Group 1 - NETSCOUT has extended its Omnis™ AI Insights solution to communications service providers (CSPs), enabling them to transform raw network data into AI-ready smart data for improved customer experience and network operations [1] - A McKinsey & Company survey indicated that 64% of telco operators are scaling their AI efforts, with 45% citing data as the primary inhibitor to these efforts [1] - The Omnis™ AI Sensor provides real-time, curated smart data that helps CSPs optimize customer experience, solve problems faster, and assure service quality across complex digital ecosystems, including 5G [1] Group 2 - The Omnis™ AI Streamer allows operational teams to convert large volumes of network telemetry into actionable intelligence, enhancing detection, analysis, and automated response [1] - NETSCOUT's solutions minimize data volume and complexity, reducing infrastructure demands while enhancing network security, thus shifting customer service from a cost center to a strategic resource [1] - The company will showcase its AI solutions for telecom networks at the Mobile World Congress from March 2-5, 2026 [1]

Core Insights - NetScout Systems (NTCT) reported revenue of $250.68 million for the quarter ended December 2025, a decrease of 0.5% year-over-year, while EPS increased to $1.00 from $0.94 in the same quarter last year [1] - The revenue exceeded the Zacks Consensus Estimate of $235.78 million by 6.32%, and the EPS surpassed the consensus estimate of $0.86 by 16.96% [1] Revenue Breakdown - Service revenue was reported at $128.98 million, exceeding the two-analyst average estimate of $118.04 million, reflecting a year-over-year increase of 4.2% [4] - Product revenue was $121.7 million, slightly above the average estimate of $117.75 million, but showed a year-over-year decline of 5.1% [4] Profit Metrics - Gross profit from services reached $97.75 million, surpassing the average estimate of $89.03 million from two analysts [4] - Gross profit from products was reported at $106.91 million, exceeding the average estimate of $103.17 million [4] Stock Performance - Over the past month, NetScout shares have returned 2.8%, while the Zacks S&P 500 composite experienced a decline of 0.2% [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating expected performance in line with the broader market in the near term [3]

Group 1 - The article does not provide any specific company or industry insights, focusing instead on the author's personal disclosures and lack of investment positions [1][2] Group 2 - There are no financial performance metrics or investment recommendations provided in the article [1][2]

Core Insights - NetScout Systems reported third-quarter fiscal 2026 results that exceeded expectations, driven by the pull-forward of product orders and service renewals originally anticipated for the fourth quarter [4][6] - The company raised its fiscal 2026 revenue outlook to a range of $835 million to $870 million, with non-GAAP EPS guidance adjusted to $2.37 to $2.45 [6][18] Financial Performance - Non-GAAP diluted earnings per share for the third quarter were $1.00, reflecting a 6.4% year-over-year increase [1] - Total revenue for the quarter was $250.7 million, slightly down from $252.0 million in the same period last year, but above the company's previous outlook [3][4] - Year-to-date revenue reached approximately $656 million, marking a 6% increase year-over-year, with non-GAAP diluted EPS of $1.96 compared to $1.70 in the prior year [9] Revenue Breakdown - Product revenue was $121.7 million, down from $128.2 million a year ago, attributed to order timing [7] - Service revenue increased by 4.1% to $129.0 million, benefiting from favorable timing of service renewals [7] - Cybersecurity revenue rose approximately 9%, while enterprise revenue increased by 9.4%, supported by AI observability product launches [5][11] Operational Highlights - Gross margin was 82.8%, consistent with the prior year, while operating expenses decreased by 1.1% year-over-year to $117.6 million [8] - Operating margin improved to 35.9% from 35.6% [8] - The company ended the quarter with $586.2 million in cash and equivalents, up $93.7 million from the end of fiscal 2025 [20] Market and Product Insights - The company emphasized strong demand in cybersecurity and enterprise sectors, with a focus on digital initiatives and AI observability [13][15] - Recent product launches include the Omnis AI Sensor and Omnis AI Streamer, aimed at enhancing real-time visibility and observability [13] - The company noted ongoing investments in 5G initiatives among service provider customers, balancing spending with monetization opportunities [14] Customer and Deal Highlights - Significant customer wins included a mid-seven-figure order from a new insurance customer and two mid-to-high seven-figure deals in Europe for DDoS protection [17] - Management highlighted that variability in revenue timing is more about order timing than demand, with a robust pipeline expected to continue [19]

