SentinelOne (NYSE:S) Beats Expectations in Strong Q2, Provides Optimistic Guidance For Next Quarter

Adam Hejl /
2021/09/08 4:21 pm EDT
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Cyber security company SentinelOne (NYSE:S) reported Q2 FY2022 results that beat analyst expectations, with revenue up 121% year on year to $45.7 million. SentinelOne made a GAAP loss of $68.1 million, down on its loss of $22.9 million, in the same quarter last year.

Is now the time to buy SentinelOne? Access our full analysis of the earnings results here, it's free.

SentinelOne (S) Q2 FY2022 Highlights:

  • Revenue: $45.7 million vs analyst estimates of $40.3 million (13.3% beat)
  • EPS (non-GAAP): -$0.38 vs analyst estimates of -$0.20 (-$0.18 miss)
  • Revenue guidance for Q3 2022 is $49.5 million at the midpoint, above analyst estimates of $45.7 million
  • Free cash flow was negative $44.7 million, compared to negative free cash flow of -$32.6 million in previous quarter
  • Net Revenue Retention Rate: 125%, in line with previous quarter
  • Gross Margin (GAAP): 58.9%, up from 51.1% previous quarter

“We’re devoted to protecting our customers and our way of life from cyberattacks in an increasingly digital society. Cybersecurity must be autonomous - that’s what we’ve built. It must perform at a faster speed, greater scale, and higher accuracy than what exists today,” said Tomer Weingarten, Co-Founder and CEO of SentinelOne.

Founded in 2013 by serial entrepreneur Tomer Weingarten, SentinelOne (NYSE:S) provides software to help organizations efficiently detect, prevent, and investigate cyber attacks.

The cyber attack surface is projected to expand as the volume of internet enabled devices grows. Given the scarcity of cyber security talents, more organizations are expected to adopt automated cybersecurity platforms to efficiently manage cyber attacks and to stay up to date with the threat landscape.

Sales Growth

As you can see below, SentinelOne's revenue growth has been incredible over the last year, growing from quarterly revenue of $20.6 million, to $45.7 million.

SentinelOne Total Revenue

This was another standout quarter with the revenue up a splendid 121% year on year. On top of that, revenue increased $8.35 million quarter on quarter, a solid improvement on the $7.52 million increase in Q1 2022, and happily, a slight re-acceleration of growth.

Analysts covering the company are expecting the revenues to grow 68.2% over the next twelve months, although we would expect them to review their estimates once they get to read these results.

There are others doing even better than SentinelOne. Founded by ex-Google engineers, a small company making software for banks has been growing revenue 90% year on year and is already up more than 400% since the IPO in December. You can find it on our platform for free.

Product Success

One of the best things about software as a service businesses (and a reason why they trade at such high multiples) is that customers tend to spend more with the company over time.

SentinelOne Net Revenue Retention Rate

SentinelOne's net revenue retention rate, an important measure of how much customers from a year ago were spending at the end of the quarter, was at 125% in Q2. That means even if they didn't win any new customers, SentinelOne would have grown its revenue 25% year on year. That is a good retention rate and a proof that SentinelOne's customers are satisfied with their software and are getting more value from it over time. That is good to see.

Key Takeaways from SentinelOne's Q2 Results

Since it has still been burning cash over the last twelve months it is worth keeping an eye on SentinelOne’s balance sheet, but we note that with a market capitalization of $18.5 billion and more than $1.68 billion in cash, the company has the capacity to continue to prioritise growth over profitability.

We were impressed by how strongly SentinelOne outperformed analysts’ revenue expectations this quarter. And we were also excited to see the really strong revenue growth. Zooming out, we think this was a great quarter and we have no doubt shareholders will feel excited about the results. The company is down -2.72% on the results and currently trades at $66.27 per share.

SentinelOne may have had a good quarter, so should you invest right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

One way to find opportunities in the market is to watch for generational shifts in the economy. Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks and as a result, the demand for cloud-native cybersecurity is skyrocketing. This company is leading a massive technological shift in the industry and with revenue growth of 70% year on year and best-in-class SaaS metrics it should definitely be on your radar.

The author has no position in any of the stocks mentioned.