In 2024, it seems to be a year of the haves and the have-nots in the cybersecurity industry. Bigger firms have tended to get bigger, while smaller ones have tended to lose value. Among eight large-cap cybersecurity stocks, including Palo Alto Networks NASDAQ: PANW, the average 2024 return is 27% as of the Dec. 10 close. Meanwhile, within a group of four small and mid-cap stocks that includes SentinelOne NYSE: S, shares are down an average of 17%. So, can the smaller SentinelOne turn things around in 2025 af ...

SentinelOne's (S -0.17%) stock market rally over the past six months came to a grinding halt on Dec. 4 following the release of the company's fiscal 2025 third-quarter results (for the three months ended Oct. 31), as investors overlooked the cybersecurity specialist's upgraded full-year guidance and focused on a weaker-than-expected bottom line that missed expectations by a whisker.However, there was a lot to like about the company's latest quarterly report. Here's a closer look at SentinelOne's performance ...

Cybercrime damages the global economy. Cybersecurity company SentinelOne helps businesses protect themselves.According to a study by McKinsey and Co., if companies were keeping up with the necessary spending needed to fend off the growing threats from hackers and malicious actors, the market for cybersecurity services in the corporate sector would be between $1.5 trillion and $2 trillion per year. As it stands, companies are on track to allocate just $213 billion toward cybersecurity protection in 2024. Tha ...

I have analyzed the cybersecurity sector via several ETFs such as Global X Cybersecurity ( BUG ) and the First Trust NASDAQ Cybersecurity ( CIBR ), which did not instill me with enthusiasm or convictionExperience is difficult to learn. After 30 plus years of critically analyzing the nuts and bolts of businesses as diverse as airlines, oil, retail, mining to fintech and ecommerce plus the macro, monetary and political drivers. I continue to immensely enjoy learning and applying my experience to unravel, comp ...

U.S. stock futures were slightly lower this morning, with the Dow futures falling around 0.1% points on Thursday.Shares of SentinelOne, Inc. S fell sharply in today's pre-market trading following third-quarter results.SentinelOne reported third-quarter revenue of $210.65 million, beating the consensus estimate of $209.72 million, according to Benzinga Pro.Total revenue increased 28% year-over-year. Annualized recurring revenue (ARR) increased 29% to $859.7 million as of Oct. 31. Customers with ARR of $100,0 ...

Financial Data and Key Metrics Changes - In Q3, total Annual Recurring Revenue (ARR) grew 29% to $860 million, while revenue increased 28% to $211 million year-over-year [15][53] - Net new ARR of $54 million increased over 20% sequentially, marking a 4% year-over-year growth, indicating a strong business momentum [16][55] - Gross margin stood at 80%, with operating margin improving by more than six percentage points compared to the previous year [17][56] - Positive net income was achieved for the second consecutive quarter, with positive free cash flow on a trailing 12-month basis for the first time in company history [18][58] Business Line Data and Key Metrics Changes - The rapid adoption of the Purple AI suite, now the fastest-growing solution, contributed significantly to the overall growth [13][28] - The number of customers with ARR of $100,000 or more grew by 24% year-over-year, reflecting strong execution and competitive positioning [19][55] - ARR per customer reached a new record in Q3, driven by success with large enterprises and platform adoption [20][56] Market Data and Key Metrics Changes - Revenue from international markets also grew 28%, representing 37% of quarterly revenue [53] - The company noted broad-based strength across geographies and platform solutions despite a challenging macroeconomic landscape [17][56] Company Strategy and Development Direction - The company is raising its full-year revenue guidance to approximately $818 million, reflecting a growth of 32% [14][61] - Strategic partnerships, such as with Lenovo, are expected to enhance market presence and contribute to long-term growth [42][96] - The focus remains on expanding market presence and enhancing operational efficiencies while maintaining a strong financial profile [68] Management's Comments on Operating Environment and Future Outlook - Management highlighted the increasing sophistication of cyber threats, which is driving customer interest in AI-based security solutions [18][40] - The company is optimistic about the future, citing a record pipeline and strong win rates against competitors [74][76] - Despite a challenging macroeconomic environment, the company expects to see stronger net new ARR growth in the second half of fiscal '25 compared to the first half [62] Other Important Information - The company achieved significant industry recognitions, including being named a leader in Gartner's Magic Quadrant for Endpoint Protection for the fourth consecutive year [22] - The introduction of AI Security Posture Management (AI-SPM) aims to protect AI services in the workplace, showcasing the company's commitment to innovation [35] Q&A Session Summary Question: What gives confidence in acceleration of pipeline and visibility ahead? - Management noted that the July outage added to existing momentum, resulting in more customer opportunities and a record pipeline [74][75] Question: What drove stronger quarter-over-quarter growth in Q3? - The growth was attributed to the leverage from emerging products and customer migrations following the July outage [82][83] Question: How is the company performing with larger customers and deals? - The company is seeing increased success in selling multiple elements of the platform, with rising average deal sizes and a record number of large customers [89][90] Question: How does the Lenovo partnership contribute to net new ARR? - The Lenovo partnership is a multiyear agreement expected to contribute to revenue in the latter part of next year as pre-installed units begin shipping [96][97] Question: Can you discuss RPO trends and pricing? - RPO delivered strong year-over-year growth, and pricing has remained steady, with a focus on maintaining high gross margins [102][105] Question: How important is vendor financing in the current market? - Management indicated that vendor financing is not a significant demand driver currently, with a focus on providing immediate capabilities to customers [110][111] Question: How are customers approaching their budgets for 2025? - Customers are focused on cost savings and investing in solutions that can fend off new AI-based threats while modernizing their infrastructure [128][130] Question: How did the SMB/mid-market perform this quarter? - The SMB/mid-market is performing well, with increased momentum and better win rates across various verticals [148][149] Question: Why is there a gradual release of products within the MSSP space? - The gradual release is to ensure that products adhere to a multi-tenanted approach and to enable partners effectively [155][156]

