A cloud-based cybersecurity company whose TruRisk platform helps more than ten thousand organizations spot security weaknesses and stay compliant across their networks, cloud setups, and mobile devices. Founded in 1999 by two French engineers and built around an early "security as a service" idea, it was one of the first companies to scan networks over the web instead of installing software on-site. The name is widely read as a blend of "quality" and "analysis" — fitting for a firm whose whole job is digging up hidden flaws.
Qualys's net dollar expansion rate fell to 98%, meaning existing customers are now spending less at renewal.
Existing customers are now spending less at renewal. rose 11% to $182.2 million and widened to 83.4%, but the fell to 98% and sales and marketing expense rose 15%, outpacing revenue growth. The company's primary growth engine is contracting even as it spends more to acquire new business.
Key takeaways
The fell to 98% as of June 30, 2026, from 100% in the prior quarter and 102% a year ago, meaning existing customers are, on average, spending less at renewal; 97% of the quarter's $18.1 million increase still came from those customers.
rose 11% to $182.2 million, a slight uptick from the 9.8% growth in the prior quarter, while widened 1.0 point to 83.4%, aided by lower and as certain assets became fully depreciated.
Section summaries
Management's Discussion and Analysis
Q2 FY2026 revenue rose 11% to $182.2M, driven by existing customer expansion, while net income margin held at 29%.
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grew 11% to $182.2M in Q2 and 10% to $357.8M in H1, with 97% and 91% of the increases coming from existing customers, respectively.
improved to 83% from 82% as cost of revenues grew only 5%, partly due to lower from fully depreciated assets.
Sales and marketing expense rose 15% to $41.0 million, outpacing the 11% growth rate, driven by higher headcount, commissions, and incentive compensation.
rose 10.8% to $52.4 million, a slower increase than growth of 20.4% because total other income fell 30% to $5.2 million, primarily from $2.1 million in unfavorable foreign-currency changes.
was $59.6 million in the quarter, up 76.5% , recovering from a prior-year quarter when a working-capital swing had depressed the figure; the company repurchased $131.4 million of shares in the first half of the year and held $703.5 million in cash and marketable securities at quarter-end.
What changed
The fell to 98%, crossing below 100% for the second consecutive quarter after hitting 99% in Q1 FY2026; the contraction of the installed base is accelerating, a risk flagged in every prior filing.
Sales and marketing expense rose 15% in Q2, a deceleration from the 19% increase in Q1 FY2026 but still outpacing growth; the return on that spending continues to decline, a concern noted in prior quarters.
The $2.1 million unfavorable foreign-currency swing that reduced other income this quarter follows a $2.0 million non-marketable security in Q1 FY2026, making other income a recurring drag on after years of amplifying it.
The income tax provision rose 27%, continuing the from the OBBBA-related reduction in the FDII deduction benefit, now compounded by lower R&D credits, as flagged in FY2025 and Q1 FY2026.
What to watch
Whether the falls further below 98% in Q3 FY2026, which would indicate the contraction of the installed base is deepening.
Whether the 15% increase in sales and marketing spend in Q2 FY2026 begins to convert into a stabilization of the growth rate, or whether the return on that spending continues to decline.
The trajectory of other income, now that foreign-currency losses and investment impairments have turned it from a into a for .
Whether the lower and that aided this quarter is a sustained benefit or a one-time effect from fully depreciated assets.
Sales and marketing expense jumped 15% in Q2 to $41.0M on higher headcount, commissions, and incentive compensation, outpacing growth.
Total other income, net fell 30% to $5.2M in Q2, primarily from $2.1M in unfavorable foreign currency changes.
Income tax provision rose 27% on higher pretax income and lower R&D credits, partially offset by a benefit from the FDDEI provision under the OBBBA.
was $154.9M in H1; the company repurchased $131.4M of shares and held $703.5M in cash and marketable securities at quarter-end.
Quantitative and Qualitative Disclosures About Market Risk
Foreign-currency and interest-rate exposures are hedged or sized such that a 10% FX or 100bp rate move would not be material.
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Primary market risks are foreign exchange, interest rate, and inflation, plus general economic conditions in operating countries.
Foreign-currency exposure is concentrated in EUR, GBP, INR, and CAD, and the company uses forward contracts to hedge forecasted , expenses, and balance-sheet items.
As of June 30, 2026, designated cash-flow hedges totaled €51.7M, £25.0M, and Rs.6,243.3M notional; non-designated forwards covered additional EUR, GBP, INR, CAD, and AUD exposures.
With the hedging strategy in place, an immediate 10% adverse FX move would not be material to financial condition, operating results, or cash flows.
Interest-rate risk stems from $703.5M in cash, equivalents, and marketable securities held in money-market funds, Treasuries, agency securities, commercial paper, corporate bonds, and asset-backed securities.
A hypothetical 100-basis-point rate increase would not cause a material decline in the fair value of marketable securities.
From time to time the Company may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. As of June 30, 2026, there has not been at least a reasonable possibility that the Company has incurred a material loss from any ongoing…
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From time to time the Company may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. As of June 30, 2026, there has not been at least a reasonable possibility that the Company has incurred a material loss from any ongoing legal proceedings, individually or taken together. However, litigation is inherently unpredictable and is subject to significant uncertainties, some of which are beyond the Company's control. Should any of these estimates and assumptions change or prove to have been incorrect, the Company could incur significant charges related to legal matters which could have a material impact on its results of operations, financial position and cash flows.
Operating results may fluctuate due to long sales cycles, competitive pressures, and macroeconomic uncertainty, while security incidents and platform disruptions pose material operational risks.
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Quarterly results vary significantly due to long, unpredictable sales cycles (often 6-18+ months), seasonal buying patterns, and the timing of large deals, making forecasting difficult.
Intense competition from larger, better-resourced firms like CrowdStrike and Palo Alto Networks, as well as emerging players, creates pricing pressure and could erode market share.
Adverse macroeconomic conditions, including inflation, potential recession, and new U.S. tariffs, have prolonged sales cycles and may further reduce customer IT security spending.
A security breach, service disruption, or failure to detect vulnerabilities in our platform could severely damage our reputation, lead to customer loss, and expose us to significant liability.
Our reliance on third-party channel partners for over half of our revenues and on third-party cloud platforms for service delivery introduces substantial operational and financial risks.
Evolving global privacy and AI regulations, such as the GDPR and the EU AI Act, could increase compliance costs, limit product functionality, and expose us to substantial fines.