SentinelOne, Inc. Q4 FY2025 earnings call

Key Points

• Fiscal year '25 was transformative, exceeding guided metrics across all areas, with reaccelerated second half net new ARR growth into positive territory.
• Achieved industry-leading revenue growth and margin improvement, with over 30% top line growth and over 15 percentage points of operating margin expansion.
• Set new customer growth record, with non-endpoint solutions crossing 50% of full year bookings, transforming to a comprehensive AI native cybersecurity platform.
• Achieved significant profitability milestones: first quarter of positive operating income in Q4, first full year of positive net income and EPS, and first full year of positive free cash flow.
• MITRE ATT&CK Evaluations showed Singularity achieved 100% detection, zero detection delays, and 88% fewer alerts compared to competitors.
• Strong adoption of platform solutions like AI SIEM, Purple AI, and cloud security, with Q4 seeing record bookings from data, cloud, and AI security solutions.
• Partnerships with MSSPs strengthened, with deeper relationships and long-term growth commitments contributing to RPO growth.
• Retirement of legacy deception solution, with expected $10 million of churn from this retirement, half impacting Q1.

In fiscal year '25, revenue grew 32% to $821 million. For Q4, revenue was $226 million, up 29% year-over-year. Total ARR grew 27% to $920 million in Q4, with net new ARR of $60 million. International revenue in Q4 grew 36% and accounted for 37% of quarterly revenue. RPO reached a new record of $1.2 billion, growing 30% in Q4. Customers with ARR of $100,000 or more grew 25% year-over-year in Q4 to 1,411. The dollar-based net retention rate for the full year was 110%.

Fiscal Year '26 Guidance

• Expect to surpass $1 billion in both ARR and revenue.
• Anticipate revenue of $1.07 billion to $1.12 billion in Q1, representing 23% growth.
• For fiscal year '26, expect approximately $200 million in net new ARR, growing about 2% year-over-year. Excluding the impact of retiring the legacy deception solution, full year net new ARR would increase by a mid to high-single digit percentage year-over-year.
• Q1 net new ARR expected in the low $30 million range, with ~$5 million churn from the retirement of the deception solution in Q1.
• Gross margin expected to be about 79% in Q1 and between 78.5% and 79.5% for the full year. Operating margin expected to be ~negative 2% in Q1 and between 3% and 4% for the full year.

• Macroeconomic conditions, including economic and political uncertainty impacting budget, timing, and business decisions.
• Deal timing and federal spending uncertainty.
• Impact of retiring the legacy deception solution on net new ARR and revenue.
• Actual results may differ materially from forward-looking statements due to various risk factors identified in SEC filings.

Q: Adam Tindle asked about net new ARR in Q4 and guidance for FY '26.

A: Tomer Weingarten stated fiscal year '25 had strong growth, and for FY '26, net new ARR would be mid to high single digits when adjusting for the deception retirement. Barbara Larson added Q4 net new ARR would have grown in mid-single digits if excluding deception impact.

Q: Brian Essex inquired about visibility into Lenovo relationship and impact on guidance.

A: Tomer Weingarten said Lenovo relationship is a multiyear one with ramp baked in, more meaningful in out years.

Q: Gray Powell asked about Barbara's guidance philosophy.

A: Barbara Larson said guidance is based on line of sight to pipeline activity, new products, conversions, and win rates, reflecting potential in the business.

Q: Joseph Gallo asked about go-to-market tweaks and hiring in context of $1B ARR.

A: Tomer Weingarten mentioned evolution in go-to-market, improved productivity, platform sales focus, and automation contributing to growth.

Q: John DiFucci asked about guidance and new ARR growth.

A: Barbara Larson said FY '25 new business growth improved in second half, and FY '26 net new ARR includes deception churn. Tomer added AI as a driver with over 300 AI deals in Q4.

Q: Jonathan Ho asked about federal government exposure.

A: Tomer Weingarten said federal pipeline expanded, and SentinelOne creates cost synergies for federal agencies.

Q: Shaul Eyal asked about deception decision.

A: Tomer Weingarten explained deception is a legacy code base with high maintenance cost, and AI is seeding growth with Purple AI in Singularity offerings.

Q: Zachary Schneider asked about emerging product portfolio adoption.

A: Tomer Weingarten highlighted AI SIEM, Purple AI, and cloud security as key growth drivers with strong adoption.

Q: Tal Liani asked about guidance and deception impact.

A: Barbara Larson said deception has ~1 point headwind on FY '26 revenue, and Tomer said guidance factors in known unknowns.

Q: Eric Heath asked about deception and pricing.

A: Barbara Larson confirmed deception was factored in guidance, and Tomer said pricing is stable with flexible procurement to allow access to platform capabilities.

Q: Trevor Walsh asked about solution selling and cloud security.

A: Tomer Weingarten said SentinelOne provides flexibility, sells best-of-breed solutions, and sees expansion in platform adoption.

Q: Andrew Nowinski asked about deception impact on NRR and cloud/data analytics ARR.

A: Tomer Weingarten said no material impact on Q4 NRR, and they won't disclose per product ARR yet but expect update later.