SentinelOne (S) reported break-even quarterly earnings per share versus the Zacks Consensus Estimate of $0.01. This compares to loss of $0.03 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of -100%. A quarter ago, it was expected that this cybersecurity provider would post a loss of $0.01 per share when it actually produced earnings of $0.01, delivering a surprise of 200%.Over the last four quarters, the company has surpassed co ...

Revenue Growth - Revenue for the three months ended October 31, 2024 was $210.6 million, representing a 28% year-over-year growth compared to $164.2 million in the same period in 2023[143] - Revenue for the nine months ended October 31, 2024 was $595.9 million, representing a 33% year-over-year growth compared to $447.0 million in the same period in 2023[143] - Revenue for the three months ended October 31, 2024, increased by $46.5 million (28%) compared to the same period in 2023, primarily due to sales to new customers and additional endpoints and modules to existing customers[181] - Revenue increased by $149.0 million (33%) for the nine months ended October 31, 2024, driven by sales to new customers and additional endpoints/modules to existing customers[193] Annualized Recurring Revenue (ARR) and Customer Growth - Annualized Recurring Revenue (ARR) grew 29% year-over-year to $859.7 million as of October 31, 2024, up from $663.9 million in 2023[156] - The number of customers with ARR of $100,000 or more grew 24% year-over-year to 1,310 as of October 31, 2024, up from 1,060 in 2023[158] - Dollar-Based Net Retention Rate (NRR) remained in expansionary territory as of October 31, 2024, driven by existing customers adopting additional endpoint licenses and adjacent platform solutions[159] Net Loss and Non-GAAP Operating Loss - Net loss for the three months ended October 31, 2024 was $78.4 million, compared to $70.3 million in the same period in 2023[143] - Net loss for the nine months ended October 31, 2024 was $217.7 million, compared to $266.7 million in the same period in 2023[143] - Non-GAAP operating loss for the three months ended October 31, 2024 was $10.7 million, compared to $18.2 million in the same period in 2023[154] - Non-GAAP operating loss for the nine months ended October 31, 2024 was $28.1 million, compared to $102.4 million in the same period in 2023[154] Gross Margin and Cost of Revenue - Gross margin increased to 75% for the three months ended October 31, 2024, up from 73% in the same period in 2023, driven by revenue growth outpacing cost of revenue growth[182] - Cost of revenue increased by $9.5 million (22%) for the three months ended October 31, 2024, primarily due to a $4.6 million increase in customer support costs, a $3.7 million increase in cloud hosting usage charges, and a $1.4 million increase in amortization of capitalized internal-use software[182] - Gross profit increased by $125.9 million (40%) with gross margin improving from 71% to 74%, driven by revenue growth outpacing cost of revenue growth[195][197] Research and Development Expenses - Research and development expenses increased by $18.1 million (35%) for the three months ended October 31, 2024, primarily due to a $13.5 million increase in personnel-related expenses, including $7.2 million in stock-based compensation, and a $1.3 million increase in cloud hosting expenses[184] - Research and development expenses increased by $30.6 million (19%) due to higher personnel-related costs, including $15.2 million in stock-based compensation, and increased cloud hosting expenses[198] - The company expects research and development expenses to increase in absolute dollars but decrease as a percentage of total revenue over time, although fluctuations may occur due to timing of expenses[168] Sales and Marketing Expenses - Sales and marketing expenses increased by $25.5 million (26%) for the three months ended October 31, 2024, primarily due to a $14.9 million increase in personnel-related expenses, including $4.5 million in stock-based compensation, and an $8.4 million increase in marketing-related expenses[184] - Sales and marketing expenses increased by $63.5 million (21%) due to higher personnel-related costs, including $15.2 million in stock-based compensation, and increased marketing and sales-related expenses[199] - The company expects sales and marketing expenses