Good afternoon. Thank you for attending today's SentinelOne Q4 Fiscal Year 2025 Earnings Conference Call. My name is Jaylin, and I will be your moderator for today. All lines will be muted during presentation portion of the call, with an opportunity for questions-and-answers at the end. I'd now like to turn the conference over to our host Doug Clark, the Vice President of Investor Relations. Doug, you may proceed.

Good afternoon, everyone, and welcome to SentinelOne's earnings call for the fourth quarter of fiscal year 2025, which ended January 31, 2025. With us today are Tomer Weingarten, CEO; and Barbara Larson, CFO. Our press release and an earnings presentation were issued earlier today and are being posted on the Investor Relations section of our website. This call and accompanying slides are being broadcast live via webcast and a replay will be available on our website after the call concludes. Before we begin, I would like to remind you that during today's call, we will be making forward-looking statements about future events and financial performance, including our guidance for the first fiscal quarter and full fiscal year 2026, as well as long-term financial targets. We caution you that such statements reflect our best judgment based on factors currently known to us, and that our actual events or results could differ materially. Please refer to the documents we file from time-to-time with the SEC, in particular, our annual report on Form 10-K and our quarterly reports on Form 10-Q. These documents contain and identify important risk factors and other information that may cause our actual results to differ materially from those contained in our forward-looking statements. Any forward-looking statements made during this call are being made as of today. If this call is replayed or reviewed after today, the information presented during the call may not contain current or accurate information. Except as required by law, we assume no obligation to update these forward-looking statements publicly or to update the reasons actual results could differ materially from those anticipated in the forward-looking statements, even if new information becomes available in the future. During this call, we will discuss non-GAAP financial measures unless otherwise stated. These non-GAAP financial measures are not prepared in accordance with generally accepted accounting principles. A reconciliation of the GAAP and non-GAAP results other than with respect to our non-GAAP financial outlook is provided in today's press release and in our earnings presentation. These non-GAAP measures are not intended to be a substitute for our GAAP results. Our financial outlook excludes stock-based compensation expense, employer payroll tax on employee stock transactions, amortization expense of acquired intangible assets, acquisition related compensation costs, restructuring charges and gains on strategic investments, which cannot be determined at this time and are, therefore, not reconciled in today's press release. And with that, let me turn the call over to Tomer Weingarten, CEO of SentinelOne.

Good afternoon, everyone, and thank you for joining our fiscal fourth quarter earnings call. Fiscal year '25 was a transformative year for SentinelOne, ending with a strong Q4 that exceeded our expectations across all guided metrics. For the full year, we also successfully met or exceeded the guidance targets that we set at the start of last year. Notably, we reaccelerated second half net new ARR growth back into positive territory. This performance was fueled by strong win rates, disciplined execution and the growing adoption of our platform solutions, particularly in data, AI and cloud. Once again, we delivered industry leading revenue growth and margin improvement. We were one of the only software companies at scale to achieve over 30% top line growth while driving over 15 percentage points of operating margin expansion. Additionally, we set a new customer growth record and scaled our emerging platform solutions to new highs with non-endpoint solutions crossing 50% of our full year bookings. We successfully transformed our business from an endpoint focused model to a comprehensive leading AI native cybersecurity platform. At the same time, we accelerated our time to profitability through focused investments and discipline. We achieved significant profitability milestones, including our first quarter of positive operating income in Q4, well ahead of our expectations, our first full year of positive net income and earnings per share and our first full year of positive free cash flow. With these results, we've crossed a key inflection point, and we believe the company is well positioned for sustained growth and profitability at scale. We expect to surpass $1 billion in both ARR and revenue this year, an important milestone in our growth journey. We also expect to achieve full year operating income profitability, while continuing to invest in our platform and future opportunities. In…

Thank you, Tomer, and thanks to everyone for joining us today. Let's review the details of our Q4 and fiscal year '25 financial performance and our guidance for Q1 and fiscal year '26. As a reminder, all comparisons are year-over-year and financial measures discussed here are non-GAAP, unless otherwise noted. We continued to deliver industry leading growth and margin expansion in fiscal year '25. Our revenue grew 32% to $821 million, while gross margin reached a new full year high and operating margin improved by 16 percentage points year-over-year. In addition, we crossed two important profitability milestones this year, delivering a positive net income margin of 2% and a positive free cash flow margin of 1% for the full year. Our profitability improvements are driven by increasing scale, operational efficiencies and a disciplined investment strategy. We will continue to build on this and improve our profit and free cash flow margins in fiscal year '26. Turning to our fourth quarter results. Our overall performance signifies a strong competitive position and demand for SentinelOne’s best-in-class cybersecurity solutions. We are taking market share and mind share from incumbents and next-gen vendors alike. Q4 revenue of $226 million grew 29% year-over-year and exceeded our expectations. This outperformance was driven by strong new business growth and linearity in the quarter. Revenue from international markets grew 36% and represented 37% of our quarterly revenue. In Q4, we added net new ARR of $60 million and our total ARR grew 27% to $920 million. We delivered on our goal to reaccelerate net new ARR growth in the second half of the year, achieving 2% growth, an improvement of 12 percentage points compared to the first half of the year. This performance improvement was driven by improved execution, a stronger competitive position and success across our platform…

[Operator Instructions] Our first question comes from Adam Tindle with the company Raymond James. Adam, your line is now open.

