Cyber security company SentinelOne (NYSE: S) met Wall Street’s revenue expectations in Q1 CY2025, with sales up 22.9% year on year to $229 million. On the other hand, next quarter’s revenue guidance of $242 million was less impressive, coming in 1.2% below analysts’ estimates. Its non-GAAP profit of $0.02 per share was in line with analysts’ consensus estimates.
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SentinelOne (S) Q1 CY2025 Highlights:
- Revenue: $229 million vs analyst estimates of $228.2 million (22.9% year-on-year growth, in line)
- Adjusted EPS: $0.02 vs analyst estimates of $0.02 (in line)
- Adjusted Operating Income: -$3.93 million vs analyst estimates of -$3.76 million (-1.7% margin, relatively in line)
- Revenue Guidance for Q2 CY2025 is $242 million at the midpoint, below analyst estimates of $244.8 million
- Operating Margin: -38.2%, up from -43.3% in the same quarter last year
- Free Cash Flow was $45.44 million, up from -$8.92 million in the previous quarter
- Customers: 1,459 customers paying more than $100,000 annually
- Annual Recurring Revenue: $948.1 million at quarter end, up 24.4% year on year
- Market Capitalization: $6.65 billion
“Our top-tier growth and margin improvement reflect continued platform momentum and customer success," said Tomer Weingarten, CEO of SentinelOne.
Company Overview
With roots in the Israeli cyber intelligence community, SentinelOne (NYSE: S) provides software to help organizations efficiently detect, prevent, and investigate cyber attacks.
Sales Growth
A company’s long-term sales performance is one signal of its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Luckily, SentinelOne’s sales grew at an incredible 52.1% compounded annual growth rate over the last three years. Its growth beat the average software company and shows its offerings resonate with customers, a helpful starting point for our analysis.
This quarter, SentinelOne’s year-on-year revenue growth of 22.9% was excellent, and its $229 million of revenue was in line with Wall Street’s estimates. Company management is currently guiding for a 21.6% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 23.1% over the next 12 months, a deceleration versus the last three years. Still, this projection is noteworthy and suggests the market is baking in success for its products and services.
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Annual Recurring Revenue
While reported revenue for a software company can include low-margin items like implementation fees, annual recurring revenue (ARR) is a sum of the next 12 months of contracted revenue purely from software subscriptions, or the high-margin, predictable revenue streams that make SaaS businesses so valuable.
SentinelOne’s ARR punched in at $948.1 million in Q1, and over the last four quarters, its growth was fantastic as it averaged 28.1% year-on-year increases. This performance aligned with its total sales growth and shows that customers are willing to take multi-year bets on the company’s technology. Its growth also makes SentinelOne a more predictable business, a tailwind for its valuation as investors typically prefer businesses with recurring revenue. 
Enterprise Customer Base
This quarter, SentinelOne reported 1,459 enterprise customers paying more than $100,000 annually, an increase of 48 from the previous quarter. That’s a bit fewer contract wins than last quarter and quite a bit below what we’ve observed over the previous year, suggesting its sales momentum with new enterprise customers is slowing. It also implies that SentinelOne will likely need to upsell its existing large customers or move down market to maintain its top-line growth.
Key Takeaways from SentinelOne’s Q1 Results
We struggled to find many resounding positives in these results. ARR, revenue, operating profit, and EPS were all roughly in line with expectations, which we've seen is rarely good enough for higher-multiple software companies. Additionally, the company's revenue guidance for next quarter slightly missed. Overall, this quarter could have been better. The stock traded down 13.8% to $16.95 immediately after reporting.
The latest quarter from SentinelOne’s wasn’t that good. One earnings report doesn’t define a company’s quality, though, so let’s explore whether the stock is a buy at the current price. If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here, it’s free.