to increase in absolute dollars but decrease as a percentage of revenue over time as it continues to invest in market penetration and global customer base expansion[171] General and Administrative Expenses - General and administrative expenses increased by $1.1 million (2%) due to higher personnel-related expenses, including a $2.1 million increase in stock-based compensation, partially offset by a $2.2 million decrease in litigation expenses[185] - The company expects general and administrative expenses to increase in absolute dollars but decrease as a percentage of revenue over time as it continues to grow its business and incur additional public company operating costs[173] Cash Flow and Liquidity - Cash provided by operating activities was $37.1 million for the nine months ended October 31, 2024, compared to a $62.2 million cash used in the prior year period[210] - The company's principal source of liquidity was $1.1 billion in cash, cash equivalents, and investments as of October 31, 2024, expected to support operations for at least the next 12 months[207] - Operating cash flow for the nine months ended October 31, 2023 was a net use of $62.2 million, driven by a net loss of $266.7 million and $6.7 million used by changes in operating assets and liabilities, partially offset by $211.2 million in non-cash adjustments[215] - As of October 31, 2024, the company held $1.1 billion in cash, cash equivalents, and investments, with $69.2 million in restricted cash primarily for acquisition-related liabilities[226] Investing Activities - Investing activities used $85.9 million in cash for the nine months ended October 31, 2024, including $597.6 million in investment purchases, $61.6 million for acquisitions of PingSafe and Stride, and $19.8 million in capitalized software costs, partially offset by $594.9 million in investment sales and maturities[216] - Investing activities provided $27.6 million in cash for the nine months ended October 31, 2023, primarily from $504.3 million in investment sales and maturities, partially offset by $462.5 million in investment purchases[217] Financing Activities - Financing activities provided $31.7 million in cash for the nine months ended October 31, 2024, primarily from $22.9 million in employee stock option exercises and $8.8 million from ESPP stock issuance[218] - Financing activities provided $23.8 million in cash for the nine months ended October 31, 2023, consisting of $17.4 million from employee stock option exercises and $6.4 million from ESPP stock issuance[219] International Operations and Currency Risk - Revenue outside of the U.S. represented 37% for the three months ended October 31, 2024 and 2023[142] - The company had approximately 11% of its personnel in Israel as of October 31, 2024, and is monitoring the impact of the Middle East conflict on its business[147] - The company's revenue is not subject to foreign currency risk as sales contracts are primarily denominated in U.S. dollars, though operating expenses outside the U.S. are subject to exchange rate fluctuations[227] - A hypothetical 10% adverse change in the U.S. dollar against other currencies would not have had a material impact on operating results for the nine months ended October 31, 2024 and 2023[227] Other Financial Metrics - Restructuring charges decreased by $0.1 million (100%) due to severance and employee benefit charges related to the June 2023 Plan[186] - Interest income increased by $0.8 million (7%) driven by higher income from marketable securities, while other income (expense), net decreased by $0.98 million (162%) due to lower net gains on strategic investments and foreign currency fluctuations[188][190] - Provision for income taxes increased by $0.2 million (16%) primarily due to higher foreign taxes from international subsidiaries[191] - Changes in operating assets and liabilities included a $60.1 million increase in deferred contract acquisition costs and a $17.2 million decrease in deferred revenue[214] - A 100 basis point change in interest rates would result in an $8.0 million change in the fair market value of the investment portfolio as of October 31, 2024[226] Subscription Contracts - The company's subscription contracts typically have a term of one to three years, and customers are invoiced upfront, periodically, or in arrears upon signing[163]

