Google is considering a major acquisition of HubSpot to strengthen its cloud footprint

Alphabet, Google’s parent company, is reportedly considering a major acquisition of HubSpot, a $31 billion US marketing software maker. This potential deal could strengthen Google’s competitive position against Microsoft in providing cloud-based applications to businesses.

According to sources, including a report from Reuters last month, Google was actively exploring HubSpot’s offering. If completed, this acquisition will be Google’s largest transaction to date, significantly expanding its range of business-focused products and applications. Analysts and investment bankers say the move underscores Google’s strategy to challenge Microsoft’s dominance, particularly through its Google Workspace collaboration tools.

Cowen analyst Derrick Wood emphasized that the HubSpot acquisition will make Google a powerful player in the customer relationship management (CRM) sector, a market currently served by Microsoft Dynamics 365. “It appears that Google has aspirations to take market share Microsoft in their productivity suite and can use HubSpot to connect applications for customers,” Wood noted.

Related: Google’s potential acquisition of HubSpot faces regulatory hurdles

HubSpot, known for marketing software tailored to the needs of small and medium-sized businesses, is navigating the challenges of maintaining sales growth in the face of a broader economic slowdown. During the company’s first-quarter earnings announcement, CEO Yamini Rangan acknowledged weakening customer demand as small businesses expressed concerns about the economic impact of high interest rates. Despite these challenges, HubSpot reported 23% sales growth and a 15% operating margin in the first quarter.

Stock analysts point out that HubSpot’s shares could suffer if it were not for the acquisition of shares from Google. Following its latest earnings report, most HubSpot analysts lowered their price targets, warning that the company’s focus on smaller companies could pose a risk if economic conditions deteriorate and financing becomes more difficult for these customers.

Source: Reuters