SentinelOne Inc (S) Q4 2025 Earnings Call Highlights: Record Revenue Growth and Strategic Shifts

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Thu, Mar 13, 2025, 2:07 AM 4 min read

Revenue: $821 million for fiscal year '25, a growth of 32% year over year.
Q4 Revenue: $226 million, a 29% increase year over year.
Gross Margin: Reached a new full year high, with Q1 expected to be about 79%.
Operating Margin: Improved by 16 percentage points year over year; first quarter of positive operating margin in Q4.
Net Income Margin: Positive 2% for the full year.
Free Cash Flow Margin: Positive 1% for the full year.
Total ARR: Grew 27% to $920 million.
Net New ARR: $60 million in Q4.
RPO Growth: Re-accelerated to 30%, reaching a record of $1.2 billion.
Customer Growth: Over 14,000 direct customers; customers with ARR of $100,000 or more grew 25% year over year.
Dollar-Based Net Retention Rate: 110% for the full year.
Fiscal Year '26 Revenue Guidance: Expected to surpass $1 billion, representing 23% growth.
Fiscal Year '26 Net New ARR Guidance: Approximately $200 million, growing about 2% year over year.
Cash and Cash Equivalents: Over $1.1 billion.

Warning! GuruFocus has detected 3 Warning Signs with AEYE.

Release Date: March 12, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

SentinelOne Inc (NYSE:S) achieved over 30% top line growth while expanding operating margins by over 15 percentage points.
The company reported its first quarter of positive operating income in Q4, alongside its first full year of positive net income and free cash flow.
SentinelOne Inc (NYSE:S) surpassed expectations in Q4, with revenue growing 29% year over year to $226 million.
The company set a new customer growth record, with over 14,000 direct customers and significant expansion in platform solutions.
SentinelOne Inc (NYSE:S) is the first company to embed foundational generative AI capabilities into every platform solution by default, enhancing its competitive edge in AI-powered cybersecurity.

Negative Points

The company faces macroeconomic challenges, including economic and political uncertainty impacting budgets and business decisions.
SentinelOne Inc (NYSE:S) is retiring its legacy Deception solution, which is expected to result in up to $10 million of churn, impacting ARR growth.
The guidance for fiscal year '26 includes a deceleration in revenue growth to 23%, compared to previous years.
There is uncertainty regarding federal spending, which could affect the company's growth in the government sector.
Despite strong performance, the company's guidance for Q1 and fiscal year '26 was slightly below analyst expectations, raising concerns about future growth momentum.

Q & A Highlights

Q: Can you explain the rationale behind the flat net new ARR in Q4 and the expectations for fiscal '26, especially considering the retirement of the Deception product? A: Tomer Weingarten, CEO, explained that despite the flat net new ARR in Q4, the company delivered over 30% revenue growth in fiscal '25. The retirement of the Deception product impacted ARR, but adjusting for this, the net new ARR would have grown in mid-single digits. For fiscal '26, they expect to grow net new ARR meaningfully, with mid to high single-digit growth when adjusted for the Deception end-of-sale.

Q: How is the partnership with Lenovo progressing, and what impact is it expected to have on ARR? A: Tomer Weingarten, CEO, stated that the partnership with Lenovo is progressing well, with go-to-market elements being put in place. The impact is expected to be more significant in the next fiscal year as more on-the-box shipments are released. The relationship is multi-year, with a ramp baked into it, and is expected to be more meaningful in the out years.

Q: Are there any changes in guidance philosophy or KPIs under the new CFO, Barbara Larson? A: Barbara Larson, CFO, mentioned that the guidance reflects reasonable expectations based on pipeline activity, new product contributions, and win rates. The macroeconomic environment remains volatile, but the guidance is set to reflect the potential seen in the business.

Q: What is driving the decision to retire the Deception product, and how does AI factor into this decision? A: Tomer Weingarten, CEO, explained that the Deception product is a legacy code base with increasing maintenance costs and low ROI. AI is expected to consolidate capabilities, making some legacy products like Deception less relevant. The focus is on reallocating resources to high-yielding areas like AI and data.

Q: Can you provide more details on the pricing adjustments and their impact on customer adoption? A: Tomer Weingarten, CEO, stated that pricing has been stable, but there is a move towards more flexible procurement models. This flexibility allows customers to access the entire platform, which is expected to drive adoption of more modules and capabilities over time.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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