[Q3 FY2025 Financial Performance and Outlook](index=1&type=section&id=SentinelOne%20Announces%20Third%20Quarter%20Fiscal%20Year%202025%20Financial%20Results) SentinelOne reports strong Q3 FY2025 results with significant revenue and ARR growth, alongside improved profitability and positive free cash flow, leading to an increased full-year outlook [Q3 FY2025 Performance Highlights](index=1&type=section&id=Third%20Quarter%20Fiscal%20Year%202025%20Highlights) SentinelOne achieved strong Q3 FY2025 results, with revenue reaching **$210.6 million** and ARR growing to **$859.7 million**, alongside significant improvements in non-GAAP operating margin and positive trailing-twelve-month free cash flow - Management highlighted strong execution, reaccelerated new business growth, and increasing enterprise adoption of the Singularity Platform[3](index=3&type=chunk) Q3 FY2025 Key Metrics (vs. Q3 FY2024) | Metric | Q3 FY2025 | Q3 FY2024 | YoY Change | | :--- | :--- | :--- | :--- | | Revenue | $210.6M | $164.2M | +28% | | Annualized Recurring Revenue (ARR) | $859.7M | - | +29% | | Customers with ARR ≥ $100k | 1,310 | - | +24% | | GAAP Gross Margin | 75% | 73% | +2 p.p. | | Non-GAAP Gross Margin | 80% | 79% | +1 p.p. | | GAAP Operating Margin | (42)% | (50)% | +8 p.p. | | Non-GAAP Operating Margin | (5)% | (11)% | +6 p.p. | | Free Cash Flow Margin | (6)% | (16)% | +10 p.p. | - For the first time, the company achieved a positive trailing-twelve-month free cash flow margin of **1%**, a significant improvement from **(17)%** in the prior year's quarter[3](index=3&type=chunk)[9](index=9&type=chunk) - As of October 31, 2024, the company held **$1.1 billion** in cash, cash equivalents, and investments[10](index=10&type=chunk) [Financial Outlook](index=2&type=section&id=Financial%20Outlook) SentinelOne raised its full-year FY2025 revenue growth outlook to **32%**, projecting **$222 million** for Q4 and **$818 million** for the full fiscal year based on strong business momentum Q4 and Full Year FY2025 Guidance | Metric | Q4 FY2025 Guidance | Full FY2025 Guidance | | :--- | :--- | :--- | | Revenue | $222 million | $818 million | | Non-GAAP Gross Margin | 79% | 79% | | Non-GAAP Operating Margin | (3)% | (4)% | - The company raised its revenue growth outlook for fiscal year 2025 to **32%**[3](index=3&type=chunk) [Consolidated Financial Statements (Unaudited)](index=7&type=section&id=Consolidated%20Financial%20Statements%20(Unaudited)) This section presents SentinelOne's unaudited consolidated financial statements, including balance sheets, statements of operations, and cash flows, for the reported periods [Condensed Consolidated Balance Sheets](index=7&type=section&id=CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) As of October 31, 2024, SentinelOne reported total assets of **$2.37 billion**, with **$1.12 billion** in cash and investments, and stable total liabilities of approximately **$727 million** Selected Balance Sheet Data (in thousands) | Account | Oct 31, 2024 | Jan 31, 2024 | | :--- | :--- | :--- | | Cash, cash equivalents, and investments | $1,123,801 | $1,130,754 | | Total Assets | $2,367,020 | $2,321,407 | | Total Liabilities | $727,497 | $727,364 | | Total Stockholders' Equity | $1,639,523 | $1,594,043 | [Condensed Consolidated Statements of Operations](index=8&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS) SentinelOne's Q3 FY2025 revenue increased to **$210.6 million**, with GAAP gross profit rising to **$157.4 million**, though the GAAP net loss slightly widened to **$78.4 million** due to increased operating expenses Q3 FY2025 Statement of Operations (in thousands, except per share data) | Metric | Three Months Ended Oct 31, 2024 | Three Months Ended Oct 31, 2023 | | :--- | :--- | :--- | | Revenue | $210,648 | $164,165 | | Gross Profit | $157,388 | $120,400 | | Loss from Operations | $(89,120) | $(81,468) | | Net Loss | $(78,364) | $(70,304) | | Net Loss Per Share | $(0.25) | $(0.24) | - Total stock-based compensation expense for Q3 FY2025 was **$70.2 million**, an increase from **$54.9 million** in the same period last year, contributing significantly to the net loss[43](index=43&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) For the nine months ended October 31, 2024, SentinelOne achieved a significant