Financial Performance - Total revenue increased by $38.8 million, or 6%, for the nine months ended December 31, 2025, compared to the same period in 2024, driven by growth in both product and service revenue [129]. - Gross profit percentage rose by 2 percentage points to 80% during the nine months ended December 31, 2025, primarily due to increased product revenue growth and a favorable product mix [130]. - Net income for the nine months ended December 31, 2025, was $77.3 million, a significant improvement from a net loss of $385.5 million in the same period in 2024, largely due to a $427.0 million decrease in goodwill impairment charges [131]. - Total revenue for the three months ended December 31, 2025, was $250.7 million, a decrease of 1% compared to $252.0 million in the same period of 2024 [142]. - GAAP net income for the three months ended December 31, 2025, was $55.1 million, compared to $48.8 million in the same period of 2024, representing a 13% increase [142]. - Non-GAAP net income for the same period was $73.7 million, up from $68.3 million, reflecting an 8% increase year-over-year [142]. - Total gross profit increased by 8%, or $38.7 million, to $523.4 million, with a gross profit margin of 80% [166]. Revenue Breakdown - Product revenue increased by 7%, or $19.0 million, to $289.4 million, attributed to higher revenue from enterprise customers and U.S. Government agency orders [161]. - Service revenue increased by 6%, or $19.7 million, to $367.0 million, primarily due to maintenance contracts and cloud services [162]. - Product revenue decreased by 5%, or $6.5 million, to $121.7 million, while service revenue increased by 4%, or $5.1 million, to $129.0 million [142][143]. - Revenue from the service assurance product line increased by 5%, or $19.3 million, to $420.6 million, while cybersecurity revenue rose by 9%, or $19.4 million, to $235.9 million [164]. Cash and Liquidity - Cash, cash equivalents, marketable securities, and investments totaled $586.2 million at December 31, 2025, an increase of $93.7 million from $492.5 million at March 31, 2025 [132]. - The company had $600 million available under a revolving credit facility as of December 31, 2025, providing sufficient liquidity for current obligations and capital spending [128]. - The increase in net cash provided by operations was $142.3 million, contributing to the overall improvement in cash reserves [132]. - Net cash provided by operating activities was $142.3 million for the nine months ended December 31, 2025, compared to $76.1 million in the same period last year [179]. - The company expects net cash provided by operating activities, along with cash, cash equivalents, and marketable securities, to sufficiently fund current obligations and capital spending over the next twelve months [190]. Expenses and Cost Management - Research and development expenses increased by 5%, or $1.9 million, to $39.6 million for the three months ended December 31, 2025, compared to the same period last year [153]. - Total sales and marketing expenses decreased by 6%, or $4.5 million, to $65.4 million for the three months ended December 31, 2025, primarily due to a decrease associated with the timing of trade shows [155]. - General and administrative expenses increased by 3%, or $0.6 million, to $24.1 million for the three months ended December 31, 2025, mainly due to higher employee-related variable incentive compensation [156]. - Total operating expenses decreased by 50%, or $438.9 million, to $433.1 million for the nine months ended December 31, 2025, compared to $872.1 million in the same period last year [168]. Strategic Initiatives - The company ceased operations in Russia in response to the war in Ukraine, impacting its business strategy and operations [126]. - The company is focused on driving product innovation and returning to annual revenue growth while managing costs amid ongoing macroeconomic challenges [126]. - The company continues to invest in areas that advance its business despite managing discretionary spending and hiring activities [127]. - The company evaluates potential acquisitions and investments in complementary technologies as part of its ordinary business operations [191]. Tax and Financial Instruments - Income tax expense rose by 34%, or $2.9 million, to $11.5 million for the three months ended December 31, 2025, with an effective tax rate of 17.2% [159]. - The effective tax rate increased to 18.8% for the nine months ended December 31, 2025, compared to 0.4% for the same period in 2024, primarily due to a decrease in research and development tax credit [174]. - The company has foreign currency forward contracts with notional amounts totaling $12.2 million as of December 31, 2025, with a liability balance of $0.1 million and an asset balance of $0.1 million [197]. - The company engages in foreign currency hedging activities to limit exposure to movements in foreign currency exchange rates, primarily the Euro, British Pound, Canadian Dollar, and Indian Rupee [196]. - The company does not use derivative financial instruments for speculative trading purposes, focusing instead on managing exchange risk [196]. Market Conditions - Macroeconomic conditions, including high inflation and potential recession, could increase the company's funding requirements or complicate access to capital [190]. - A hypothetical 10% change in foreign currency exchange rates would not have a material impact on the company's historical consolidated financial statements [198]. - The company maintains a diversified portfolio of cash, cash equivalents, and investments to minimize interest rate risk, with no material exposure to changes in fair value due to interest rate fluctuations [194].

