NetScout Systems, Inc. Q2 FY2026 earnings call

• Delivered solid Q2 performance driven by revenue growth from cybersecurity and service assurance product lines, with revenue up ~15% year-over-year. Expanded gross and operating margins, and diluted EPS increased by ~32% year-over-year.
• Service Assurance revenue in first half up 10.1% driven by enterprise (federal strong) and service provider (maintenance renewal timing) growth; launched Omnis KlearSight Sensor for Kubernetes. Service Provider aligned with 5G monetization opportunities.
• Cybersecurity revenue in first half up nearly 13% driven by enterprise and service provider growth; discussed evolving DDoS attack landscape and NETSCOUT's solutions to mitigate risk.
• Customer wins include an 8-figure Enterprise deal and a low 7-figure Service Provider deal, reflecting momentum in executing long-term strategy.

For the first half of fiscal year 2026, Service Assurance revenue increased by 10.1% and accounted for approximately 65% of total revenue, while Cybersecurity revenue grew by 12.7% and accounted for 35%. In terms of customer verticals, Enterprise customer vertical revenue grew 12.7% and accounted for approximately 60% of total revenue, and Service Provider customer vertical revenue grew 8.4% and accounted for 40%. Additionally, 57% of revenue in the first half of fiscal year 2026 was generated from the United States, with the remaining 43% from international markets.

• Raised full-year revenue outlook to $830M-$870M (previously $825M-$865M) and non-GAAP diluted EPS to $2.35-$2.45 (previously $2.25-$2.40).
• Anticipates third quarter revenue in range of $230M-$240M and non-GAAP diluted EPS in range of $0.83-$0.88, citing acceleration of orders in Q2.

• Uncertain macro environment. Potential impact of government shutdown on federal business and tariffs on non-federal customers. Evolving threat landscape poses challenges for defending against sophisticated attacks.

Q: Could you talk about the acceleration of orders originally expected in the second half and demand trends in the Fed piece?

A: Fed orders can come at end of federal fiscal year, and there was a big maintenance order timing; strong federal quarter with order acceleration due to prep for government shutdown.

Q: On the 10% customer, which vertical was it? And on threat landscape evolution and customer defense capability?

A: The over 10% customer related to federal government orders. DDoS attacks are evolving with carpet bombing, botnets using AI, etc.; NETSCOUT's Adaptive DDoS solution with scalable DPI technology helps address these, but industry needs specialists for DDoS area.

Q: Impact of government shutdown on pipeline and fulfillable backlog?

A: Some backlog related to federal order already fulfilled; shutdown so far not affecting non-federal and most federal business, but watching potential impact if it lingers.