Industry Overview - The Zacks Computer - Networking industry is poised for growth driven by advancements in cloud computing, network security, big data, and next-gen connectivity, particularly with the rapid adoption of AI technology [1][2] - The proliferation of AI workloads and hyperscale data centers is leading to increased investments in high-speed interconnects, optical networking, and Ethernet switches [1] - The deployment of 5G technology is enhancing the Internet of Things (IoT), Advanced Driver Assistance Systems, AR/VR devices, and 5G smartphones, thereby increasing demand for robust networking infrastructure [1] Trends Influencing the Industry - The explosion of AI workloads necessitates significant upgrades in observability infrastructure, increasing the demand for innovative networking products [2] - The rapid deployment of 5G technology is expected to boost growth prospects, with substantial investments required to upgrade core fiber backhaul networks [5] - The upcoming Wi-Fi 7 upgrade cycle is anticipated to drive momentum in the industry, addressing Wi-Fi spectrum shortages and supporting a higher number of connected devices [6] Company Performance - NetScout Systems reported a 15% year-over-year revenue increase to $219 million in Q2 of fiscal 2026, driven by demand across enterprise and service provider markets [20] - Digi International achieved a 9% year-over-year revenue growth of $114 million in fiscal 2025, with a 31% surge in Annual Recurring Revenue (ARR) to $152 million [28] - Lantronix reported a 3% year-over-year revenue increase to $29.8 million in Q1 of fiscal 2026, with significant growth in its unmanned aerial systems segment [34] Stock Market Performance - The Zacks Computer - Networking industry has outperformed the S&P 500 Composite and the broader Zacks Computer and Technology sector, gaining 33.4% over the past year compared to the sector's 23.9% and the S&P 500's 12.9% [11] - The industry is currently trading at a forward 12-month price-to-earnings (P/E) ratio of 22.45X, slightly below the S&P 500's 22.78X and the sector's 27.8X [14] Future Outlook - The Zacks Industry Rank for the Computer - Networking industry is 38, placing it in the top 16% of over 243 Zacks industries, indicating bright near-term prospects [9] - Companies in the industry are focusing on innovation in networking technologies, including network virtualization and Software-Defined Networking, to meet the growing demand for secure infrastructure [4]

Summary of NetScout Systems Conference Call Company Overview - **Company**: NetScout Systems (NasdaqGS: NTCT) - **Conference Date**: November 19, 2025 Key Points Financial Performance - **Q2 Revenue Growth**: NetScout reported a revenue growth of **15%** in Q2, with contributions from both service assurance and cybersecurity sectors [4][5] - **First Half Growth**: The company achieved an **11%** growth in revenue for the first half of the fiscal year [5] - **Customer Behavior**: Despite macroeconomic uncertainties, there has been no significant pullback in customer spending observed [6] Industry Dynamics - **5G Capacity Utilization**: The company noted a turning point in the 5G market, where previously deployed capacity is now being utilized, leading to increased demand for monitoring tools [9][10] - **AI Traffic Growth**: The rise in AI-related traffic is expected to create additional network demands, further driving the need for NetScout's services [11] Capital Expenditure Trends - **Carrier Investments**: Major carriers like Verizon and AT&T are focusing on investing in fiber infrastructure to enhance network capacity and reduce costs [14][15] - **Satellite Deployment**: Carriers are also exploring satellite technology to expand coverage, which will necessitate more monitoring solutions [16] Cybersecurity Focus - **Cybersecurity Growth**: The cybersecurity segment grew by **13%** in the first half of the year, driven by ongoing threats and the need for modern technology [12] - **Adaptive DDoS Solutions**: The company is focusing on adaptive DDoS solutions to help enterprises manage cybersecurity threats more effectively [39][42] Product Development - **AI Integration**: NetScout is embedding AI into its products, including new offerings like AI Sensor and Streamer, to enhance observability and data analysis capabilities [18][19] - **DPI Technology**: The company has a strong competitive advantage in Deep Packet Inspection (DPI) technology, which is becoming increasingly relevant in the AI and cybersecurity landscape [25] Strategic Outlook - **Future Growth Opportunities**: The management expressed optimism about future growth driven by tailwinds in service assurance and cybersecurity, as well as the integration of AI into their offerings [50][52] - **Investment Strategy**: The company maintains a strong balance sheet and is focused on organic growth opportunities, while also considering potential acquisitions [46][48] Market Position - **Competitive Landscape**: NetScout has established a strong moat in the DPI space with minimal competition, positioning itself well for future growth [25] Conclusion - **Investment Rationale**: The management believes that the headwinds faced in previous years are dissipating, and there are multiple catalysts for growth, making it an opportune time for potential investors to consider NetScout [51][52]

NetScout Systems (NTCT) closed the last trading session at $27.42, gaining 6.2% over the past four weeks, but there could be plenty of upside left in the stock if short-term price targets set by Wall Street analysts are any guide. The mean price target of $36.33 indicates a 32.5% upside potential.The average comprises three short-term price targets ranging from a low of $31.00 to a high of $43.00, with a standard deviation of $6.11. While the lowest estimate indicates an increase of 13.1% from the current p ...

