install-based selling, which has lower months up front, and we saw less of a benefit of expanding durations versus what we saw in Q2. And so as a result, what you're seeing in Billings growth is something that is still above revenue growth in constant currency, but just a little bit closer than what we saw in Q2. And for Q4, you know, there's always going to be some variability here, but I would expect that constant currency billings and revenue are going to track each other.

Thank you.

Do you want to address the net new ARR question as well?

Yeah. I mean, I think that what we have said, and you said it yourself, is like net new ARR is the leading metric. revenue is the lagging metric. And it will take repeating quarters of net new ARR growth above revenue for revenue to inflect. Net new ARR hit its low point in the first half of 2023. We saw a steady increase throughout 2024. And since the back half of 2024 through the first half of 2025, as we shared in analyst day, it has been above revenue growth. And so what we have seen is that our install base ARR has started to inflect, and then revenue will follow the inflection of the core install base. It just will take time to get there.

Thank you. One moment for our next question. Our next question comes from the line of Elizabeth Porter from Morgan Stanley.

Great. Thank you very much. I wanted to follow up on some of the emerging drivers. You called out the customer adoption of HubSpot agents has been strong, and credits are going to be a lever for growth in the future. Although some of the subscription plans currently include some usage credits, among your early adopters, are customers using up those credits, and where are we on the path for customers to purchase additional ones? Just overall, some of the trends you're seeing in credit consumption or usage intensity. that can give confidence for that lever to become a larger impact in the near to medium term. Thank you. Hey, Elizabeth.

Thank you. Thank you for that question. We launched HubSpot credits, and as everybody knows, that is our universal usage-based pricing system. Today, it includes agent actions. for any agent that is out in general availability. And it also includes data hub things. Those are the two things. And as we go into the future, we'll add more and more usage-based features into that system. Now, we have a clear framework for how we monetize credit. We focus on product and feature activation. Then we drive repeat usage. then consistent customer value, and from then on, we monetize. And having this disciplined, structured approach ensures that when customers start paying for usage with credits, it's because they are getting clear value and repeatable value. Now, in terms of the patterns that we're seeing for credits monetization, it's been just about a quarter, but customer agent is the strong growth driver of credits. It's delivering value. It's highly retentive. So when customers adopt customer agents, they continue to use it. We're seeing positive signals on credit growth, which is they start with the included credits and they continue to grow beyond the included credits with customer agents. The second one is data hub sinks. This is where when you bring in data and when you use that data, then it consumes credit. That's the second area where we're beginning to see credit consumption. And then the third is prospecting agent. This is one where our customers use it to research accounts and scale their outreach campaigns. And we're beginning to see clear trends. And I shared some of the adoption trends metrics, which is also driving credit adoption. Look, it's early days, but we are very pleased with the progress so far in terms of credit consumption. The one thing that I will point out, and it's an important point, is that credits are just one way for us to monetize AI. Broadly, if you step back and think about it, credit monetization does not equal AI monetization at the spot. And that's because we have embedded AI. And when that embedded AI drives value, then we see it in attach rates as well as seat upgrades, which we have been seeing now for a few quarters. We're also driving AI value within core seats. And we will see the monetization there as we shared in analyst day. And we'll continue to monetize usage-based components with credit. So overall, we feel very good about our AI strategy and the monetization strategy. And this is a solid foundation for credits to emerge as a lever for growth.

Thank you. One moment for our next question. Our next question comes from the line of Tyler Radka from Citi.

Yes, thank you very much for taking the question. One clarification and then sort of a product question. So just on the clarification, I know there's been a lot of questions just around the net new ARR trends. And I guess the clarification is did the growth rate in net new ARR that you observed in the first half, did that, continue or perhaps accelerate or decelerate into 3Q. And then, Yamini, you talked about a lot of customers, I think 47,000 customers using the ChatGPT connector. Just curious if you're seeing any interesting usage or expansion trends for customers that are using that versus customers that are not. Thank you.

Yeah, Tyler, I'll start with a short answer to your question on net new ARR growth. In Q3, net new ARR growth did remain above constant currency revenue growth.