Financial Performance - For Q3 FY2026, total revenue was approximately $251 million, consistent with the same period last fiscal year, and diluted earnings per share totaled $1, reflecting a 6% year-over-year increase [5][16] - For the first nine months of FY2026, revenue was approximately $656 million, a 6% year-over-year increase, with diluted earnings per share of $1.96, up 15% from $1.70 in the prior year [5][20] - Gross profit margin was 82.8% in Q3, consistent with the prior year, while operating margin increased to 35.9% from 35.6% year-over-year [19][20] Business Line Performance - Service assurance revenue increased approximately 5% year-over-year for the first nine months, driven by growth in enterprise customer verticals, particularly from government-related spending [6][20] - Cybersecurity revenue grew 9% year-over-year during the same period, reflecting strong demand in response to a complex cyber threat landscape [8][20] - Product revenue for Q3 was $121.7 million, down from $128.2 million last year, while service revenue increased 4.1% to $129 million [16][20] Market Insights - The U.S. represented 57% of total revenue, while international markets accounted for 43% during the first nine months of FY2026 [21] - The enterprise customer vertical accounted for approximately 58% of total revenue, with a 9.4% growth, while service provider vertical revenue grew 2.2% [20][21] Company Strategy and Industry Competition - The company is focused on product innovation, returning to annual revenue growth, and enhancing margins through disciplined cost management [13][14] - The competitive landscape in the service provider sector is characterized by price pressures and budget constraints, particularly in the context of 5G initiatives [43][44] Management Commentary on Operating Environment and Future Outlook - Management expressed cautious optimism regarding demand signals, noting potential supply chain challenges that could affect order timing [26][27] - The company raised its revenue outlook for FY2026 to a range of $835 million to $870 million, reflecting solid execution and continued demand for its solutions [23][24] Other Important Information - NETSCOUT's Omnis Cyber Intelligence was recognized as a 2025 CyberSecured Award Winner, highlighting its advanced capabilities in network security [9] - The company ended Q3 FY2026 with $586.2 million in cash and cash equivalents, representing an increase of $93.7 million since the end of FY2025 [21] Q&A Session Summary Question: Can you comment on demand trends and if they are improving? - Management noted that demand signals are similar or improving, but supply chain challenges could delay order timing [26][27] Question: Can you quantify the pull-ins this quarter? - Approximately $15 million in pull-ins were noted, impacting both product and service revenue [28] Question: How did customer budgets work in pulling orders from one quarter to another? - Customers often pull orders based on their fiscal year-end budgets, which can lead to demand in one quarter that reflects budget utilization from another [33][35] Question: What is driving the service assurance business? - The service assurance business is seeing growth from traditional service triage and AI use cases, with Smart Data being a key differentiator [36][37] Question: How is the supply chain impacting product growth margins? - Management indicated that while supply chain issues could affect timing, they do not significantly impact margins due to the software-centric nature of the business [46][48]

