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SentinelOne, Inc. (S)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 FY25 delivered 28% revenue growth to $210.6M and 29% ARR growth to $859.7M; net new ARR re-accelerated to $54M (+22% q/q, +4% y/y), with record additions of $100K+ ARR customers, driven by platform wins across endpoint, cloud, data, and AI .
  • Reported non-GAAP gross margin was 80% and non-GAAP operating margin was -5%; management noted operating margin would have been ~-3% excluding a one-time legal settlement and fees, in line with guidance .
  • FY25 revenue guidance was raised to $818M (from $815M) and Q4 FY25 revenue guided to $222M; non-GAAP gross margin and operating margin outlook maintained at ~79% and -4% for FY25 .
  • Catalysts: accelerating enterprise pipeline (including displacements), Purple AI attach doubled vs. Q2, Lenovo OEM partnership (ramp expected in the latter half of next year), and FedRAMP High designations for endpoint and AI SIEM; all bolster medium-term share gains narrative .

What Went Well and What Went Wrong

  • What Went Well

    • “We exceeded our topline growth expectations and re-accelerated new business growth” and raised FY25 revenue growth outlook to 32% .
    • Platform traction: “Purple AI… now our fastest growing solution” with attach rate across eligible endpoints doubling vs Q2; AI SIEM introduced for autonomous operations .
    • Enterprise momentum: “We added a record number of $100,000 plus ARR customers” and saw larger multimillion-dollar platform expansions; best-in-class non-GAAP gross margin 80% .

  • What Went Wrong

    • Non-GAAP operating margin (-5%) impacted by “onetime legal settlement costs and legal fees” (a few million); excluding would have been ~-3% consistent with guidance .
    • Operating and free cash flow were negative in the quarter (OCF margin -3%, FCF margin -6%), though TTM margins turned positive (OCF 4%, FCF 1%), highlighting quarterly variability .
    • Persistent macro headwinds keep customers focused on cost and efficiency; management maintained prudent stance despite a stronger pipeline .

Financial Results

MetricQ1 FY25Q2 FY25Q3 FY25
Revenue ($USD Millions)$186.4 $198.9 $210.6
GAAP Gross Margin (%)73% 75% 75%
Non-GAAP Gross Margin (%)79% 80% 80%
GAAP Operating Margin (%)(43)% (40)% (42)%
Non-GAAP Operating Margin (%)(6)% (3)% (5)%
GAAP EPS ($)(0.23) (0.22) (0.25)
ARR ($USD Millions)$762 $806 $860
Net New ARR ($USD Millions)N/A$44 $54
Customers with ARR ≥$100K (count)1,193 1,233 1,310
International Revenue (% of total)37% 37% 37%
Operating Cash Flow Margin (%)23% 1% (3)%
Free Cash Flow Margin (%)18% (3)% (6)%

Notes:

  • Actual vs prior guidance for Q3 revenue: $210.6M vs $209.5M guided (beat) .
  • Non-GAAP operating margin: reported -5% vs ~-3% guided due to one-time legal settlement; excluding item ~-3% per CFO .

Segment/Geography mix:

MixQ1 FY25Q2 FY25Q3 FY25
International Revenue (% of total)37% 37% 37%

KPIs:

KPIQ1 FY25Q2 FY25Q3 FY25
ARR ($USD Millions)$762 $806 $860
Net New ARR ($USD Millions)N/A$44 $54
$100K+ ARR Customers (count)1,193 1,233 1,310
TTM OCF Margin (%)N/AN/A4%
TTM FCF Margin (%)N/AN/A1%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD Millions)Q4 FY25N/A$222New (initial Q4 guide)
Revenue ($USD Millions)FY25$815 $818 Raised
Non-GAAP Gross Margin (%)Q4 FY25N/A79%New (initial Q4 guide)
Non-GAAP Gross Margin (%)FY2579% (high end of 78–79%) 79%Maintained
Non-GAAP Operating Margin (%)Q4 FY25N/A(3)%New (initial Q4 guide)
Non-GAAP Operating Margin (%)FY25(5)% to (3)% (4)%Maintained (midpoint)

