Qualys (QLYS -0.21%), a provider of cloud-based IT, security, and compliance solutions, released its earnings for the second quarter of fiscal 2025 on August 5, 2025. The report showed that the company outpaced analyst forecasts for both non-GAAP EPS and GAAP revenue, delivering non-GAAP earnings per share of $1.68, compared to expectations of $1.48, and GAAP revenue of $164.1 million exceeded the consensus estimate of $161.23 million. Despite these beats, a drop in operating cash flow stood out as a concern. Overall, the period reflected continuing growth in key areas alongside some financial pressure points.
| Metric | Q2 2025 | Q2 2025 Estimate | Q2 2024 | Y/Y Change |
|---|---|---|---|---|
| EPS (Non-GAAP) | $1.68 | $1.48 | $1.52 | 10.5% |
| Revenue (GAAP) | $164.1 million | $161.23 million | $148.7 million | 10.4% |
| Operating Income (Non-GAAP) | $70.1 million | $65.9 million | 6.4 % | |
| Adjusted EBITDA | $73.4 million | $69.9 million | 5.0 % | |
| Operating Cash Flow | $33.8 million | $49.8 million | (32.1 %) |
Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.
About Qualys: Business Model and Key Success Factors
Qualys operates a cloud-based platform that helps organizations manage IT assets, ensure compliance, and detect and remediate cybersecurity threats. Its integrated approach combines many security solutions under a centralized interface. This unified platform makes it easier for customers to manage growing security needs in complex digital and hybrid environments.
The company's recent focus is on scaling its cloud platform, investing in advanced security technologies, and strengthening relationships with global partners. Success hinges on continuously innovating its product suite, effective sales execution, and maintaining strong customer retention rates. Qualys also places a strategic emphasis on seamless integration, both across its products and with third-party security tools.
Quarter Highlights: Growth, Margins, and Strategic Initiatives
The company delivered notable top- and bottom-line improvements compared to Q2 2024. GAAP revenue increased by 10% compared to the prior year period, beating analyst expectations by $2.87 million in GAAP revenue. Non-GAAP operating income and adjusted EBITDA also saw year-over-year gains. Growth occurred despite what management called a "more challenging environment for new business growth" and ongoing scrutiny of IT budgets among enterprise customers.
Recent product innovation played a key role in performance. Qualys advanced its Risk Operations Center (ROC) capabilities, which are tools to help organizations track, prioritize, and respond to cybersecurity risks across diverse systems. It also launched TotalAI, a set of artificial intelligence security capabilities, and enhanced policy audit solutions—streamlining compliance processes for customers. In the public sector, a new FedRAMP High authorization for its government-focused solution expanded potential U.S. federal adoption.
The company continued shifting toward a channel-driven sales strategy. Channel partners drove a significant share of bookings, with management highlighting increased partner-led deal activity. The managed Risk Operations Center (mROC) Alliance, introduced with six partners, was aimed at global expansion. International markets, supported by strong channel engagement, outpaced domestic growth. Meanwhile, retention rates remained firm, with net dollar retention holding at 103%, although upsell and cross-sell rates saw some impact from persistent macroeconomic factors.
However, profitability metrics signaled some pressures. While gross margins held steady at industry-leading levels, with a non-GAAP gross margin of 84%, both Operating margin and adjusted EBITDA margin saw slight contraction. Operating cash flow declined 32%. Management did not specify drivers for the drop in operating cash flow in the release, pointing instead to continued investment in both the partner ecosystem and public sector momentum.
Product Mix and Competitive Landscape
Qualys’s main product lines include solutions for vulnerability management, asset discovery, and patch management, as well as its cloud-native application protection platform, TotalCloud CNAPP (Cloud Native Application Protection Platform). Patch Management and Cybersecurity Asset Management drove 15% of total bookings on an LTM basis, with Cloud security (TotalCloud CNAPP) made up 5% of last twelve months (LTM) bookings. These product milestones show Qualys’s focus on securing both traditional and cloud-native environments, which is increasingly important as enterprises adopt more cloud applications.
On the competitive front, Qualys’s integrated platform approach sets it apart from specialized competitors offering point solutions. Management commented on the entry of new market players but cited the ability to ingest data from competing tools, giving customers unified visibility of their environment regardless of vendor. Industry recognition reinforced its market position, with Qualys named as a leader in multiple third-party assessments—such as Qualys being named a leader in the KuppingerCole Leadership Compass for Attack Surface Management and Cloud Native Application Protection Platforms (CNAPP), and TotalCloud being named best in its segment for cloud protection.
Looking Ahead: Guidance and Investor Considerations
Management raised full-year FY2025 revenue and non-GAAP EPS guidance following stronger-than-expected execution and a solid new business pipeline. GAAP revenue guidance for FY2025 was updated from $648.0–$657.0 million to $656.0–$662.0 million. Non-GAAP net income per share guidance increased to $6.20–$6.50 for FY2025. For Q3 2025, Qualys expects GAAP revenue between $164.5 million and $167.5 million, and Non-GAAP EPS is expected to be $1.50–$1.60 for Q3 2025. The guidance for FY2025 implies continued margin discipline, but also builds in ongoing macro uncertainty and budget scrutiny among customers.
Investors are likely to keep a close watch on operating cash flow in the quarters ahead, due to the notable decline in GAAP operating cash flow in Q2 2025. Trends in margin performance, international and partner-driven growth, and continued product innovation—especially in cloud and AI-driven security—will also be important factors as Qualys pursues stronger top-line acceleration in a competitive market. Management flagged that visibility into new bookings remains tempered by a lengthened sales cycle and greater budget oversight at enterprise customers.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
