HubSpot gave investors a first-quarter report that showed several positive headline numbers, but Bank of America came away focused on a different part of the story.
The firm downgraded HubSpot to underperform from buy and cut its price objective to $180 from $300, arguing that the company’s changing go-to-market strategy brings a new layer of execution risk. The call came after HubSpot’s first-quarter results and management commentary, which Bank of America said made its prior bullish stance look early.
“We now believe our bullish call was premature,” the firm said in a Bank of America note given to TheStreet.
The note said the biggest surprise from the quarter was HubSpot’s move toward an agent-first go-to-market model, with sales representatives expected to position AI agents at the top of the sales conversation instead of leading with the company’s traditional products.
Bank of America said the shift may be strategically sound over the long term, though the timing creates near-term uncertainty because HubSpot is also changing its pricing and packaging model.
Bank of America says HubSpot’s sales shift could pressure growth
Bank of America’s concern is less about whether HubSpot can benefit from AI over time and more about how smoothly the company can change the way its sales organization operates.
The firm said HubSpot is reorienting its sales motion toward AI agents, following the company’s April introduction of a new outcomes-based pricing model for AI agents. That change, according to Bank of America, could make the company’s path to a second-half growth reacceleration harder to prove.
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“We expect this to constrain investor sentiment until clear traction can be proven, which we believe could take multiple quarters,” the note said.
The firm said the move may lengthen sales cycles and create uncertainty around sales representative productivity. Bank of America also noted that end-market readiness for broad-based agent adoption remains unproven, which adds another question for a company that already has meaningful exposure to small and medium-sized businesses.
HubSpot’s earnings beat did not change the downgrade
HubSpot reported first-quarter revenue of $880.995 million, which was 2.1% above Bank of America’s estimate of $863.058 million. Customer count came in at 299,458, slightly ahead of the firm’s estimate of 298,206, while average subscription revenue per customer reached $11,722, topping the firm’s $11,524 estimate.
The company’s pro forma earnings per share came in at $2.72, above Bank of America’s estimate of $2.46. Pro forma net income was $143.039 million, compared with the firm’s estimate of $129.116 million.
Revenue growth also came in ahead of the bank’s expectation. Bank of America’s exhibit showed total revenue growth of 23.4% year over year, compared with its estimate of 20.9%.
The softer parts of the quarter were still important to the firm’s view. Billings came in at $912.303 million, slightly below the firm’s estimate of $916.770 million. Free cash flow was $153.729 million, below Bank of America’s estimate of $167.501 million.
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Bank of America lowers HubSpot estimates and resets valuation
Bank of America lowered its fiscal 2026 revenue estimate by about $18 million, bringing its forecast closer to the low end of guidance. The firm’s updated fiscal 2026 revenue estimate is $3.702 billion, down from its prior estimate of $3.720 billion.
The bank also lowered its fiscal 2027 revenue estimate to $4.286 billion from $4.336 billion, a reduction of about $50.7 million. Subscription revenue estimates were also reduced, with Bank of America cutting its fiscal 2026 subscription revenue forecast to $3.622 billion from $3.645 billion.
The valuation reset was a major part of the call. Bank of America said its new $180 price target is based on a 9x calendar 2027 estimated enterprise value to free cash flow multiple, down from the prior 15x multiple.
Bank of America still raised its adjusted EPS estimates, with its fiscal 2026 EPS forecast moving to $13.38 from $12.46and its fiscal 2027 EPS estimate rising to $16.18 from $15.39. The higher earnings estimates did not offset the firm’s concern that revenue growth and investor confidence could take longer to rebuild.
HubSpot faces a tougher setup after earnings
Bank of America said HubSpot’s guidance now implies an acceleration in the second half of 2026, though the firm sees the setup as less favorable than before.
The note said second-quarter net new annual recurring revenue growth is likely to follow the first quarter’s pattern, with some pressure from sales representatives being retrained on the new go-to-market model for a week in April. Bank of America said that likely reduced sales capacity during the period.
HubSpot’s first-quarter report showed growth, margin strength, and better-than-expected earnings. Still, the firm is concerned that the company’s AI-driven sales shift could make the next stage of growth harder to execute.
Bank of America said upside risks to its view include a faster-than-expected ramp in AI agent revenue, stronger margin expansion, and a broader revenue growth reacceleration. Downside risks include higher customer attrition, intensifying competition from frontier model providers, and more pressure from the economic cycle, especially given HubSpot’s exposure to SMB customers.
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