Rapid7 (RPD) and Qualys (QLYS) delivered slight Q1 beats while increasingly focusing on artificial intelligence-driven cybersecurity products, but overall sentiment is unlikely to improve given the companies' flat to slightly weaker outlooks, Morgan Stanley said in a note Wednesday.
For Q2, Rapid7 expects revenue to continue declining and annual recurring revenue is expected to fall further to around $820 million. Qualys' outlook for 2026 is stable but lacks acceleration, with unchanged billings guidance implying continued low-to-mid single-digit growth, the investment bank said.
Morgan Stanley said Rapid7 management leaned heavily into the AI and cybersecurity narrative, shifting value toward proactive exposure management, managed detection and response services, AI-driven security operations center automation, and large-scale remediation, but the company will need to show these improvements in its results before it gets credit for a turnaround.
Qualys management also emphasized accelerating momentum in exposure and threat management, Agent Val, TruRisk Eliminate, autonomous exploit validation, and AI-native risk operations center workflows, arguing that advanced AI models will increase vulnerability volumes and shorten exploit windows, according to the note.
Morgan Stanley lowered its price target on Rapid7 to $9 from $10, while keeping its equal-weight rating. The firm also cut Qualys' price target to $96 from $117, and maintained its underweight rating.
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