QLYS: Execution Gains And Buybacks Will Support Balanced EPS Outlook

Analysts have nudged their fair value estimate for Qualys slightly higher to about $143, supported by recent Street research highlighting solid Q3 execution, accelerating billings growth, record operating margin and five straight quarters of upside to quarterly guidance as reasons for a higher $135 price target.

Analyst Commentary

Bullish Takeaways

Bullish analysts point to accelerating billings growth as a key support for the higher fair value estimate, seeing it as evidence that underlying demand is backing recent valuation moves.
Record operating margin is viewed as a sign that Qualys is managing costs and pricing effectively, which supports confidence in the company’s ability to generate cash and justify a higher price target near $135.
Five consecutive quarters of upside to quarterly guidance are seen as strengthening management’s credibility, which bullish analysts see as reducing execution risk in the current fair value framework around $143.
The upgrade from a more skeptical stance to a neutral one is interpreted by bullish analysts as a sign that execution trends have improved enough to warrant less discounting of the shares.

Bearish Takeaways

Bearish analysts may see the move only to a Neutral stance as a sign that, even with better execution, the upside relative to the new $135 price target and the roughly $143 fair value estimate could be limited.
Some remain cautious that continued outperformance versus guidance is already reflected in current valuation, which could leave less room for error if billings or margins soften in future periods.
The recent focus on margin strength, while positive, may raise questions among bearish analysts about how much additional profitability improvement is realistic without putting pressure on growth.
With expectations now reset higher after repeated beats to guidance, bearish analysts might see a risk that any return to more in-line results could weigh on sentiment relative to the raised targets.

What's in the News

Qualys reported that, between July 1, 2025 and September 30, 2025, it repurchased 365,513 shares for US$49.44 million, bringing total buybacks under the February 12, 2018 authorization to 10,384,802 shares, or 27.19%, for US$1,194.7 million (Key Developments).
The company issued earnings guidance for Q4 2025, with expected revenue of US$172.0 million to US$174.0 million. Management describes this as 8% to 9% growth over Q4 2024, and GAAP EPS of US$1.26 to US$1.33 based on an assumed 22% effective tax rate and about 36.0 million diluted shares (Key Developments).
Management raised full year 2025 guidance and now calls for revenue of US$665.8 million to US$667.8 million. It describes this as 10% growth over 2024, and GAAP EPS of US$5.23 to US$5.30, above the prior range of US$4.47 to US$4.77 (Key Developments).
Qualys announced new capabilities for its Enterprise TruRisk Management platform, including tools aimed at identity risk posture, predictive threat analysis, and validation of exposure exploitability to help security teams focus on higher impact remediation in the context of growing agentic AI driven threats and non human identities (Key Developments).

Valuation Changes

The Fair Value Estimate has moved slightly, from about US$142.56 to about US$143.24.
The Discount Rate is essentially unchanged, shifting from about 8.44% to about 8.46%.
The Revenue Growth assumption is steady, moving marginally from about 7.95% to about 7.95%.
The Net Profit Margin input is stable, adjusting only slightly from about 25.15% to about 25.14%.
The future P/E multiple has edged up, from about 29.9x to about 30.1x.

Cloud-native platforms, AI innovation, and flexible pricing drive expansion, retention, and strong margins through unified cybersecurity and broadening market opportunities.
Strategic partner ecosystem and government wins accelerate growth, international reach, and integrate regulatory compliance, bolstering Qualys' leadership in proactive risk management.
Rapid AI security evolution, shifting customer preferences, pricing model uncertainty, macroeconomic challenges, and costly growth investments threaten Qualys' revenue visibility, margins, and long-term growth.

Catalysts

About Qualys

Provides cloud-based platform delivering information technology (IT), security, and compliance solutions in the United States and internationally.What are the underlying business or industry changes driving this perspective?

Adoption of Qualys' new cloud-native risk operations center (ROC) and Agentic AI platform positions the company as a leading pre-breach risk management provider, offering unified orchestration, automation, and remediation across both Qualys and non-Qualys data; this opens incremental greenfield opportunities and should support higher ARPU and expanded TAM, leading to durable revenue and earnings growth.
Persistent digital transformation, cloud adoption, and increased regulatory scrutiny (such as GDPR and FedRAMP High compliance) are driving organizations globally to invest in proactive, unified cybersecurity solutions; Qualys' platform-first approach and recent government sector wins (aided by exclusive FedRAMP High authorization) are expected to drive faster land-and-expand cycles and incremental long-term revenues.
Flex (QLU) pricing and expanded module integration reduce adoption friction and incentivize larger initial commitments as well as multi-module expansion within existing accounts, directly supporting higher net retention and improving margins by leveraging the SaaS delivery model's operating leverage.
Strategic investments in partner ecosystems (reseller channels, mROC, and technical alliances) have increased channel contribution to nearly half of total revenues, which is scaling faster than direct sales; this should accelerate new logo acquisition, international reach, and upsell activity, thus supporting both revenue growth and healthy margin expansion.
Rapid, continuous innovation-embedding AI-driven automation into remediation workloads and launching identity security posture management (ISPM)-is tightly aligned with industry shifts toward integrated, cloud-based, and continuous security, which strengthens Qualys' competitive position and increases the potential for higher customer retention, elevated margins, and sustained multi-year revenue growth.

Qualys Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Qualys's revenue will grow by 7.4% annually over the next 3 years.
Analysts assume that profit margins will shrink from 29.0% today to 25.2% in 3 years time.
Analysts expect earnings to reach $199.0 million (and earnings per share of $5.46) by about September 2028, up from $185.0 million today.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 30.7x on those 2028 earnings, up from 26.0x today. This future PE is lower than the current PE for the US Software industry at 36.2x.
Analysts expect the number of shares outstanding to decline by 1.35% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 8.42%, as per the Simply Wall St company report.

Qualys Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

The pace of innovation in AI security is described as "rapid" and "dynamic," raising the risk that Qualys' internally developed AI agents and platform could quickly fall behind competitors or more agile upstarts, potentially resulting in increased R&D expense, product obsolescence, or customer attrition that would negatively affect revenue growth and net margins.
Qualys acknowledges that customers increasingly prefer to consolidate certain security tools but often retain other vendors for key functions like identity or endpoint security, suggesting that vendor consolidation (especially with large platforms or hyperscalers) could eventually squeeze Qualys out of "all-in-one" enterprise deals, leading to slower revenue expansion or market share erosion.
The newly introduced Flex pricing and QLU model, while designed to drive upsell and larger initial commitments, introduces uncertainty around usage patterns and may result in customers optimizing spend and using fewer Qualys units than anticipated, potentially impacting average revenue per customer and revenue visibility.
Despite strong margins, the financial guidance and management's comments highlight continued macroeconomic uncertainty and "challenging environment for new business growth," indicating persistent headwinds that could prolong slower bookings, limit billings/revenue acceleration, and constrain near-term and potentially long-term earnings growth.
The company's significant recent investments in go-to-market, public sector, and sales and marketing initiatives (including new executive hires) are intended to drive future growth, but if these investments do not lead to expected pipeline conversion, increased competition and operating expense growth could put pressure on free cash flow and EBITDA margins over the long term.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $141.023 for Qualys based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $160.0, and the most bearish reporting a price target of just $97.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $789.6 million, earnings will come to $199.0 million, and it would be trading on a PE ratio of 30.7x, assuming you use a discount rate of 8.4%.
Given the current share price of $133.11, the analyst price target of $141.02 is 5.6% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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