SentinelOne tumbles 15% after Q3 bottom line miss; analyst says buy weakness

Investing.com -- SentinelOne Inc (NYSE:S ) shares tumbled 15% in premarket trading Thursday after the cybersecurity firm missed Wall Street’s profit estimates for the third quarter of fiscal 2025. 

For the quarter ended October 31, the company reported a breakeven result, with a GAAP earnings per share of $0.00, falling short of analysts' expectations of $0.10 per share.

The Mountain View, California-based company posted a 28% increase in revenue, reaching $210.6 million, slightly above the projected $209.73 million, driven by strong demand.

EBIT margins stood at -5.1%, missing the management's prior guidance of -3.0%, which included a one-time legal expense in the "millions of dollars".

Net new annual recurring revenue (NNARR) grew 4% year-over-year to $53.7 million, outperforming the Street estimates of $51 million. This marks the first time NNARR returned to growth since the fiscal Q4 2024. 

ARR came in at $859.7 million, also ahead of the consensus estimate of $856.9 million. Year-over-year, ARR grew 29%, decelerating from the 32% surge last quarter. 

Deutsche Bank (ETR:DBKGn ) analysts maintained a Buy rating on the stock, noting that the print was "more than fine" despite the stock "getting unduly pressured in AH trading."

"NNARR growth reaccelerated after two quarters of y/y declines and relative to the toughest compare in two years," analysts noted. 

"Our thesis remains intact and we would be buying any weakness post F3Q," they emphasized.

Separately, D.A. Davidson analysts said SentinelOne's stronger second-half pipeline that management has talked about "is materializing in stronger NNARR. The firm continues to believe that "execution is improving, but nothing in the numbers suggests to us that the CRWD outage is driving any kind of inflection for S."

"We continue to find shares fairly valued for the growth/profitability profile & we thus remain Neutral rated," D.A. Davidson added. 

Enterprise clients continue to invest in AI-powered cybersecurity solutions as rising digital scams and high-profile security breaches pose significant risks to business operations and reputation.

SentinelOne has introduced innovative products, including the generative AI-powered Purple AI and the Singularity platform, aimed at addressing vulnerabilities associated with businesses' expanding digital presence.

The company issued revenue guidance for the fourth quarter, projecting it to be approximately $222 million.

“Based on strong execution and business momentum, we’re raising our revenue growth outlook to 32% for the fiscal year ’25,” the company said in a statement.

Pratyush Thakur contributed to this report. 

Source: Investing.com