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How Should Investors Approach SentinelOne Shares Post Q3 Earnings?

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SentinelOne (S - Free Report) reported break-even earnings in third-quarter fiscal 2025, which missed the Zacks Consensus Estimate by 100%. The company reported a loss of 3 cents per share in the year-ago quarter.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Revenues were $210.65 million, up 28.3% year over year and beat the consensus mark by 0.52%. The upside can be attributed to the continued adoption of its AI-powered security solutions.

SentinelOne raised its top-line guidance for fiscal 2025 based on the strong fiscal third-quarter results and go-to-market momentum.

SentinelOne, Inc. Price, Consensus and EPS Surprise

SentinelOne, Inc. Price, Consensus and EPS Surprise

SentinelOne, Inc. price-consensus-eps-surprise-chart | SentinelOne, Inc. Quote

SentinelOne’s shares have returned 9.8% year to date compared with the Zacks Computer & Technology sector’s rise of 30.6%. We believe the raised guidance will help S stock to recover.

SentinelOne’s Q3 Top-Line Details

At the end of third-quarter fiscal 2025, SentinelOne’s annual recurring revenues (ARR) increased 29% year over year to $859.7 million. The upside was driven by a mix of new customer acquisitions and expansion within existing customer accounts.

Net new ARR increased 20% sequentially, driven by stronger new business generation.

SentinelOne experienced strong momentum among large enterprises, with customers generating ARR of more than $100K, rising 24% year over year to 1,310. 

The company is riding on strong demand for its Cloud Security and Data Lake solutions, with Singularity Cloud emerging as its most rapidly-expanding solution.

SentinelOne’s Singularity platform continued to gain traction, with significant growth in customer adoption and a high attachment rate for new solutions like Purple AI and Cloud-Native Application Protection Platform.

SentinelOne Benefits From Expanding Clientele

SentinelOne’s expanding partner base, which includes Amazon’s (AMZN - Free Report) cloud computing platform Amazon Web Services (AWS) and Lenovo (LNVGY - Free Report) , has been a key catalyst.

In the third quarter of fiscal 2025, SentinelOne partnered with Lenovo to pre-install the Singularity platform and Purple AI on enterprise PC shipments, drastically increasing its market reach.

The company also deepened its integration with AWS, notably Purple AI becoming available through Amazon Bedrock, which expanded SentinelOne's capabilities to assist organizations in securing generative AI applications.

SentinelOne’s Operating Details

In third-quarter fiscal 2025, the non-GAAP gross margin was 80%, significantly up from 79% reported in the year-ago quarter.

Research & development expenses, as a percentage of revenues, were 22.2% compared with 22.1% reported in the year-ago quarter.

General & administrative expenses, as a percentage of revenues, were 13.8%, contracting 460 basis points year over year.

Sales and marketing expenses, as a percentage of revenues, were 48.7% compared with 49.9% reported in the year-ago quarter.

Total operating expenses increased 20.2% year over year to $178.3 million.

SentinelOne reported an operating loss of $10.7 million in the reported quarter, narrower than $18.2 million reported in the year-ago quarter.

SentinelOne’s Balance Sheet & Cash Flow

As of Oct. 31, 2024, SentinelOne had cash, cash equivalents and short-term investments of $ 1.1 billion, in line with the previous quarter’s reported figure.

Free cash outflow was $12.7 million in the reported quarter compared with cash outflow of $5.4 million reported in the previous quarter. The free cash outflow margin was 6%.

SentinelOne Raises Fiscal 2025 Guidance

For fourth-quarter fiscal 2025, SentinelOne expects revenues of $222 million, indicating growth of nearly 27% year over year.

Non-GAAP gross margin is expected to be 79%.

For fiscal 2025, the company expects total revenues of $818 million, suggesting growth of 32% year over year.

Non-GAAP gross margin is expected to be 79%.

SentinelOne’s Zacks Rank & a Stock to Consider

Currently, SentinelOne has a Zacks Rank #4 (Sell).

C3.ai (AI - Free Report) is a better-ranked stock that investors can consider in the broader sector. 

AI carries a Zacks Rank of 2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

C3.ai shares have lost 5.7% year to date. AI is scheduled to release second-quarter fiscal 2025 results on Dec. 9.


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