Since April 2025, Qualys has been in a holding pattern, posting a small return of 3.9% while floating around $128. The stock also fell short of the S&P 500’s 21.1% gain during that period.
Is there a buying opportunity in Qualys, or does it present a risk to your portfolio? Get the full breakdown from our expert analysts, it’s free for active Edge members.
Why Is Qualys Not Exciting?
We're cautious about Qualys. Here are three reasons there are better opportunities than QLYS and a stock we'd rather own.
1. Weak ARR Points to Soft Demand
While reported revenue for a software company can include low-margin items like implementation fees, annual recurring revenue (ARR) is a sum of the next 12 months of contracted revenue purely from software subscriptions, or the high-margin, predictable revenue streams that make SaaS businesses so valuable.
Qualys’s ARR came in at $656.2 million in Q2, and over the last four quarters, its year-on-year growth averaged 9.6%. This performance was underwhelming and suggests that increasing competition is causing challenges in securing longer-term commitments. 
2. Projected Revenue Growth Is Slim
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect Qualys’s revenue to rise by 6.8%, a deceleration versus its 13.2% annualized growth for the past five years. This projection is underwhelming and indicates its products and services will see some demand headwinds.
3. Operating Margin in Limbo
While many software businesses point investors to their adjusted profits, which exclude stock-based compensation (SBC), we prefer GAAP operating margin because SBC is a legitimate expense used to attract and retain talent. This metric shows how much revenue remains after accounting for all core expenses – everything from the cost of goods sold to sales and R&D.
Looking at the trend in its profitability, Qualys’s operating margin might fluctuated slightly but has generally stayed the same over the last two years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability. Its operating margin for the trailing 12 months was 31%.
Final Judgment
Qualys’s business quality ultimately falls short of our standards. With its shares underperforming the market lately, the stock trades at 6.9× forward price-to-sales (or $128 per share). Beauty is in the eye of the beholder, but our analysis shows the upside isn’t great compared to the potential downside. We're fairly confident there are better investments elsewhere. Let us point you toward the most entrenched endpoint security platform on the market.
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