Core Insights - The article emphasizes the author's background in finance and engineering, highlighting a focus on tech, infrastructure, and internet services, with an interest in companies that exhibit strong fundamentals and growth potential [1]. Group 1 - The author holds FMVA® and BIDA® certifications, indicating a strong foundation in financial analysis and data interpretation [1]. - The narrative suggests a commitment to long-term investment strategies rather than short-term market fluctuations, appealing to investors who prioritize sustainable returns [1]. - The content aims to foster engagement and discussion among investors, featuring analytical breakdowns and investment ideas [1].

Financial Performance - Total revenue increased by $40.1 million, or 11%, for the six months ended September 30, 2025, compared to the same period in 2024[131]. - Net income for the six months ended September 30, 2025, was $22.1 million, a significant improvement from a net loss of $434.3 million in the same period of 2024[133]. - Non-GAAP net income for the six months ended September 30, 2025, was $69.8 million, compared to $54.1 million for the same period in 2024[140]. - Total revenue for the three months ended September 30, 2025, was $219.0 million, representing a 15% increase from $191.1 million in the same period of 2024[144]. - Total revenue for the six months ended September 30, 2025, was $405.8 million, an increase of 11% or $40.1 million compared to $365.7 million in the same period of 2024[166]. Revenue Breakdown - Product revenue increased by 17% to $94.7 million, while service revenue rose by 13% to $124.3 million compared to the previous year[144][145]. - Product revenue increased by 18% or $25.5 million to $167.7 million, driven by service assurance offerings and cybersecurity offerings[166]. - Service revenue grew by 7% or $14.6 million to $238.1 million, primarily due to maintenance contracts and cloud services[167]. - Revenue from the United States grew by 18% to $131.2 million, accounting for 60% of total revenue, driven by service assurance offerings[147][150]. - Service assurance revenue increased by 10% or $24.0 million to $262.4 million, while cybersecurity revenue rose by 13% or $16.1 million to $143.4 million[169]. Profitability Metrics - Gross profit percentage rose by 3 percentage points to 79% during the six months ended September 30, 2025, due to increased product and service revenue growth[132]. - The gross profit for the six months ended September 30, 2025, was $318.7 million, up from $279.2 million in the same period of 2024[140]. - Gross profit for the three months ended September 30, 2025, was $175.4 million, an 18% increase from $149.1 million in 2024, with a gross profit margin of 80%[152]. - The gross profit margin improved to 79% for the six months ended September 30, 2025, compared to 76% in the same period of 2024[171]. Expenses and Charges - Research and development expenses increased by 12% to $40.3 million, primarily due to higher employee-related variable incentive compensation[154][156]. - Total operating expenses rose by 6% to $142.9 million, representing 65% of total revenue[154]. - The company recorded restructuring charges of $0.3 million in the current period, significantly lower than $2.4 million in the same period last year[160]. - Total operating expenses decreased by 60% to $292.8 million, down from $728.4 million, primarily due to a significant goodwill impairment charge in the prior year[173]. Cash and Liquidity - Cash, cash equivalents, marketable securities, and investments totaled $526.9 million as of September 30, 2025, an increase of $34.4 million from $492.5 million at March 31, 2025[134]. - Net cash provided by operating activities for the six months ended September 30, 2025, was $80.2 million, a significant increase from $34.7 million in the same period of 2024[186]. - Cash used in investing activities was $12.6 million for the six months ended September 30, 2025, compared to cash provided of $0.9 million in the same period of 2024[187]. - Cash used in financing activities decreased to $46.8 million during the six months ended September 30, 2025, from $63.8 million in the same period of 2024[189]. - The company believes it has adequate liquidity to meet anticipated funding requirements for at least the next twelve months, supported by cash flows from operating activities and available cash balances[206]. Strategic Initiatives - The company ceased business operations in Russia in response to the war in Ukraine, impacting its operational strategy[128]. - The company is focused on driving product innovation and returning to annual revenue growth amid ongoing macroeconomic uncertainty[128]. - The company plans to continue investing in capital expenditures to support infrastructure through the remainder of fiscal year 2026[188]. Tax and Other Financial Metrics - The effective tax rate for the three months ended September 30, 2025, was 17.7%, down from 26.8% in the same period of 2024[163]. - The effective tax rate for the six months ended September 30, 2025, was 22.4%, compared to 1.6% for the same period in 2024, reflecting a change primarily due to sales mix and non-deductible expenses[179]. - Interest and other expense, net, decreased by 39% to $(1.8) million, attributed to a reduction in interest expense and an increase in interest income[162]. - Interest and other income (expense), net, decreased by 66% or $5.2 million to $2.6 million, mainly due to a decline in the fair value of an equity investment[178]. Market and Risk Factors - The company is not currently exposed to market risks related to interest rate fluctuations as it had no debt as of September 30, 2025[211]. - The company engages in foreign currency hedging to limit exposure to movements in exchange rates, primarily for expenses denominated in foreign currencies[212]. - Macroeconomic factors such as high inflation and interest rates could increase funding requirements or complicate access to capital[207].

