HubSpot ticks all the right AI boxes, but Wall Street still throws a hissy fit

HubSpot became the latest victim of Wall Street short-termism yesterday when it turned in solid growth numbers, complete with the requisite ticks in all the right AI boxes, but saw its stock plummet as investor greed exceeded sales forecasts for the coming months.

Revenue for for Q3 rose 21% year-on-year to $809.5 million, while net income of $16.5 million was more than double the $8.1 million in the year-ago period. Subscription revenue rose 21%, to $791.7 million.

The firm also trotted out some strong AI adoption stats with CEO Yamini Rangan saying:

.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 with an average resolution rate in the 60s. Prospecting agents has been activated by 6,400 customers, up 94% from last quarter, and customers have used it to engage over 1 million prospects. Data Agent is new, but already has 1,700 customers who have activated it. Breeze 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.

The company even topped all this off with what ought to be a crowd-pleasing appointment of Clara Shih, one time Salesforce AI CEO and now head of Meta’s Business AI arm, to its Board of Directors.

But it all fell on deaf ears it seems as the post-results announcement stock price took a hefty tumble on the back of some weaker-than-anticipated forward sales guidance for Q4. But what can you do? HubSpot is not the first and nor will it be the last to fall victim to the red suspender brigade’s myopic worldview and its resulting knee-jerk responses.

Platforms

For Rangan, it’s a case of keep on keeping on, pitching the case for HubSpot’s platform approach to AI:

Platforms were sticky pre-AI, they will be even stickier in the AI era...[There are] three reasons why customers talk to us about consolidating on a platform. The first one is total cost of ownership. Remember, we've come from a period of people buying a lot of point solutions and tools and TCO (total cost of ownership) bloating up, and that continues to be the #1 reason.

The second reason is actually getting all of the customer data and context onto a unified platform. Whether they're leveraging AI or they're just getting their whole digitization journey going, you need data and unique 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 road map 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 road map.

Rangan also pointed to Hubspot’s emphasis on its LLM (Large Language Model) connector strategy as a key differentiator in the market:

We became the first CRM to connect directly with the three leading LLMs, ChatGPT, Cloud and Gemini...A key part of our AI strategy is our LLM connector approach, and the momentum we are seeing here is impressive. Our ChatGPT connector has been activated by more than 47,000 customers with 55% of them being Pro Plus customers, and our Cloud Connector is already being used by over 6,000 customers.

Why? Rangan explains: 

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 - 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 is a very specific implication for our customers and our ecosystem, which is that LLMs will be a way in which companies will be found. That means it will become an AI referral source for companies.

We see this in our AEO (Answer Engine Optimization) efforts. We are 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, ChatGPT Connector is our fastest growing app in five years, 47,000 installations. And if I look at the patterns, I see a lot of directors about using it for meeting prep. 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.

My take

Just...onwards!