In a surprising turn of events, HubSpot shares plummeted by 11% on Wednesday following reports that Alphabet has decided not to pursue an acquisition of the software company. The potential deal, which had been a topic of speculation earlier this year, never progressed to detailed discussions, according to Bloomberg sources familiar with the matter.
The news comes as a blow to HubSpot, a company known for its innovative software that helps small and medium-sized businesses automate their marketing efforts and reach new customers. An acquisition by Alphabet would have bolstered Google’s revenue streams from business software, adding to its cloud infrastructure and other non-cloud services.
Efforts to reach representatives from HubSpot and Google’s parent company for comments were unsuccessful.
This development also highlights the growing scrutiny from regulators in the U.S. and internationally, who have recently opposed several large tech acquisitions. For instance, Amazon abandoned its bid to acquire iRobot, and it took Microsoft nearly two years to finalize its purchase of Activision Blizzard.
HubSpot has demonstrated impressive growth, with revenue increasing over 20% in the last six quarters and surpassing 30% before that. The company reported a 23% rise in sales for the first quarter, amounting to $617.4 million. Under the leadership of Yamini Rangan, former executive at Dropbox and Workday, HubSpot has navigated a challenging business environment where customers are increasingly demanding proof of concepts before committing to purchases.
In contrast, Alphabet has not seen revenue growth above 20% since early 2022, with its latest period showing a 15% increase to $80.54 billion. Google's cloud unit, however, achieved profitability in 2023 after years of substantial investment.
Despite Wednesday’s stock drop, HubSpot retains a market cap of $25 billion, making it twice the size of Google's largest acquisition to date—the $12.5 billion purchase of Motorola Mobility in 2011.
As Google continues to face regulatory challenges, including accusations of violating anti-monopoly laws by securing exclusive agreements to make its search engine the default option on various devices, the tech giant’s strategic moves will be closely watched. HubSpot's strong market position and ongoing growth trajectory suggest it will remain a key player in the business software arena, regardless of Alphabet's decision.