Core Insights - NetScout Systems (NTCT) reported quarterly earnings of $0.62 per share, exceeding the Zacks Consensus Estimate of $0.45 per share, and up from $0.47 per share a year ago [1] - The earnings surprise was +37.78%, with the company having surpassed consensus EPS estimates three times in the last four quarters [2] - The company generated revenues of $219.02 million for the quarter ended September 2025, surpassing the Zacks Consensus Estimate by 9.43% and increasing from $191.11 million year-over-year [3] Financial Performance - NetScout's earnings surprise of +37.78% indicates strong performance relative to expectations [2] - The company has consistently exceeded revenue estimates, achieving this four times over the last four quarters [3] - Year-to-date, NetScout shares have increased by approximately 26.1%, outperforming the S&P 500's gain of 15.6% [4] Future Outlook - The company's earnings outlook is crucial for assessing future stock performance, with current consensus EPS estimates at $0.88 for the upcoming quarter and $2.35 for the current fiscal year [8] - The Zacks Rank for NetScout is currently 3 (Hold), suggesting expected performance in line with the market in the near future [7] - The Computer - Networking industry, to which NetScout belongs, is currently ranked in the bottom 37% of Zacks industries, which may impact stock performance [9] Industry Context - The performance of NetScout's stock may be influenced by the overall outlook for the Computer - Networking industry [9] - Another company in the same industry, Digi International (DGII), is expected to report quarterly earnings soon, with estimates indicating a slight year-over-year decline [10][11]

Q2 FY'26 Financial Results Conference Call PERIOD ENDED September 30, 2025 Published November 6, 2025 COPYRIGHT © 2025 NETSCOUT SYSTEMS, INC. | 1 Agenda 01 02 03 04 Introduction Scott Dressel, Assistant 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 © 2025 NETSCOUT SYSTEMS, INC. | 2 Forward-Looking Statements Forward Looking ...

