SentinelOne, Inc. (S) Earnings

Management highlights

### Business and Product Momentum - Achieved record net new ARR growth, the fourth consecutive quarter of accelerating positive net new ARR, marking consistent strong execution and business momentum. - Reached a key ARR mix inflection: non-endpoint solutions approached 50% of total ARR, driven by accelerating growth of AI, data, and cloud offerings, demonstrating successful platform diversification. - AI security is the fastest growing cybersecurity segment (over 70% year-over-year growth per Gartner), and SentinelOne's native AI architecture positions it to capture a large share of the $100 billion+ total market opportunity. - Launched new high-demand AI-focused offerings: Singularity AI Red Teaming (autonomous stress testing for AI applications pre-production) and Purple AI Auto Investigations (one-click autonomous SOC investigation). - The SentinelOne Flex consumption model has crossed $200 million in total contract value after just three quarters, driving larger 7- and 8-figure deals, longer-term customer commitments, and simpler purchasing. ### Strategic Partnerships and Ecosystem Expansion - Expanded strategic partnership with LevelBlue (the world's largest MSSP), consolidating LevelBlue's endpoint estate onto the Singularity platform and expanding global customer reach. - Won 2026 Google Cloud Partner of the Year Award and expanded the Google Cloud alliance; also integrated Singularity into AWS Security Hub Extended, enabling instant pay-as-you-go deployment for AWS customers without new procurement processes. - Participates in strategic industry AI security initiatives including Project Glasswing, and maintains deep strategic partnerships with leading frontier AI labs including Anthropic and OpenAI. ### Operational Efficiency and Restructuring - Implemented a deliberate 8% workforce reduction to streamline organizational complexity, improve agility, and align resources with high-priority growth areas (AI, data, cloud, endpoint). - Cuts are focused on non-technology roles; R&D and innovation investment remains a top priority, with company-wide adoption of frontier AI driving meaningful internal productivity gains. - Expects a one-time $25 million non-GAAP restructuring charge in Q2, with $45 million in annualized cost savings that will be reinvested in core growth areas. ### Financial Performance Highlights - Non-GAAP operating margin hit 4% in Q1, a 550 basis point year-over-year improvement, with non-GAAP EPS of $0.04 (83% year-over-year growth). - Trailing 12-month adjusted free cash flow margin reached 6.5%, a 440 basis point year-over-year improvement, putting the company on a path to sustained positive free cash flow. - Remaining performance obligations grew 30% year-over-year to a record $1.5 billion, with a robust balance sheet of $812 million in cash/equivalents/investments and no debt.

Guidance

- Full fiscal year 2027 revenue guidance is maintained at $1.195 billion to $1.205 billion, representing 20% year-over-year growth at the midpoint. - Q2 FY2027 revenue is expected to be between $289 million and $291 million, representing 20% year-over-year growth at the midpoint. - Full fiscal year 2027 non-GAAP operating income guidance is raised to $115 million to $125 million, representing a 10% operating margin at the midpoint (a 650 basis point year-over-year improvement from FY2026). - Q2 FY2027 non-GAAP operating income is expected to be between $23 million and $25 million, representing an 8% operating margin at the midpoint. - Full fiscal year 2027 fully diluted EPS guidance is $0.32 to $0.38 ($0.35 at the midpoint), with Q2 FY2027 EPS expected between $0.06 and $0.08. - Management expects the full-year non-GAAP tax rate to hold at approximately 17%.

Segment performance

For Q1 FY2027 ended April 30, 2026: SentinelOne's total non-GAAP revenue was $277 million, growing 21% year-over-year. Total ARR grew 23% year-over-year, with $44 million in net new ARR (55% year-over-year growth, a company record). Non-endpoint solutions (AI security, data, cloud security) approached 50% of total ARR, reaching an important growth inflection: - Endpoint Security: Remains the core foundational segment, still the largest revenue contributor at just over 50% of total ARR. It continues to gain market share as nearly half the global endpoint sector still uses legacy antivirus solutions, creating ongoing opportunity. - AI Security: ARR nearly doubled year-over-year and sequentially, with strong growth from offerings including Prompt Security, Singularity AI Red Teaming, and Purple AI. - Data Solutions (including AI SIEM): Marked the fourth consecutive quarter of accelerating ARR growth, driven by demand for the unified AI-native security data lake. - Cloud Security: ARR growth accelerated in Q1, driven by adoption of AI-powered runtime security for both on-prem and cloud environments. International revenue grew 25% year-over-year, representing 39% of total revenue.

Risks & headwinds

- Evolving macroeconomic conditions and geopolitical uncertainties may impact deal timing and lengthen sales cycles across the cybersecurity industry. - AI-driven threat development expands the global attack surface faster than legacy defenses can adapt, creating ongoing pressure to innovate to address new threat vectors. - Workforce restructuring carries inherent execution risk, though management expects minimal go-to-market or operational disruption. - Competitive displacement of long incumbent legacy security vendors requires sustained go-to-market execution to capture existing market share.

Analyst Q&A

• Q: Are you seeing increased demand for core endpoint as customers address technical debt, and how do you balance full platform sales at initial onboarding versus future upselling?

  A: The endpoint remains the critical control plane for AI security, and we are seeing strong demand for core endpoint, as well as adjacent AI prompt security deployed on endpoints. The definition of endpoint is also expanding to cover cloud-based AI workloads, which is another strong area of demand for our business. We see adjacent AI security solutions driving new landing opportunities that open the door for broader platform expansion over time.

• Q: Where were the 8% workforce cuts concentrated, and what impact will they have on sales productivity?

  A: Cuts are focused on streamlining non-technical organizational layers to reduce complexity, and barely impact our technology and innovation teams. We were carrying excess capacity at our current scale, and are reallocating resources to our highest conviction growth areas: AI, data, cloud, and endpoint. We do not expect any go-to-market disruption, and the restructuring will improve focus and sales productivity by aligning the organization with our current growth priorities.

• Q: You recorded strong record net new ARR growth this quarter but maintained full-year revenue guidance, why is that?

  A: The strong Q1 net new ARR growth was driven by both strong new logos and expansion across our emerging AI, data, and cloud products. We maintained full-year guidance because we are still early in the fiscal year, and much of the recent large deal activity is back-end loaded, which shifts revenue recognition into later quarters. We still expect full-year positive net new ARR growth and remain confident in our full-year outlook.

• Q: How will you allocate the $45 million in annualized cost savings from restructuring, between margin expansion and reinvestment in AI?

  A: We are guiding to 700 basis points of full-year operating margin improvement, with exit fourth quarter margin significantly above the full-year 10% guidance. A portion of the savings will be reinvested into our highest ROI opportunities, including AI security, cloud, and data products, where we see large untapped market opportunity. We are able to deliver both durable growth and ongoing margin expansion, as demonstrated by Q1's record ARR growth and 550 basis point margin improvement.

• Q: Is Prompt Security acting as a lead offering to drive larger full platform deals and competitive displacements?

  A: Prompt delivers unique enterprise AI security capability that no competitor currently offers, making it a strong catalyst across all go-to-market vectors. It drives expansion within our existing customer base as well as new logo acquisitions, and the fast deployment and immediate time-to-value make it very competitive against alternative incomplete offerings. We are rapidly rolling Prompt out to our entire existing customer base, which will unlock significant additional future growth.