Yep. And then on the second part of the question in terms of the LLM connectors and what kinds of use cases and what types of trends we are seeing there, look, I think we'll start with why we built these connectors. It's because our customers and prospects are spending a ton of time in LLMs, and we want to bring the insights from HubSpot regarding their business and growth opportunities there. And the more deeper reason is this. You know, LLMs are basically the new AI operating system. And just like you had browser wars and mobile wars, there will be a clear winner in the AI operating system. Now, that has just a lot of implications across the industry, but there's a very specific implication for our customers and our ecosystem, which is that LLMs will be a way in which companies will be found. And that means it will become an AI referral source for companies. We see this in our AEO efforts. We're seeing this in our customers' AEO efforts. And that is why we want to be the best platform that enables that growth. And so that's the reason. In terms of the traction, I shared some numbers. ChatGPT Connector is our fastest platform. growing app in five years, 47,000 installations. And if I look at the patterns, I see a lot of directors and about using it for meeting prep. So they're using it to understand pipeline trends before they go into a weekly meeting or a board meeting. They are using it to get insights on what changed week to week or month to month. The second pattern that we see is doing deeper research and then being able to take actions within HubSpot. For example, we were talking to customer basement group. They used a prompt from our library to identify the highest converting persona And then they built a nurture campaign in HubSpot and that campaign open rates actually jumped from 8% to 40%. So huge improvement in terms of conversion rates. So we're seeing customers ask questions, get insights, and then begin to take the action within HubSpot. And that's the pattern that we want to see. Get insights and then drive actions to drive growth within HubSpot. And very encouraged by the patterns there.

Thank you. One moment for our next question. Our next question comes from the line of Brad Sills from Bank of America.

Wonderful. Thank you so much. I wanted to ask a question about ASP growth. It's been kind of bumping along at this kind of flattish level for several quarters. Historically, before we entered into some of these macro pressures, it was more in the 12% to 15% range. My question is what would it take to get ASP growth back to, you know, back in the green and moving up north? You know, what are some of the unlocks there? I think in the past, Kate, you've talked about how you're still seeing some pressure on those upgrades, so maybe an update on that trend as well. Thank you.

Yes. Thanks, Brad, for the question. I think, you know, you know that there are a number of factors that drive ASRPC and, you know, It is also a lagging indicator because revenue is the numerator for ASRPC. It's impacted by the volume and mix of our customers. It's impacted by new ASPs and, as you rightly point out, upgrades. We continue to see, you know, a number of headwinds and a number of tailwinds around ASRPC growth. They're all, you know, going to sound very familiar to you. The headwinds are robust starter additions and the lower ASPs associated with new customers post our pricing change in 2024. In terms of tailwinds, we continue to see momentum in large deals, multi-hub adoption, and then increasingly seat upgrades and credits. We did see a bit of inflection in the third quarter, you know, with constant currency growth of ASRBC up 1%. We expect to see that continue into Q4.

Thank you. One moment for our next question. Our next question comes from the line of Rushi Jaluria from RBC.

Oh, wonderful. Thanks. It's Rushi Jaluria from RBC here. Thanks so much for taking my question. I wanted to dive a little bit deeper into kind of the existing traction that you're seeing with, you know, your current AI products and agents, right, including the most recent announcements out of Inbound. Obviously, you've seen some really good traction there. As we kind of think about, you know, new products that you're going to be working on and getting out into the market, Totally understand it's going to take a while before this turns into direct monetization, you know, whether through credits or any other way. But how are you internally gauging the success of newer AI offerings and working directly with your customers to not only make sure that it's delivering kind of the value that I think they expect out of you, but also that the way they're using it is aligned with future contemplated pricing mechanisms that you have in place? Thanks.

Hey, Rishi, that's a great question. And I think I'll kind of start with our strategy, the momentum, and then how we are driving customer adoption, because that is the right question to be digging into. If we step back, our strategy for AI has been consistent and clear, which is we want to embed AI into all of our hubs and platforms. We want to build agents that deliver work for our customers. And we want to deliver a brief assistant and connectors that convert data into insights. And the strategy has just been consistent across the board. So when we look at momentum as well as traction in terms of the strategy, we look at all factors there. So the first thing is, is the embedded strategy working? And the answer for us is very clear because embedded features are being used across marketing hubs, sales hubs, service hubs. They are improving the outcomes for our customers. Things like conversion rate that I mentioned before, win rate, an improvement in 10% win rate in sales. I mean, previously before AI, I don't think that types of you know, outcome would have been possible with Sales Hub. I think that's a huge improvement for our customers. And similarly, Service Hub customers who are using AI see much better ticket closure as well as much better customer sentiment. So all of that translates into much better attach rates for us, which we have seen with Content Hub, which we've seen with Service Hub, as well as adoption of Sales Seats as well as Service Hub Seats. The second part of the strategy, which is probably earlier in the journey, is the agent journey. All of us within the industry, we know we're building agents that do work, and the adoption is slightly less than the embedded products. And for us, the three featured agents that we launched, which is customer agent, prospecting agent, and data agent, we look at what are the signs in terms of adoption as well as repeat usage. And customer agent is the most mature there. It has been in GA the longest, 6,200 customers with 62 plus percent resolution rate and credit consumptions that are really in the pattern that we expect. So really clear trajectory in terms of the agents. And you ask broadly about customer adoption. Part of what is happening is that when you look at AI, people have roadmaps, but they're on very different portions of the adoption journey. So we work with our partners, we work with our customer success managers, and we work with our customers to help them build a roadmap. And they like our strategy. They like that they're getting a platform that is future-proofed. And all of that leads to traction. I continue to believe that AI is early and this is going to play out for the next five years, 10 years. And we are setting ourselves up to be leaders within this and doing it in a way where we focus on small medium businesses and helping them grow with this new technology. So very confident there.

