HubSpot shares drop 12% after Alphabet suspends interest in shares

HubSpot CEO Yamini Rangan speaks at the company's Inbound conference in Boston on September 6, 2023.

Chance Yeh | HubSpot | Getty Images

HubSpot shares fell 12% on Wednesday after a report said Alphabet is not proceeding with plans to buy the software company.

According to Bloomberg, Alphabet was in talks with HubSpot earlier this year, “but the parties did not reach a point of detailed discussions about due diligence,” the report, which cited sources with knowledge of the matter, said.

Representatives for HubSpot and Google parent company Alphabet did not immediately respond to requests for comment.

Regulators in the US and abroad have recently rejected proposals from major tech companies. Amazon has abandoned its planned acquisition of robot vacuum cleaner manufacturer i robotand it took Microsoft 20 months to complete its acquisition of game publisher Activision Blizzard.

HubSpot develops software that businesses, primarily small and medium-sized businesses, use to automate marketing and reach potential customers. The HubSpot purchase would have helped Google grow revenue from enterprise software, along with cloud infrastructure, and other non-cloud businesses under the Alphabet umbrella.

Google's cloud division turned profitable in 2023 after years of heavy investments.

HubSpot has been growing faster than Google recently, with the company reporting revenue growth of more than 20% for the past six quarters and more than 30% before that. Revenue in the first quarter rose 23% to $617.4 million.

Yamini Rangan, a former Dropbox and Workday executive, has led HubSpot since 2021. In March, she pointed to a challenging business climate, where she said “there was more proof of concept before customers were ready to make purchasing decisions.”

Alphabet has not posted growth of more than 20% since the start of 2022. Revenue in the latest period rose 15% from a year earlier to $80.54 billion.

Google is already under regulatory scrutiny. The U.S. Department of Justice and several state attorneys general have accused Google of violating antimonopoly law by striking exclusive deals with phone makers and browser companies to make its search engine the default for consumers.

Even after Wednesday's drop, HubSpot still has a market cap of $25 billion, twice the size of Google's biggest deal, its $12.5 billion acquisition of Motorola Mobility in 2011.

Read Bloomberg's full report here.

WATCH: Google and Microsoft announce layoffs

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