turnaround, generating **$37.1 million** in cash from operating activities and **$15.7 million** in positive free cash flow Cash Flow Summary (Nine Months Ended Oct 31, in thousands) | Metric | 2024 | 2023 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $37,129 | $(62,192) | | Net cash (used in) provided by investing activities | $(85,898) | $27,561 | | Net cash provided by financing activities | $31,667 | $23,782 | - The improvement in operating cash flow was primarily driven by a lower net loss after non-cash adjustments, such as stock-based compensation of **$193.4 million**[45](index=45&type=chunk) [Non-GAAP Financial Measures and Reconciliations](index=3&type=section&id=Non-GAAP%20Financial%20Measures%20and%20Reconciliations) This section details SentinelOne's non-GAAP financial measures, explaining their purpose and providing comprehensive reconciliations to the corresponding GAAP results [Explanation of Non-GAAP Measures](index=3&type=section&id=Explanation%20of%20Non-GAAP%20Measures) SentinelOne uses non-GAAP financial measures to provide a clearer view of core operational performance by excluding non-cash, variable, or non-core items from GAAP results - Key items excluded from non-GAAP calculations include: - Stock-based compensation expense - Employer payroll tax on employee stock transactions - Amortization of acquired intangible assets - Acquisition-related compensation costs - Restructuring charges - Gains and losses on strategic investments[23](index=23&type=chunk)[26](index=26&type=chunk)[28](index=28&type=chunk) [Reconciliation of GAAP to Non-GAAP Information](index=10&type=section&id=RECONCILIATION%20OF%20GAAP%20TO%20NON-GAAP%20FINANCIAL%20INFORMATION) The Q3 FY2025 reconciliation demonstrates how non-cash and other adjustments significantly reduce the GAAP operating loss of **$89.1 million** to a non-GAAP operating loss of **$10.7 million**, and GAAP net loss of **$78.4 million** to a non-GAAP net income of **$75 thousand** Q3 FY2025 GAAP to Non-GAAP Operating Loss Reconciliation (in thousands) | Description | Amount | | :--- | :--- | | **GAAP operating loss** | **$(89,120)** | | Stock-based compensation expense | $70,188 | | Amortization of acquired intangible assets | $6,448 | | Other adjustments | $1,803 | | **Non-GAAP operating loss** | **$(10,681)** | Q3 FY2025 GAAP to Non-GAAP Net Loss/Income Reconciliation (in thousands) | Description | Amount | | :--- | :--- | | **GAAP net loss** | **$(78,364)** | | Total adjustments from operating loss | $78,385 | | Net gain on strategic investments | $0 | | **Non-GAAP net income (loss)** | **$75** | [Key Business Metrics](index=5&type=section&id=Key%20Business%20Metrics) This section defines SentinelOne's key business metrics, including Annualized Recurring Revenue (ARR) and the count of large customers, used to assess market penetration and growth [Definitions of Key Metrics](index=5&type=section&id=Definitions%20of%20Key%20Metrics) SentinelOne defines key metrics such as Annualized Recurring Revenue (ARR) and the number of customers with ARR of **$100,000** or more to measure business performance, market penetration, and customer relationship expansion - **Annualized Recurring Revenue (ARR):** Represents the annualized revenue run rate of subscription and consumption-based agreements at the end of a period, assuming contracts are renewed on existing terms. It is a key metric for measuring the ability to acquire and expand customer relationships[35](index=35&type=chunk) - **Customers with ARR of $100,000 or More:** This metric indicates market penetration and demand for the platform among larger enterprises. It counts each entity with an active subscription, treating managed service providers as a single customer[36](index=36&type=chunk)

The recommendations of Wall Street analysts are often relied on by investors when deciding whether to buy, sell, or hold a stock. Media reports about these brokerage-firm-employed (or sell-side) analysts changing their ratings often affect a stock's price. Do they really matter, though?Let's take a look at what these Wall Street heavyweights have to say about SentinelOne (S) before we discuss the reliability of brokerage recommendations and how to use them to your advantage.SentinelOne currently has an aver ...