Could HubSpot, Inc (HUBS) Stock be Vulnerable to Further Collapse?

HubSpot, Inc. (HUBS) is an AI-powered software platform that helps businesses simplify and centralize their sales, marketing, and relationship management efforts. HUBS’ business clients, which are typically mid-market businesses (up to 2,000 employees), use feature-rich and intuitive software to automate sales and marketing processes, serve customers more effectively, and allow their teams to work together more efficiently.

HUBS controls about a 5% market share of global CRM spending, a smaller share than both Salesforce, Inc. and Zoho (a private company). Please note, our sister company, L2 Asset Management, LLC, is short HUBS.

Get our insights direct to your inbox: SUBSCRIBE

Why We are Bearish on HUBS:

• Investors fear that AI’s expanding reach threatens the business models of many software providers. Summarily, we start with the observation that today AI is employed primarily as a co-pilot that assists a person in completing a task. As AI usage expands, and the technology starts to complete jobs on behalf of a person rather than supporting his or her efforts, software companies, especially Customer Relationship Management (CRM) providers like HUBS, will be required to change a basic tenet of their business strategies. Such companies could be forced to charge fees for software use based on results or outcomes, not based on the number of users of their software as they do now. Whether these companies will be able to adapt to this new paradigm is a huge uncertainty.

• Perhaps the best illustration of this concern is investors’ run-for-the-exits reaction to HUBS’ 3Q 2025 earnings release on November 5, 2025. Despite posting revenue, adjusted operating income, and adjusted EPS that each exceeded consensus analysts’ estimates, HUBS’ stock price plummeted $69, or 15%, to $395 on November 6^th. A highly valued stock’s selling off on earnings results that looked impressive but were apparently “not good enough” is not by itself surprising, but the ferocity of the move is noteworthy. The real takeaway of the stock market’s adverse reaction to HUBS’ 3Q 2025 results is that investors are now concerned that AI could disrupt the company’s business more rapidly than they previously thought.

• In a strong market for technology stocks, the stock price of HUBS has declined 44% so far in 2025. There is no reason to think this underperformance will end anytime soon. After all, in this “anything is possible” market for leading AI companies, how can an investor disprove that an AI-powered unfavorable future backdrop for CRM software companies is not a real possibility?

• Notwithstanding potentially weakened future fundamentals and the poor performance of the stock in 2025, HUBS still looks expensive. HUBS trades at a P/E ratio of 40x based on estimated 2025 earnings and an enterprise value-to-adjusted EBITDA ratio of 29x. These multiples are well above those of its chief and much larger CRM rival Salesforce, Inc., which carries multiples of 23x and 15x, respectively.

What is the Bull Case? If subscription-based software stocks as a group were to begin to rally, a CRM software provider such as HUBS could potentially be carried along. However, a key premise of such a move would presumably be that AI’s reach into a variety of industries might not be as extensive as investors currently believe.

Possibly one of the most valuable lessons for younger tech investors is that we have swung from “software is going to eat the world” to “AI is going to crush software.” And the change came abruptly due to a novel technology. This hews perfectly with KCR’s constant refrain that disruptors get disrupted, particularly in tech.

In our view you can either believe that AI will disappoint and hope stocks like HUBS eventually “grow into their exorbitant multiples” or you might need to rethink your positions in AI. If you think the 40x P/E multiple HUBS is trading at hides some tremendous cash flow generation by the firm: you would be wrong. How wrong?

As we will explain – not only is HUBS business model at risk, the company generated $0 in true FCF last year. That means the P/E ratio is overstating true cash profits.