Artificial intelligence (AI) has been on everyone’s lips since the beginning of 2023, so it’s easy to forget that these sophisticated algorithms have been around in one form or another for decades, helping early adopters become the most valuable companies in the world.
Microsoft is at the top of the list with $2.9 trillion, taking the crown away Applewhich comes in second with $2.6 trillion. Nvidiawhich currently ranks third at $2.1 trillion, has arguably helped fuel the current AI revolution thanks to its processors that underpin the technology. alphabet, AmazonAnd Metaplatforms They all have a long history of using AI to advance their business goals and are also members of this elite community.
With a market cap of around $31 billion (as of this writing), it may seem ridiculous to claim this HubSpot (NYSE:HUBS) could be on the fast track to the $1 trillion club. However, the company’s rapidly growing customer list, ever-expanding market opportunity, and strategic use of AI could provide HubSpot with a clear path to membership.
A pioneer of inbound advertising – and much more
Unless you’ve worked in advertising, you may not be familiar with HubSpot, but the company pioneered the concept of inbound marketing – attractive Offer prospects compelling online content, social media, and blog posts instead of pursuing them with traditional ads.
Since these humble beginnings, HubSpot has expanded its offerings to include a wide range of connected customer relationship management (CRM) tools, including marketing, sales, service, content management systems, and operations.
This strategy has served the company well. By expanding its range of products and services, HubSpot’s revenue has grown at a compound annual growth rate (CAGR) of 38% over the past decade. Even as the economy emerged from the worst downturn since 2008, HubSpot’s growth continued.
In 2023, revenue of $2.17 billion increased 25%, while adjusted operating income increased 95%. This was driven by a customer base that grew 23% to 205,091, while average revenue per customer continued to grow 1%.
This uninterrupted growth appears to be continuing. Management estimates that HubSpot’s total addressable market (TAM), which was $51 billion last year, will grow to $77 billion by 2028.
Additionally, the company’s more conservative outlook for the coming year predicts revenue growth of about 18% to $2.555 billion at the midpoint of its forecast.
After all, HubSpot has a long history of success in AI. Years before AI entered the public spotlight, the company introduced “predictive lead scoring,” which used machine learning to sift through thousands of new sales leads and prioritize them based on their likelihood to convert.
Recently, the company launched a comprehensive AI strategy called HubSpot AI, which integrates with its extensive CRM platform and provides its customer base with a wealth of information and practical AI-powered tools. Given the strong interest and increasing demand for generative AI, this will likely lead to additional growth.
The Path to $1 Trillion
HubSpot is in an enviable position in the CRM market. The company’s focus on small and medium-sized businesses has resulted in exceptional growth in a market segment that has historically been unattractive to larger competitors. This helps HubSpot attract and retain loyal customers while their businesses are still small, and those same customers tend to stay when their businesses are still small much greater.
Despite these clear advantages and enormous opportunities, it will still be some time before HubSpot joins the brotherhood of trillionaires. According to Wall Street, HubSpot is expected to generate $3.05 billion in revenue in 2024, which translates to a price-to-sales (P/S) ratio of about 14. Assuming P/S remains constant, HubSpot would need to grow its revenue to around $70 billion per year to support a $1 trillion market cap, which is clearly far in the future.
If the company was able to maintain its high double-digit year-over-year growth rate, HubSpot could reach the $1 trillion market cap threshold by 2037. However, given its 38% compound annual growth rate (CAGR) over the last decade, it’s quite likely that HubSpot’s revenue could rebound once the inflation dragon is finally vanquished. If we increased the revenue growth rate to 28%, HubSpot could achieve this possibly reach a market capitalization of $1 trillion as early as 2033.
So if HubSpot can capitalize on just a small portion of its $77 billion opportunity, the company could be on its way to joining the $1 trillion club.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, former director of market development and spokesperson for Facebook and sister of Mark Zuckerberg, CEO of Meta Platforms, is a member of The Motley Fool’s board of directors. Danny Vena has positions at Alphabet, Amazon, Apple, HubSpot, Meta Platforms, Microsoft and Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, HubSpot, Meta Platforms, Microsoft and Nvidia. The Motley Fool recommends the following options: long $395 January 2026 calls on Microsoft and short $405 January 2026 calls on Microsoft. The Motley Fool has a disclosure policy.
1 Unstoppable Stock That Could Join Microsoft, Apple, Nvidia, Alphabet, Amazon and Meta in the $1 Trillion Club was originally published by The Motley Fool