Financial Performance - For Q3 FY2026, total revenue was approximately $251 million, consistent with the same period last fiscal year, and diluted earnings per share totaled $1, reflecting a 6% year-over-year increase [5][16] - For the first nine months of FY2026, revenue was approximately $656 million, a 6% year-over-year increase, with diluted earnings per share of $1.96, up 15% from $1.70 in the prior year [5][20] - Gross profit margin was 82.8% in Q3, consistent with the prior year, while operating margin increased to 35.9% from 35.6% [19] Business Line Performance - Service assurance revenue increased approximately 5% year-over-year for the first nine months, driven by growth in enterprise customer verticals, particularly from government-related spending [6][20] - Cybersecurity revenue grew 9% year-over-year for the first nine months, reflecting strong demand in response to a complex cyber threat landscape [8][20] Market Insights - The U.S. represented 57% of total revenue, while international markets accounted for 43% during the first nine months of FY2026 [21] - The enterprise customer vertical accounted for approximately 58% of total revenue, while service provider verticals accounted for 42% [20] Company Strategy and Industry Competition - The company is focused on product innovation, returning to annual revenue growth, and enhancing margins through disciplined cost management [13] - NETSCOUT is well-positioned to support advancements in 5G network slicing and AI observability solutions, despite competitive pricing pressures from smaller players in the service provider market [7][44] Management Commentary on Operating Environment and Future Outlook - Management raised the midpoint of revenue and earnings outlook for FY2026, now expecting revenue in the range of $835 million to $870 million, reflecting solid execution and demand for solutions [23] - Management expressed caution regarding supply chain challenges that could impact order timing, although demand for solutions remains strong [26][47] Other Important Information - NETSCOUT's Omnis Cyber Intelligence was recognized as a 2025 CyberSecured Award Winner, highlighting its advanced capabilities in network security [9] - The company ended Q3 FY2026 with $586.2 million in cash and cash equivalents, representing an increase of $93.7 million since the end of FY2025 [21] Q&A Session Summary Question: Can you comment on demand signals and if they are improving? - Management noted that demand signals are similar or improving, but supply chain challenges could delay order timing [26] Question: Can you quantify the pull-ins this quarter? - Approximately $15 million in pull-ins were noted, impacting both product and service revenue [28] Question: How are customer budgets impacting order timing? - Customers may pull orders from their fiscal year-end budgets, leading to earlier purchases in NETSCOUT's Q3 [33] Question: What is driving the service assurance business? - The service assurance business is seeing growth from traditional service triage and AI use cases, with Smart Data being a key differentiator [36] Question: How is the supply chain impacting product growth margins? - Supply chain issues primarily affect order timing rather than margins, as most revenue comes from services and software [47]

Financial Performance - For Q3 FY2026, total revenue was approximately $251 million, consistent with the same period last fiscal year, and diluted earnings per share totaled $1, reflecting a 6% year-over-year increase [5][17] - For the first nine months of FY2026, revenue reached approximately $656 million, a 6% year-over-year increase, with diluted earnings per share of $1.96, up 15% from the previous year [5][20] - Gross profit margin for Q3 was 82.8%, consistent with the prior year, while operating margin increased to 35.9% from 35.6% year-over-year [19] Business Line Performance - Service assurance revenue increased approximately 5% year-over-year for the first nine months, driven by growth in enterprise customer verticals, particularly from government-related spending [6][20] - Cybersecurity revenue grew 9% year-over-year during the same period, reflecting strong demand in response to a complex cyber threat landscape [9][20] - Product revenue for Q3 was $121.7 million, down from $128.2 million the previous year, while service revenue increased by 4.1% to $129 million [18] Market Insights - The U.S. market represented 57% of total revenue, while international markets accounted for 43% during the first nine months of FY2026 [21] - The enterprise customer vertical accounted for approximately 58% of total revenue, with a 9.4% growth, while service provider vertical revenue grew 2.2% [20] Company Strategy and Industry Competition - The company is focused on product innovation, achieving annual revenue growth, and enhancing margins through disciplined cost management [14] - The competitive landscape in the service provider sector is characterized by price pressures and budget constraints, particularly in the context of 5G initiatives [44] Management Commentary on Operating Environment and Future Outlook - Management expressed cautious optimism regarding demand signals, noting that while demand remains strong, supply chain challenges could impact order timing [26][28] - The company raised its revenue outlook for FY2026 to a range of $835 million to $870 million, reflecting solid execution and continued demand for its solutions [23] Other Important Information - The company ended Q3 FY2026 with $586.2 million in cash and cash equivalents, representing an increase of $93.7 million since the end of FY2025 [21] - Free cash flow for the quarter was $59.4 million, with no outstanding balance on the $600 million revolving credit facility [21] Q&A Session Summary Question: Can you comment on demand trends and any improvements? - Management noted that demand signals are similar or improving, but supply chain challenges could delay order timing [26][27] Question: Can you quantify the pull-ins this quarter? - Approximately $15 million in pull-ins were noted, impacting both product and service revenue [29] Question: How did customer budgets work in pulling orders from one quarter to another? - Customers often pull orders based on their fiscal year-end budgets, which can lead to demand in one quarter being fulfilled from budgets allocated for another [34] Question: What AI use cases are driving the service assurance business? - Traditional service triage and enhanced data usage for AI-related applications are key drivers, with a noted contribution of about $15 million for the nine months [36][39] Question: How is the service provider business impacted by competitive dynamics? - There is no direct competitive pressure from smaller players, but budget constraints and price pressures are present [44] Question: How are supply chain issues affecting product growth margins? - Supply chain issues primarily affect timing rather than margins, as the company focuses on software solutions [46][48]

