QLYS Q3 Deep Dive: Platform Expansion and AI Drive Upside as Qualys Advances Risk Operations

Cybersecurity cloud platform provider Qualys (NASDAQ:QLYS) reported Q3 CY2025 results beating Wall Street’s revenue expectations, with sales up 10.4% year on year to $169.9 million. Guidance for next quarter’s revenue was optimistic at $173 million at the midpoint, 2.1% above analysts’ estimates. Its non-GAAP profit of $1.86 per share was 19.2% above analysts’ consensus estimates.

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StockStory’s Take

Qualys delivered third quarter results that exceeded Wall Street’s expectations, driving a strong market reaction. Management attributed the outperformance to growing demand for its Enterprise TruRisk Management (ETM) platform and early adoption of its Risk Operations Center (ROC) approach. CEO Sumedh Thakar emphasized that customers are seeking to consolidate cybersecurity tools and operationalize risk management, stating, “CISOs are looking for a practical approach to consolidate tools where possible and empower their teams to use best-of-breed where it makes sense.” The company also highlighted the impact of its partner ecosystem and improved margin efficiency from increased automation and AI in product development.

Looking forward, management’s guidance is informed by expectations for broader ETM adoption, expansion of AI-powered features, and increasing traction with both large enterprise and government customers. CFO Joo Mi Kim noted that ongoing investments in sales and marketing will continue but are being balanced by efficiency gains, especially as AI streamlines R&D efforts. Thakar pointed to the upcoming rollout of TruConfirm, an automated exploit validation tool, as a future growth lever, adding, “We are unleashing a sophisticated predictive platform that leverages a combination of Qualys TruRisk framework, our TruLens threat management capabilities and a mission-ready Agentic AI workforce.”

Key Insights from Management’s Remarks

Qualys’ third quarter was shaped by strong ETM platform traction, increased automation, and growing momentum in partner-led sales, all of which contributed to higher margins and revenue outperformance.

• ETM platform momentum: Management highlighted early commercial success with the ETM solution, which integrates risk quantification, continuous threat exposure management (CTEM), and automated remediation. Customers converting from proof-of-concept to full deployments cited the ability to centralize risk data, reduce security stack complexity, and automate critical tasks as meaningful advantages.
• AI-driven product enhancements: The company expanded its Agentic AI features across several offerings. Thakar explained that Qualys is embedding AI not only in customer-facing solutions—such as automated remediation and exploit validation—but also internally to accelerate software development and boost engineering productivity by up to 25%.
• Partner ecosystem scaling: Management noted a strategic shift toward partner-led sales, with channel-driven revenue outpacing direct sales and contributing 50% of total revenue this quarter. New certifications and the launch of Managed Risk Operations Center (mROC) services are expected to further accelerate ETM adoption and broaden reach, especially in international markets.
• Government and enterprise wins: The quarter saw notable wins in both federal and large enterprise segments. For example, a major government agency consolidated 17 Qualys modules, while a Global 700 customer shifted to Qualys for unified risk management after struggling with fragmented tools, driving significant upsell opportunities.
• Flexible pricing innovation: The launch of Q-Flex, a new platform pricing model, was met with positive customer response. Management cited a multiyear commitment from a Global 10 customer that increased annual bookings by over 50%, illustrating how Q-Flex is enabling broader and faster module adoption.

Drivers of Future Performance

Management expects continued growth to be driven by deeper ETM penetration, AI-powered capabilities, and increased partner leverage, though budget scrutiny and competitive dynamics remain key factors.

• ETM and AI adoption: The company sees a substantial opportunity to migrate its installed base from vulnerability management to ETM, which now includes asset management, Agentic AI, and exploit confirmation. Management believes this transition can double upsell opportunities and drive platform stickiness, with TruConfirm expected to further differentiate Qualys from dashboard-centric competitors.
• Partner-led expansion: Partner sales are projected to remain a core growth lever, with mROC partners delivering both new logos and upsell potential. Management anticipates that as more partners are certified, especially internationally, ETM penetration and global revenue mix will rise.
• Budget and competitive pressures: While management believes the platform approach insulates Qualys from some macro volatility, they acknowledge ongoing headwinds from customer budget scrutiny and intensified competition from both established players and new entrants in vulnerability and risk management. The company is prioritizing efficiency and fast time-to-value as ways to maintain momentum.

Catalysts in Upcoming Quarters

In the coming quarters, our analysts will focus on (1) the pace of ETM adoption and conversion among existing customers, (2) the scaling of partner-led mROC deployments and their impact on international growth, and (3) the rollout and customer uptake of new AI-driven features like TruConfirm and TruRisk Eliminate. Additionally, we will monitor how budget scrutiny and competitive moves influence deal cycles and upsell rates.

Qualys currently trades at $134, up from $121.18 just before the earnings. In the wake of this quarter, is it a buy or sell? See for yourself in our full research report (it’s free for active Edge members).

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