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Introduction & Market Context
Yubico AB (YUBICO) presented its Q3 2025 financial results on November 12, 2025, revealing a mixed performance as the cybersecurity authentication provider continues its transition toward a subscription-based business model. The stock responded positively to the results, rising 3.63% to SEK 93.2, though it remains near the lower end of its 52-week range of SEK 85-295.
The company operates in the advanced authentication market, which is projected to grow at a 14% CAGR from 2020 to 2027. With an estimated 5% market share of a USD 5.2 billion total addressable market, Yubico has significant room for expansion despite near-term headwinds.
As shown in the following chart of Yubico's market position and opportunity:
Quarterly Performance Highlights
Yubico reported a 7.1% year-over-year decline in net sales for Q3 2025, though this decrease was largely attributable to currency effects, with sales nearly flat (-0.1%) when excluding foreign exchange impacts. More concerning was the 17% drop in order bookings compared to the same period last year, which the company attributed to delays in large orders.
The quarter's financial performance is summarized in the following key metrics:
Despite these challenges, Yubico's subscription business showed remarkable strength, with subscription sales growing 22% year-over-year and Annual Recurring Revenue (ARR) increasing by 31.7%. This shift toward recurring revenue represents a strategic pivot that could provide more stability and predictability to future earnings.
The following chart illustrates the company's evolving revenue mix as subscription bookings continue to gain share:
Detailed Financial Analysis
Profitability metrics showed significant pressure during the quarter, with gross profit margin declining by 10.0% and EBIT margin falling by 28.1% compared to Q3 2024. Management attributed these declines to higher costs related to expansion initiatives and currency fluctuations.
The net sales and ARR trends can be seen in the following chart, highlighting the growing importance of recurring revenue to Yubico's business model:
Cash flow from operating activities before changes in working capital amounted to SEK 105.6 million, down from SEK 142.2 million in the comparable period. However, the company maintains a strong balance sheet with SEK 874.7 million in cash and cash equivalents and a net cash position of SEK 835.7 million at the end of the quarter.
One area of potential concern is inventory management, as inventory as a percentage of last twelve months' sales increased to 33.1% from 29.5% in Q2 2025, suggesting possible challenges in aligning production with current demand.
Strategic Initiatives
Yubico continues to execute its "Land and Expand" strategy, which has shown impressive results over the past several years. The company has increased its success in landing new key accounts by 2.3x between 2019 and Q3 2025, while achieving 115% growth in expanding within existing accounts between 2019 and 2024.
The following chart demonstrates this strategic approach and its results:
During Q3, Yubico expanded its retail presence through a collaboration with BestBuy, making YubiKeys available in over 350 stores across the United States. This move aims to increase consumer awareness and accessibility of the company's authentication solutions.
The company also highlighted its investment in innovation, with development of next-generation YubiKey firmware underway, and geographic expansion, including a new hub in Singapore to strengthen its presence in the Asia-Pacific region.
Yubico's core value proposition remains its ability to combine high security with ease of use, as illustrated in the following slide:
Forward-Looking Statements
Management summarized the quarter with several key takeaways, acknowledging the short-term challenges while emphasizing the long-term growth potential. The company views the delay in large orders as temporary and remains confident in its ability to execute its strategic plan.
The key takeaways from the quarter are summarized in the following slide:
Yubico's overall business fundamentals remain strong, with 4,500+ business customers, 40 million YubiKeys sold to date, and an impressive 40% net sales CAGR between 2020-2024. The company maintains an exceptional 81% gross margin on a last twelve months basis, demonstrating the inherent profitability of its business model despite current pressures.
As shown in this comprehensive company overview:
While Yubico faces near-term headwinds with declining hardware sales and bookings, the strong growth in its subscription business suggests the company is successfully navigating the transition toward a more recurring revenue model. Investors will be watching closely to see if the delayed large orders materialize in coming quarters and whether the company can maintain its expansion momentum while improving profitability metrics.
Full presentation:
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