Q3 FY'26 Financial Results Conference Call PERIOD ENDED December 31, 2025 Published February 5, 2026 COPYRIGHT © 2026 NETSCOUT SYSTEMS, INC. | 1 Agenda 01 02 03 04 Introduction Scott Dressel, Vice President Corporate Finance CEO Perspective Anil Singhal, President & Chief Executive Officer (CEO) CFO Financial Review Tony Piazza, Executive Vice President & Chief Financial Officer (CFO) Question & Answer Session COPYRIGHT © 2026 NETSCOUT SYSTEMS, INC. | 2 Forward-Looking Statements This presentation contains ...

Revenue Performance - Total revenue for Q3 FY26 was $250.7 million, a slight decrease from $252.0 million in Q3 FY25[4] - Product revenue for Q3 FY26 was $121.7 million, approximately 49% of total revenue, down from $128.2 million or 51% in Q3 FY25[5] - Service revenue for Q3 FY26 increased to $129.0 million, approximately 51% of total revenue, compared to $123.8 million or 49% in Q3 FY25[6] - For the first nine months of FY26, total revenue increased to $656.4 million, up from $617.7 million in the same period of FY25[10] - Total revenue for the three months ended December 31, 2025, was $250.683 million, a slight decrease from $252.019 million in the same period of 2024[24] Profitability Metrics - GAAP income from operations for Q3 FY26 rose to $64.3 million, with an operating margin of 25.7%, up from $61.7 million and 24.5% in Q3 FY25[7] - GAAP net income for Q3 FY26 increased to $55.1 million, or $0.75 per share, compared to $48.8 million, or $0.67 per share in Q3 FY25[8] - Gross profit for the three months ended December 31, 2025, was $204.654 million, compared to $205.407 million in the prior year, resulting in a gross margin of 81.7%[24] - Net income for the three months ended December 31, 2025, was $55.142 million, an increase from $48.810 million year-over-year, resulting in a diluted net income per share of $0.75[24] - Non-GAAP net income for the three months ended December 31, 2025, was $73.746 million, compared to $68.282 million in the same period of 2024[27] - The company reported a non-GAAP diluted net income per share of $1.00 for the three months ended December 31, 2025, compared to $0.94 in the prior year[27] Financial Outlook - NETSCOUT is raising its FY26 revenue outlook to a range of $835 million to $870 million, implying a year-over-year growth of 3.6% at the midpoint[11] - The company expects FY'25 revenue to be $822.7 million, with FY'26 projected revenue between $835 million and $870 million[34] - GAAP net income (loss) for FY'25 is projected at $(366.9) million, with FY'26 expected to be between $85 million and $91 million[34] - Non-GAAP net income for FY'25 is estimated at $160.4 million, with FY'26 projected between $174 million and $180 million[34] Cash and Investments - The company reported a total cash and investments of $586.2 million as of December 31, 2025, compared to $492.5 million as of March 31, 2025[9] - Cash, cash equivalents, and marketable securities increased to $573.003 million as of December 31, 2025, from $491.473 million at the end of March 2025[26] - Total assets rose to $2.321 billion as of December 31, 2025, compared to $2.187 billion at the end of March 2025[26] - Total liabilities increased to $680.375 million as of December 31, 2025, from $626.183 million at the end of March 2025[26] Expenses and Charges - Operating expenses totaled $140.339 million for the three months ended December 31, 2025, down from $143.694 million in the same period of 2024[24] - Research and development expenses for the three months ended December 31, 2025, were $4.1 million, slightly up from $4.0 million in the previous quarter[30] - Total amortization expense for the three months ended December 31, 2025, was $11.7 million, compared to $12.6 million for the same period in 2024[32] - The company incurred restructuring charges of $25,000 for the three months ended December 31, 2025, down from $923,000 in the previous quarter[33] - Total share-based compensation expense for the nine months ended December 31, 2025, was $47.3 million, down from $50.6 million in the same period in 2024[30] Product and Industry Recognition - Recent product enhancements include real-time deep packet inspection over Ethernet and Wi-Fi 7, aimed at improving remote site management[14] - NETSCOUT was named Frost & Sullivan's 2025 Global Company of the Year in the network monitoring industry for its achievements in real-time visibility and performance assurance[14]