Sign in

You're signed outSign in or to get full access.

NS

NETSCOUT SYSTEMS INC (NTCT)·Q4 2025 Earnings Summary

Executive Summary

  • Q4 FY25 revenue was $205.0M, up 0.8% YoY and above consensus; non-GAAP EPS was $0.52, modestly above the single estimate, and GAAP EPS was $0.25, with non-GAAP operating margin expanding to 23.1% .
  • Strength came from Cybersecurity, with management highlighting momentum into FY26; Service Assurance remained pressured but improving as offerings align with observability and AI use cases .
  • FY26 guidance introduced: revenue $825M–$865M, non-GAAP diluted EPS $2.25–$2.40, GAAP diluted EPS $1.07–$1.22, tax ~20%, shares 74–75M; Q1 FY26 expected 3–5% revenue and EPS growth vs prior year .
  • Executive transitions announced: CFO Jean Bua and COO Michael Szabados to retire May 31, 2025; Deputy CFO Anthony Piazza named CFO and Deputy COO Sanjay Munshi named COO effective June 1, 2025—an orderly succession likely to reduce uncertainty and serve as a catalyst alongside growth guidance .

What Went Well and What Went Wrong

What Went Well

  • Cybersecurity delivered ~7% FY25 revenue growth; management expects continued momentum from Adaptive DDoS, Mobile Security, and Distributed Threat Mitigation, citing elevated DDoS activity tied to geopolitics and AI-enabled attacks .
  • Q4 non-GAAP operating margin expanded to 23.1% from 19.2% YoY on disciplined cost management; gross margin reached 79.2% .
  • Liquidity strengthened: cash and investments rose to $492.5M; revolver fully repaid, leaving zero debt outstanding; Q4 free cash flow was $140M .

Management quotes:

  • “We closed fiscal year 2025 revenue on a strong note, with fourth-quarter revenue exceeding our expectations, driven by solid performance in our Cybersecurity product line.” — Anil Singhal, CEO .
  • “We remain encouraged by the momentum in our Cybersecurity offerings… and expect to achieve year-over-year revenue growth [in FY26].” — Anil Singhal .

What Went Wrong

  • Service Assurance declined ~4.4% in FY25; service provider demand remains measured with some delayed sales cycles amid macro uncertainty .
  • Q4 non-GAAP EPS of $0.52 was down 5% YoY partly due to an unrealized loss on a foreign investment ($0.03 impact) .
  • FY25 GAAP results were impacted by non-cash goodwill impairment charges ($427.0M in FY25), producing a GAAP net loss of $366.9M for the year despite stable revenue .

Financial Results

Quarterly Trend (Sequential: Q2 → Q3 → Q4 FY25)

MetricQ2 FY25Q3 FY25Q4 FY25
Revenue ($USD Millions)$191.1 $252.0 $205.0
GAAP Diluted EPS ($)$0.13 $0.67 $0.25
Non-GAAP Diluted EPS ($)$0.47 $0.94 $0.52
Non-GAAP Operating Margin (%)23.1% 35.6% 23.1%
Non-GAAP EBITDA Margin (%)24.9% 36.8% 24.5%
Gross Margin (%)——79.2%

Year-over-Year (Q4 FY24 vs Q4 FY25)

MetricQ4 FY24Q4 FY25
Revenue ($USD Millions)$203.4 $205.0
GAAP Diluted EPS ($)$(0.46) $0.25
Non-GAAP Diluted EPS ($)$0.55 $0.52
Non-GAAP Operating Margin (%)19.2% 23.1%

Actual vs Wall Street Consensus (S&P Global, Q4 FY25)

MetricConsensusActual
Revenue ($USD Millions)$192.3*$205.0
Primary EPS ($)$0.49*$0.52

Values retrieved from S&P Global.*

Segment / Mix

  • Product vs Service (Q4 FY25)
MetricQ4 FY24Q4 FY25
Product Revenue ($USD Millions)$89.4 $89.5
Service Revenue ($USD Millions)$114.0 $115.5
Product Mix (%)~44% ~44%
Service Mix (%)~56% ~56%

KPIs and Balance Sheet

KPIQ4 FY24Q3 FY25Q4 FY25
Combined Product Backlog ($M)$6.8 ~$30.0 (fulfillable) $33.1 (incl. $25.1 fulfillable; $0.9 RF modeling; $7.1 multi-year ELA)
Deferred Rev. – RF Modeling ($M)$1.2 —$8.3
Cash & Investments ($M)$424.1 $427.9 $492.5
Revolving Credit Facility Outstanding ($M)$100.0 $75.0 $0.0
Free Cash Flow ($M)——$140 (Q4)
DSO (days)81 (FY24 end) —68

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD Millions)FY26N/A$825–$865 New
GAAP Diluted EPS ($)FY26N/A$1.07–$1.22 New
Non-GAAP Diluted EPS ($)FY26N/A$2.25–$2.40 New
Effective Tax Rate (%)FY26N/A~20% New
Diluted Shares (Millions)FY26N/A~74–75 New
Q1 Revenue Growth (%)Q1 FY26 vs Q1 FY25N/A~3%–5% New
Q1 EPS Growth (%)Q1 FY26 vs Q1 FY25N/A~3%–5% New

Note: FY26 non-GAAP outlook reconciliation provided in press release tables .

