By Cheng Xin,Contributor,Trefis Team

Copyright forbes

CHONGQING, CHINA – JUNE 01: In this photo illustration, the logo of Rubrik, Inc. is displayed on a smartphone screen, with the company’s latest stock market chart visible in the background, reflecting recent trading activity and investor sentiment, on June 01, 2025, in Chongqing, China. Rubrik is a U.S.-based cloud data management and cybersecurity company that provides data protection, ransomware recovery, and backup solutions for enterprises across hybrid and multicloud environments. (Photo Illustration by Cheng Xin/Getty Images)
Getty Images

Rubrik (NYSE:RBRK), a company focusing on cloud data management and data security, has experienced a 12% drop in its stock price over the last five trading days, despite announcing impressive earnings. This decline occurs amid investor dissatisfaction with the forward guidance, which the market perceives as modest compared to the stock’s relatively high valuation. Therefore, as Rubrik establishes itself as a significant player in the Zero Trust Data Security and enterprise data protection sectors, could this current decline offer a buying opportunity for the stock?

However, regardless of how appealing it may seem, investing in a single stock involves significant risk. Trefis High Quality Portfolio aims to mitigate stock-specific risk while providing upside potential.

Strong Performance, Cautious Outlook

Rubrik posted an exceptional Q2 performance, with Rubrik revenue increasing by 51.2% year-over-year and margins exceeding expectations. The underlying metrics were also robust, with a significant portion of revenue deriving from subscriptions, which ensure stable, recurring cash flow. The average revenue run rate from subscriptions exceeded $1.25 billion, reflecting a 36% year-on-year growth. Net Revenue Retention was above 120%, signifying strong customer loyalty and growth. For Q3, the company anticipates revenue between $319 million and $321 million, with an adjusted loss of $0.16 to $0.18 per share. The full-year forecast estimates revenue between $1.227 billion and $1.237 billion, and an adjusted loss of $0.44 to $0.50 per share. While these figures indicate ongoing growth and reduced losses, they highlight the elevated expectations investors have for the stock.

Rubrik’s cloud-native SaaS platform, Rubrik Security Cloud (RSC), consolidates backup, recovery, sensitive data discovery, governance, and cyber resilience across on-premises, hybrid, and multi-cloud settings. The company is strategically placed to benefit from several structural trends.

Increasing cyber threats and ransomware attacks are compelling enterprises to prioritize resilient data protection, resulting in consistent demand for Rubrik’s solutions.

The accelerated adoption of cloud and multi-cloud technology further heightens the need for scalable, cloud-native security software. As organizations distribute workloads across various clouds, traditional backup and recovery solutions frequently fall short, providing Rubrik an edge with its cloud-native architecture that can secure data seamlessly across varied environments.

MORE FOR YOU

Additionally, AI-driven security, which includes real-time threat detection and predictive analytics, is revolutionizing enterprise data protection, and Rubrik’s platform utilizes these features to remain ahead of emerging threats.

Furthermore, stricter global data protection laws such as GDPR, HIPAA, and CCPA are compelling businesses to invest in advanced compliance and security solutions, reinforcing Rubrik’s status as an essential provider of enterprise-grade data protection. Companies that do not adhere to these regulations face substantial fines and reputational harm, making Rubrik’s compliant, audit-ready platform a highly appealing option.

Fundamentals: Growth vs. Valuation

Concerning fundamentals, the situation is mixed. The valuation remains elevated, with a price-to-sales ratio of 14x based on trailing revenue compared to 3.2 for the S&P 500, and a negative P/E ratio reflecting ongoing losses. Nevertheless, growth is strong: revenues have surged by 48% over the past year to $1.1 billion, with a three-year average growth rate of 47.7%, significantly surpassing the S&P 500’s 5% pace. Profitability remains a challenge, with a trailing twelve-month operating margin of -39.6% and a net margin of -41%, although the company generated $211 million in operating cash flow, resulting in a cash flow margin of 19.5%. As sales continue to scale, margins should see significant improvement, given the large fixed cost base and operating leverage benefits. Financial stability is strong, with a low debt-to-equity ratio of 7.5% and a cash-to-assets ratio of 63.8%, providing a safeguard against market fluctuations.

The Trefis High Quality (HQ) Portfolio, consisting of 30 stocks, has a history of outperforming its benchmark comfortably, which includes the S&P 500, Russell, and S&P midcap. What accounts for this? Collectively, HQ Portfolio stocks have delivered better returns with less risk compared to the benchmark index; producing a more stable performance, as demonstrated by HQ Portfolio performance metrics.

Editorial StandardsReprints & Permissions