HubSpot Drops 11% as Alphabet Halts Acquisition Plans

HubSpot shares drop 11% as Alphabet halts $25 billion acquisition amid regulatory scrutiny.

By Jack Wilson

7/10, 14:52 EDT
Alphabet Inc.
HubSpot, Inc.

Key Takeaway

  • HubSpot shares dropped 11% after Alphabet decided not to pursue its acquisition, halting what could have been a major tech deal.
  • Regulatory scrutiny from US antitrust regulators influenced Alphabet's decision, reflecting broader challenges for large tech mergers.
  • Despite the halted acquisition, HubSpot continues strong financial performance with 23% revenue growth in Q1, outpacing Alphabet's 15%.

Alphabet Halts HubSpot Acquisition

Shares of HubSpot plummeted 11% on Wednesday following a Bloomberg report that Alphabet, Google's parent company, has decided not to proceed with plans to acquire the software firm. According to sources familiar with the matter, discussions between Alphabet and HubSpot did not advance to detailed due diligence stages. Representatives from both companies have not provided any comments on the matter.

The potential acquisition of HubSpot, which specializes in software for small and medium-sized businesses to automate marketing and reach prospective customers, would have been one of the largest tech deals of the year. HubSpot's market value stands at approximately $25 billion, making it twice the size of Google's largest acquisition to date, the $12.5 billion purchase of Motorola Mobility in 2011.

Regulatory Challenges

The decision to halt the acquisition comes amid increasing regulatory scrutiny on large technology companies. The U.S. Justice Department and the Federal Trade Commission have been actively opposing significant mergers and acquisitions under the Biden Administration. This regulatory environment has already impacted other major tech deals, such as Amazon's abandoned acquisition of iRobot and the prolonged 20-month process for Microsoft to finalize its purchase of Activision Blizzard.

"Any deal for HubSpot would have likely gotten bogged down in reviews by US antitrust regulators," noted industry analysts. The aggressive stance of regulators has forced sizable tech companies to reconsider their growth strategies through acquisitions.

Financial Performance

HubSpot has demonstrated robust financial performance, with revenue growth exceeding 20% for the past six quarters and surpassing 30% in earlier periods. In the first quarter, HubSpot reported a 23% increase in sales, reaching $617.4 million. This growth rate outpaces Alphabet, which has not achieved over 20% growth since early 2022. Alphabet's revenue in the latest period rose 15% year-over-year to $80.54 billion.

The acquisition of HubSpot would have bolstered Alphabet's revenue from business software, complementing its cloud infrastructure and other non-cloud businesses. Google's cloud unit, which reached profitability in 2023 after years of significant investment, would have benefited from HubSpot's capabilities.