Earnings Call Themes & Trends

TopicQ2 FY25 (Oct 2024)Q3 FY25 (Jan 2025)Q4 FY25 (May 2025)Trend
AI/Technology initiativesLaunched AI-ready data, Omnis AI Insights; MITRE ATT&CK analytics in Omnis NDR Continued platform momentum; early orders pulled into Q3 aided results Continued investment in product-related AI and cybersecurity; Adaptive DDoS highlighted Building
Cybersecurity/DDoSEmphasized Adaptive DDoS updates; threat report showed rising attacks Strong Cybersecurity and Service Assurance performance in Q3 Cybersecurity up ~6.6% FY25; momentum expected to continue amid AI-enabled attacks and geopolitics Strengthening
Service AssuranceProduct enhancements; observability-aligned capabilities Stronger-than-expected Q3, aided by early orders FY25 SA down ~4.4%; repositioning toward observability and AI Stabilizing/Repositioning
Tariffs/MacroNot highlightedNot highlightedMinimal direct cost exposure; some delayed sales cycles; guidance range accounts for uncertainty Cautious
Regional trendsEMEA threat escalation noted in 1H2024 report Mix: U.S. 57%, International 43% FY25 (consistent) Mix unchanged; global conferences to gauge sentiment Stable
R&D executionOngoing product enhancements (NDR analytics, observability) Continued efficiency, cost focus Cost actions lowered OpEx; margin expansion Efficient
Regulatory/Legal—Goodwill impairment impacted GAAP results (prior quarters) No new legal items; FY25 goodwill impairment reiterated Neutral

Management Commentary

  • Prepared strategic messages: Returning to revenue growth in FY26, continued investment in innovation, deepening customer relationships, disciplined cost management, and leveraging mission-critical solutions for complex digital environments .
  • Quotes:
    • “We remain encouraged by the momentum in our Cybersecurity solutions and are focused on returning to revenue growth.” — Anil Singhal .
    • “Based on our current view, in fiscal year 2026 we expect to achieve year-over-year revenue growth, improve our operating margin and diluted EPS performance, and continue to generate solid free cash flow.” — Jean Bua .
    • “The customer recognizes the value of our industry-leading scalability, advanced detection, and surgical mitigation… critical to supporting the growth of their cloud and AI services business.” — Michael Szabados (cloud provider win) .

Q&A Highlights

  • Macro/tariffs: Minimal direct cost exposure; some delayed sales cycles; guidance range incorporates uncertainty .
  • Cyber momentum: Expect step-up from newer offerings (Adaptive DDoS, Mobile Security, Distributed TMS); service assurance repositioning to observability/AI broadens TAM .
  • Software mix: Solutions increasingly unbundled; majority customers prefer software-only deployments, supporting margins; tariffs not a driver of mix change .
  • Government/defense: Prior refresh contributed last year; pipeline intact but visibility limited—watch next 6 months .

Estimates Context

  • Q4 FY25 beat vs consensus: Revenue $205.0M vs $192.3M*, Non-GAAP EPS $0.52 vs $0.49*; estimate set was thin (one estimate) .
  • With FY26 guidance implying growth, Street models likely need to reflect continued Cybersecurity momentum, margin discipline, and ~20% tax rate; Q1 FY26 guide (~3–5% growth) shapes near-term revisions .

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Cybersecurity is the growth engine; elevated DDoS activity and AI-enabled threats are secular drivers—monitor uptake of Adaptive DDoS, Mobile Security, and TMS expansions .
  • Margin expansion is durable: non-GAAP operating margin up to 23.1% in Q4 with improved gross margin and lower OpEx; software mix supports profitability .
  • FY26 outlook signals a return to top-line growth with disciplined cost control and solid FCF; near-term Q1 guide adds tactical visibility .
  • Balanced liquidity and no revolver debt reduce risk; strong cash position ($492.5M) provides optionality for buybacks or investment .
  • Service Assurance headwinds transitioning toward observability and AI use cases—watch carrier spending cadence and enterprise edge monitoring demand .
  • Executive succession is orderly; continuity via internal promotions (new CFO/COO) lowers execution risk and can be a sentiment catalyst .
  • Trading lens: Positive reaction likely tied to growth guide and Cyber momentum; risks include macro-driven sales delays and service provider spend pacing .