Earnings Call Themes & Trends

TopicQ1 FY25 (prior)Q2 FY25 (prior)Q3 FY25 (current)Trend
AI initiatives (Purple AI, AI SIEM)Launched Purple AI; strong early adoption; Data Lake fastest-growing; CNAPP integration Purple AI attach in double digits; AI SIEM narrative; accelerating pipeline Purple AI attach doubled vs Q2; AI SIEM unveiled; hyperautomation; strong interest Strengthening
Competitive dynamics and July 19 outageBuilding pipeline; GTM transition; focus on new logos Outage catalyzed consideration; record win rates; guidance not dependent on it Record wins vs closest competitor; larger enterprise displacements Tailwind
Enterprise momentumLarge enterprise traction; $100K+ customers up 30% y/y Continued large deals and platform lands Record additions of $100K+ customers; multimillion expansions Improving
Regulatory/Federal (FedRAMP)Partnerships with CISA; platform fit for federal Progress in federal engagements Achieved FedRAMP High for endpoint and AI SIEM Advancing
Macro/Cost focusMacro pressures; prudently revising full-year range Customers focused on cost/efficiency; guidance raised Macro still challenging; balanced with strong pipeline Stable headwind
OEM/Partner routes to marketExpanding partner ecosystem Multiple IR/Insurer/federal partnerships Lenovo OEM bundling; AWS Bedrock for Purple AI; MSSP enablement Expanding

Management Commentary

  • CEO: “We exceeded our top line growth expectations and continue to deliver year-over-year margin improvement… net new ARR growth reaccelerated back to positive territory” .
  • CFO: “Excluding onetime legal settlement costs and legal fees… our operating margin would have been approximately negative 3%, consistent with our Q3 guidance” .
  • CEO on platform wins: “We added a record number of $100,000 plus ARR customers… success with large enterprises and platform adoption continues to drive higher ARR per customer” .
  • CEO on Purple AI: “Purple AI remains a true source of platform differentiation and growth… attach rate… doubled compared to Q2” .
  • CFO on FY25 outlook: “We’re raising our full year revenue guidance… to approximately $818 million… growth of 32%” .

Q&A Highlights

  • Pipeline acceleration and enterprise displacements: management cited record wins and strengthening pipeline; endpoint growth accelerated; the July outage is driving larger opportunities, but guidance is not dependent on it .
  • Lenovo OEM partnership: multiyear, with revenue contribution expected to pick up in the latter half of next year through pre-installations and co-sell .
  • Remaining performance obligations (RPO): grew ~25% y/y; ARR remains preferred metric due to duration effects .
  • Vendor financing: no outsized demand; typically handled via partners; focus remains on delivering current capabilities .
  • One-time legal settlement: impacted Q3 non-GAAP operating margin; decision made to avoid lengthy litigation and future legal costs .

Estimates Context

  • S&P Global consensus estimates retrieval was temporarily unavailable at time of analysis; comparisons vs company guidance indicate Q3 revenue modestly exceeded prior guidance ($210.6M actual vs $209.5M guided), while non-GAAP operating margin was below guidance due to a one-time legal item (ex-legal ~-3% per CFO) .
  • With continued pipeline strength and raised FY25 revenue outlook ($818M), Street models may need to reflect higher top-line trajectory alongside near-term margin variability due to discrete legal items .

Key Takeaways for Investors

  • Top-line re-acceleration: sequential revenue growth and net new ARR re-accelerated with record $100K+ ARR customer adds, supporting a durable growth trajectory into Q4 and FY26 .
  • Margin quality: non-GAAP gross margin at 80% underscores strong unit economics; operating margin would have met guidance absent one-time legal costs, suggesting underlying leverage intact .
  • Platform differentiation: AI SIEM and Purple AI are driving larger, multimillion platform lands; Purple AI attach doubling is a concrete adoption signal .
  • Federal and OEM scale levers: FedRAMP High certifications and Lenovo bundling expand routes to market; AWS Bedrock integration eases enterprise AI adoption—expect contributions to build over 2025–2026 .
  • Cash flow inflection: despite quarterly OCF/FCF headwinds, TTM cash flow margins turned positive and FY25 FCF is expected to be positive, supporting investment flexibility .
  • Trading implications: near term, stock may react to raised FY25 revenue guide and AI platform momentum; watch Q4 execution vs $222M revenue target and any further enterprise displacement disclosures .
  • Medium-term thesis: sustained share gains vs incumbents driven by autonomous AI security, unified data architecture, and partner-led scale; monitor attach rates, enterprise wins, and MSSP ramp to validate platform-led ARR growth .