Thank you. One moment for our next question. Our next question comes from the line of Gabriela Borges from Goldman Sachs.

Hi, good afternoon.

Thank you.

For either Yamini or Dharmesh, I would love to hear you talk a little bit about what you see in terms of customer data estates and the quality of those data estates. Yamini, you mentioned a handful of times this idea of converting data into insights. How would you describe customer readiness from a data hygiene standpoint? Is there a period of time where they have to work to clean up their data and or work to standardize a HubSpot? I think you have a really unique position because of how your hubs are organically connected together. So maybe just a little more on what you're seeing in the environment with respect to that. Thank you.

Yeah, I'll start there, Gabriela, and I'm sure Dharmesh can add to it. That's a very broad question in terms of the state of data. And I would probably say that it's multiple... The state of data maturity for a customer depends on how mature they are within their stack. And I would maybe talk about... The first is, if they already have data, is it high quality? And within our customer base, if they have adopted... all of our hubs then it tends to be in higher quality versus having point you know solutions that they're trying to bring together but partly we also have data hub that we launched at inbound that helps with improving data quality that is exactly what you know the purpose is for data hub uh the second is it's not just about data quality can you get data across the customer journey And can you build a context layer on top of that data that enables you to do more with AI? And this is where I have a very strong point of view that platforms that bring together data and help build a customer context, they're going to be able to get much more done with AI. And then the third, which you didn't answer the question, but comes up in all our customer conversations is unstructured data. You can do a lot more with AI. sales conversations with service conversations, pulling unstructured data together. And that is exactly where HubSpot shines, our ability to bring better quality data, to bring data across the entire customer journey, and to add both structured and unstructured data. Those three things are the foundation to get anything done with AI. And that's one of the reasons why we brought Data Hub to the forefront at Inbound.

Thank you. One moment for our next question. Our next question comes from the line of Taylor McGinnis from UBS.

Yeah, hi. Thanks so much for taking my question. Kate, maybe for you, I think if I heard you correctly, you reiterated the outlook for NRR to be a couple points higher, you know, this year than last year. And if I look at, you know, what that potentially implies for 4Q, it looks like it could be closer to 106. So one, just wanted to check if I'm doing that math right. And if that is right, that would be probably the biggest uptick in NRR that you guys have seen over the last, you know, several quarters. So is that, you know, an indicator of some of what you're talking about of, you know, like seed expansion activity and, you know, the new pricing model to throw through, like evidence that you're starting to see that materialize into NRR?

numbers and you know that alone you know potentially is a leading indicator or you know maybe you can just talk about like what are the the puts and takes in that number and how to think about it going into next year thanks yes I appreciate the question thank you and you are you are right I did reiterate that we expect network we continue to expect net revenue retention to be of a couple points this year and it does imply a nice step up in NRR into q4 The drivers of net revenue retention are the same as they've been all year. We continue to see healthy customer dollar retention. We've seen very stable downgrades, which is a nice indicator that customers have right-sized. And then we've seen strong seat upgrades across both sales and service seats as well as core seats. And we have also seen a benefit, and we'll continue into Q4 to see the benefit of the pricing increase for customers post their migration onto the new model.

Thank you. One moment for our next question. Our next question comes from the line of Ramo Lencho from Barclays.

Hey, guys. This is Damon Cobb, and I'm from Ramo Lencho. Thanks for taking the question. I guess piggybacking off the last question, I know it might be a little early for 2026. Would you be able to tell us a little bit about how you're thinking about net retention? With stronger pricing, healthier renewal rates on the new SEEDS model, multi-product adoption, is there any reason to believe that this metric does not improve? Thank you.

