After accidentally causing a crash in its customers’ computers, cybersecurity firm CrowdStrike (CRWD) unwittingly gave its competitors, most notably SentinelOne (S), a surge in business. This mishap has allowed SentinelOne to seize the opportunity to become one of the fastest-growing software companies in the space.
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The company continues to experience robust growth with its Singularity Platform, posting a revenue beat for the third quarter with a 28% year-over-year increase. Annual recurring revenue (ARR) has similarly seen growth with a spike of 29% as the company has expanded its customer base, boasting a 24% increase in customers with ARR of $100,000 or more. The company projects ongoing growth, making it an appealing option for investors interested in growth at a reasonable price.
SentinelOne Showcases a Robust Growth
SentinelOne is known for its AI-driven cybersecurity and provides robust protection through its Singularity Platform. This advanced platform enables organizations to guard their endpoints, cloud tasks, containers, identities, and mobile and network connections.
CEO Tomer Weingarten announced that SentinelOne’s upcoming products, powered by artificial intelligence, are geared to access markets worth over $100 billion while avoiding the update issues that plagued CrowdStrike. The AI capabilities will also automate the company’s cybersecurity products for cloud computing and enterprise networks. Showing robust growth, SentinelOne, now cash flow positive, is projected to generate $1 billion in annual subscription revenue by mid-next year.
New Product and Growing Partnreships
SentinelOne has also launched AI SIEM, an AI-based cybersecurity system that ingests and synthesizes data to deliver real-time detection, full visibility, accelerated investigations, and autonomous responses. The firm’s adoption of cloud workload protection remains solid, and the recent introduction of AI Security Posture Management adds another layer of protection against potential attack paths and misconfigurations.
The company has collaborated with Lenovo (LNVGY) to package the Singularity Platform and Purple AI in enterprise PCs to improve endpoint security on a large scale. It has extended its reach in the federal sector by securing more contracts with agencies and achieving FedRamp High for endpoint security and AI SIEM. A growing partnership with AWS has enabled customers to use Purple AI on Amazon Bedrock (AMZN).
SentinelOne’s Recent Financial Results & Outlook
The third quarter of FY2025 showed promising growth across various metrics. Total revenue saw a year-over-year increase of 28%, reaching $210.65 million, an increase from the previous year’s $164.2 million.
The Annualized Recurring Revenue (ARR) also followed suit, growing 29% to $859.7 million, driven by 24% growth in customers with an ARR of $100,000 or more, which reached 1,310 this quarter.
Gross margin increased, growing from 73% to 75%, while operating margin showed progress from (50)% to (42)%. Further, the company reported improvements in cash flow margin, which increased from (14)% to (3)%, and the free cash flow margin rose ten percentage points from (16)% to (6)%. GAAP earnings per share (EPS) of -$0.25 missed expectations by $0.05.
As of the quarter’s end, cash, cash equivalents, and investments stood at a substantial $1.1 billion.
Following Q3, encouraging earnings, SentinelOne’s management has provided an outlook for the fourth quarter and the full 2025 Fiscal year (ending January 31, 2025), projecting revenue of $222 million for the quarter and $818 million for the full fiscal year. The quarter and the year project a non-GAAP gross margin of 79%.
Is SentinelOne a Buy?
After a rough slide over the past few years, the stock has rebounded up over 44% in the past six months. It trades near the upper end of its 52-week price range of $14.33 – $30.76. The P/S ratio of 10x reflects a premium to the Information Technology average of 3.3x.
Analysts following the company have been bullish on S stock. For example, Susquehanna analyst Shyam Patil, a five-star analyst according to Tipranks’ ratings, recently raised the price target from $28 to $30 and kept a Positive rating on the shares, noting a solid Q3 and guidance for Q4 that was ahead of expectations and noted pipeline growth and new customer wins as a result of the CrowdStrike outage.
SentinelOne is rated a Moderate Buy overall, based on the recommendations of 22 analysts. The average price target for S stock is $29.90, representing a potential 15.98% upside from current levels.
SentinelOne in Summary
SentinelOne’s trajectory as one of the fastest-growing software companies in cybersecurity continues to impress. Not only did the company seize the opportunity of CrowdStrike’s missteps, but it has also demonstrated notable revenue growth and robust expansion of its customer base. Moreover, the company is transforming into a more profitable entity, forecasting a revenue increase in the fiscal year of 2025 and a solid gross margin, making it an appealing investment consideration for those seeking growth at a reasonable price.