Revenue Performance - Total revenue for Q2 FY26 increased to $219.0 million, up 14.6% from $191.1 million in Q2 FY25[4] - Product revenue for Q2 FY26 was $94.7 million, approximately 43% of total revenue, compared to $81.0 million or 42% in Q2 FY25[5] - Service revenue for Q2 FY26 was $124.3 million, approximately 57% of total revenue, compared to $110.1 million or 58% in Q2 FY25[6] - Total revenue for the three months ended September 30, 2025, was $219.017 million, a 14.6% increase from $191.108 million in the same period of 2024[25] - Product revenue increased to $94.712 million, up 16.8% from $81.033 million year-over-year, while service revenue rose to $124.305 million, a 12.9% increase from $110.075 million[25] Profitability Metrics - GAAP income from operations for Q2 FY26 was $32.5 million, with an operating margin of 14.8%, compared to $14.1 million and 7.4% in Q2 FY25[7] - Non-GAAP net income for Q2 FY26 was $45.1 million, or $0.62 per share, compared to $33.6 million, or $0.47 per share in Q2 FY25[8] - Gross profit for the three months ended September 30, 2025, was $175.407 million, representing a gross margin of 80.0%, compared to $149.051 million and a margin of 77.9% in the prior year[25][28] - Net income for the three months ended September 30, 2025, was $25.828 million, compared to $9.027 million in the same period of 2024, resulting in a diluted net income per share of $0.35[25][28] - Non-GAAP net income for the three months ended September 30, 2025, was $45.077 million, compared to $33.562 million in the same period of 2024, with a non-GAAP diluted net income per share of $0.62[28] Cash and Assets - Cash and marketable securities as of September 30, 2025, were $526.9 million, up from $492.5 million as of March 31, 2025[9] - Cash, cash equivalents, and marketable securities increased to $516.863 million as of September 30, 2025, up from $491.473 million at the end of the previous fiscal year[27] - Total assets decreased slightly to $2.176 billion as of September 30, 2025, from $2.187 billion as of March 31, 2025[27] Financial Outlook - The company raised its revenue outlook for FY26 to a range of $830 million to $870 million, up from the previous range of $825 million to $865 million[12] - GAAP net income per share (diluted) outlook for FY26 is now expected to be in the range of $1.13 to $1.23, compared to the previous range of $1.07 to $1.22[12] - The company expects FY'25 revenue to be approximately $822.7 million, with FY'26 projected revenue ranging from $830 million to $870 million[33] - GAAP net income (loss) for FY'25 is projected at $(366.9) million, while FY'26 is expected to be between $83 million and $90 million[33] - Non-GAAP net income for FY'25 is estimated at $160.4 million, with FY'26 expected to be between $171 million and $178 million[33] Operational Efficiency - Operating expenses totaled $142.921 million for the three months ended September 30, 2025, an increase from $134.928 million in the same period of 2024[25] - Non-GAAP income from operations for the three months ended September 30, 2025, was $58.071 million, up from $44.067 million in the prior year, indicating a significant increase in operational efficiency[32] - Non-GAAP EBITDA from operations for the three months ended September 30, 2025, was $60.701 million, representing 27.7% of revenue, compared to $47.518 million (24.9%) in the same period of 2024[32] Strategic Initiatives - NETSCOUT showcased new solutions at the Engage Technology and User Summit, emphasizing AI-driven product innovation and customer reliance on curated data[3] - The company announced the availability of extended continuous end-to-end monitoring to enhance compliance and incident reporting capabilities[11] - NETSCOUT's strategic objectives include capturing new opportunities through differentiated solutions, although actual results may differ due to various risks and uncertainties[22] Restructuring and Expenses - The company incurred restructuring charges of $20.5 million in FY'25, with an expected reduction to approximately $1 million in FY'26[33] - The total share-based compensation expense for the six months ended September 30, 2025, was $19.959 million, down from $36.084 million in the same period of 2024[31] - The company reported a total amortization expense of $11.713 million for the three months ended September 30, 2025, compared to $12.638 million in the prior year[31]

Core Insights - NETSCOUT reported strong financial results for Q2 FY26, exceeding both revenue and earnings expectations, and raised its fiscal year outlook [1][3][12] Financial Performance - Total revenue for Q2 FY26 was $219.0 million, up from $191.1 million in Q2 FY25, representing a growth of approximately 14.5% [4] - Product revenue for Q2 FY26 was $94.7 million, approximately 43% of total revenue, compared to $81.0 million or 42% in Q2 FY25 [5] - Service revenue for Q2 FY26 was $124.3 million, approximately 57% of total revenue, compared to $110.1 million or 58% in Q2 FY25 [6] - GAAP income from operations for Q2 FY26 was $32.5 million, with an operating margin of 14.8%, compared to $14.1 million and 7.4% in Q2 FY25 [7] - Non-GAAP income from operations for Q2 FY26 was $58.1 million, with a non-GAAP operating margin of 26.5%, compared to $44.1 million and 23.1% in Q2 FY25 [7] Net Income - GAAP net income for Q2 FY26 was $25.8 million, or $0.35 per diluted share, compared to $9.0 million or $0.13 per diluted share in Q2 FY25 [8] - Non-GAAP net income for Q2 FY26 was $45.1 million, or $0.62 per diluted share, compared to $33.6 million or $0.47 per diluted share in Q2 FY25 [9] Cash and Shareholder Returns - As of September 30, 2025, NETSCOUT had cash and marketable securities totaling $526.9 million, up from $492.5 million as of March 31, 2025 [10] - During Q2 FY26, the company repurchased 740,981 shares at an average price of $22.34 per share, totaling approximately $16.6 million [10] First-Half Financial Results - For the first half of FY26, total revenue was $405.8 million, compared to $365.7 million in the first half of FY25 [13] - GAAP net income for the first half of FY26 was $22.1 million, or $0.30 per diluted share, compared to a net loss of $434.3 million or $(6.08) per diluted share in the first half of FY25 [13] Financial Outlook - The company raised its revenue outlook for FY26 to a range of $830 million to $870 million, up from the previous range of $825 million to $865 million [12] - GAAP net income per share (diluted) is now expected to be in the range of $1.13 to $1.23, and non-GAAP net income per share (diluted) is expected to be in the range of $2.35 to $2.45 [12] Strategic Initiatives - NETSCOUT is focusing on AI-driven product innovation and has received positive customer feedback at its recent Engage Technology and User Summit [2][3] - The company announced new solutions for enhanced monitoring and observability in cloud environments, addressing compliance demands [12][14]

Group 1 - The article does not provide any relevant content regarding company or industry insights [1]