Yeah, I appreciate the question. I'm sure that you're not surprised when I'll start by saying that I'm not going to make any specific comments around 2026. That said, we do think that there's a path for further improvement on net revenue retention over the longer term. We talked about some of the drivers, but I'll reiterate them for the sake of completeness here. We are very confident that we can continue to support really healthy customer dollar retention. We've talked about the fact that we've seen downgrades stabilize nicely over the last year or so, and actually cancellation and downgrades together were a benefit to net revenue retention in 2024. The pricing model change is resulting in both stronger seat upgrade motions, but also we will expect to see a continued tailwind to net revenue retention from the pricing changes on the remaining 50% of our install base that will go through the renewal post the end of 2025. And then finally, Yamini talked a lot about the core seats and credits as emerging drivers, and they will begin to contribute in a more meaningful way in 2026. So again, nothing specific on 2026, but I do believe that this is a business that's capable of delivering higher net revenue retention.

Thank you. One moment for our next question. Our next question comes from the line of Steve Koenig from Macquarie Capital.

Great. Hey, thanks for taking my question. You know, some of your peers have also talked about expectation of net new ARR growth higher than revenue, but it's more of an anticipation than historically seeing that. and predicated on sales capacity expansion as being an important driver. I'm wondering, you touched upon many of the drivers that you see for potential acceleration, but I'm also curious, to what extent is your sales capacity or execution tactics, aside from the pricing model change, to what extent are you lined up

to uh for further acceleration or you know or changes to that strategy uh might be might be helping you thanks for taking my question i i really like that question uh i think that you know it's it's really good to ask us about the sales capacity and how we're teed up and look we have been investing in two fronts one uh in headcount and we have consistently hired sales capacity in regions, in segments where we see clear opportunity and that has continued and that will likely continue into 2026. We see further opportunities for expanding sales capacity. The second thing which I'm really excited about is all the investments that we have made in terms of AI to transform our own go-to-market has had a clear impact in terms of sales productivity. how we are using intent data to drive our prospecting, how we are using data during the deal process, we call it guided selling. So internally, every sales rep knows the insights that they need, they prepare better for meetings, they follow up faster for meetings, they have much better competitive insights during the call and post-call, and all of that has had measurable impact in terms of sales productivity. So both sales capacity and sales productivity are, you know, really humming and we see that continue going into 2026.

So we feel pretty good about that. Thank you. One moment for our next question. Our next question comes from the line of Brian Peterson from Raymond James.

Thanks for taking the question. So I'd love to understand from your perspective what you're seeing in terms of demand trends, maybe a little bit more by geography. We saw international was a little bit stronger this quarter. We picked it up in some of our partner checks. But as we think about the growth opportunity going forward, anything you call out in terms of international versus North America in terms of growth expectations? Thanks, guys.

Yeah, I appreciate the question. Look, we have not seen any material changes in terms of segments or industries or geographies. It continues to be very consistent with prior quarters. Now, if I look at our pipeline, we see a handful of trends that is not geo-based, but generally based on the products that we have launched and the momentum we are seeing. We saw very positive response from inbound. Specifically, customers are excited about the loop. They are excited about Data Hub, and I explained why Data Hub is almost important and critical for value from AI. And I see a lot of our customers and prospects talking to us about customer agent, prospecting agent. All of that has landed really well. I continue to see multi-hub adoption as well as upmarket momentum. The large deal momentum this year has been consistent and compounding. And we see that both in Q3 as well as entering into the Q4 in terms of the pipeline. And that has been a consistent driver. So not as much as segment or geo change, but really consistency in what is driving the demand across all of these regions.

And Brian, just one small point to make on the domestic versus international growth You will just remember that the legacy Clearbit business is about a half a point of headwind to our growth in 2025. All of that business is domestic business, and so it's about a one-point headwind to domestic growth this year.

Thank you. One moment for our next question. Our next question comes from the line of Jackson Adder from KeyBank Capital Markets.

Oh, great. Thanks for taking our questions, guys. I was just curious to ask on two things as far as the fourth quarter is concerned. Number one is, is there anything kind of seasonally here in the fourth quarter? I know you guys aren't, you know, giant deal dependent, but is there anything in terms of the fourth quarter booking that could impact the timing, Kate, of when you expect that net new piece to be kind of large enough to accelerate growth as we head into 26? And then also, I think we're getting into the heart of the pricing renewals for some of your larger customers. And so just curious whether the pricing, how those larger customers are handling the pricing increases, whether it's firmer or softer than you expected. Thank you.

Yeah, thanks for the question. Look, I think that Q4 is always our most important quarter of the year in terms of being the largest net new ARR quarter, with November and obviously December being pretty critical. We do see a lot of the migrated customers coming up for renewal at the end of this year, and so that will impact Q4 a bit. And so far, they are performing as reported over the last couple of quarters.

Thank you. This concludes the HubSpot Q3 2025 earnings call. Thank you to everyone who was able to join us today. You may now disconnect your lines.