Okay. Thanks. I'm going to ask one, but it's going to be multi-part. I'm going to try to beat up net new ARR right out of the box here, so bear with me. Appreciate the highlight that net new ARR, flipped back to positive for the back half. But if we're looking at just Q4, it was flattish on easier comparison. So just rationale for that in Q4. And then Barbara, as we look to fiscal ‘26, it was helpful to get that color on total ARR growth. I guess the question would be on that starting kind of flattish, I think if I backed out the retirement of the product you mentioned and needing to grow low-single digits for the year as the comparisons get tougher throughout the year. What kind of gives you the confidence to come out here with that back half tougher comparisons and with this ramp throughout the year? Thank you.

Thanks, Adam. So let me actually address that first. So in fiscal year ‘25, we delivered revenue growth of over 30%, that's industry leading with full year profitability, with really strong win rates, pipeline growing, interest from new larger enterprises, that just means more awareness for SentinelOne. And we're seeing very strong adoption from all of our platform capabilities. If you kind of think about that with successfully reaccelerating our net new ARR growth in the second half of the year. For FY ‘26, we expect to grow that meaningfully if you adjust it for the deception end of sale, that will be mid to high growth single digits. So we feel confident in the opportunity and the trajectory. I think the underlying strength of the business is somewhat masked by that end of life decision, which we believe is the right decision longer term. And all-in-all, the guide gives, I think, a good achievable starting point for us as we execute throughout the year.

And then I'll just follow-up with the question on Q4 ‘25. We did have some impact from churn in this Q4 related to deception. And if we adjust that out, our Q4 net new ARR would have grown in mid-single digits.

Our next question comes from Brian Essex with the company JPMorgan. Brian, your line is now open.

Hi. Good afternoon. Thank you for taking the question. I was wondering if maybe sticking on the topic of ARR or net new ARR, how you're thinking about contribution from Lenovo? Are you starting to see some traction? Is it -- are they selling devices? I think you previously talked about maybe in the back half of the year. Just wondering about visibility into that relationship and how that might impact -- how you're thinking about guide for the year?

We're working very closely with the Lenovo team. All of the go-to-market elements are now being put in place. And as I've said before, we expect that impact to be much more back end loaded, mostly, I would say, even in the next fiscal year as more on the box shipments are starting to get out the door. So everything we know, understand and want to take into this year is factored in the guidance. We believe the Lenovo, which is a multiyear relationship with ramp baked into it, is going to be much more meaningful in the out years versus in this immediate fiscal year.

Okay. Great. Thank you. I’ll keep it one and follow-up afterwards. Thank you.

Our next question comes from Gray Powell with the company BITG. Gray, your line is now open.

Great. Thanks for taking the question. So maybe one for Barbara. You've been at SentinelOne a little over six months now. It's your first time owning the guide for the full year. Are there any material changes that you're making? Are you looking at any different KPIs or just any difference with regards to your guidance philosophy versus your predecessor?

Yeah, Gray. Thanks so much for the question. In terms of the guide, we really feel like this is the right starting point for the year. We're focused on setting reasonable expectations that reflect the potential that we see in the business. Of course, it's based on what we have line of sight to pipeline activity, contributions from new products, anticipated conversions and win rates. We're mindful of the macro as well. It's not extremely different than what we’ve seen recently. It just continues to persist, it’s still volatile. It’s almost like it’s the new normal. But we do believe this is the right starting point for this year.

Understood. That’s very helpful. Thanks.

Our next question comes from Joseph Gallo with the company Jefferies. Joseph, your line is now open.

Hi, guys. This is Annick Baumann on for Joe Gallo. Tomer, you guys have put a ton of work into your go-to-market engine and I'm just curious if there's any more tweaks as you begin to work through FY '26? And how do you think about capacity and hiring in the context of looking to reach over $1 billion in ARR this year.

Thank you for the question. There's always evolution happening. I mean, we are working on better productivity. We've improved productivity year-over-year. We are gearing towards more platform sales. We're adjusting our pricing structures. I mean, we're allowing for even more flexibility for our customers, and we're aligning with some of the pricing structures that we're seeing out there. So all-in-all, we're in this evolution of go-to-market, every indicator that we track is looking better, and that's reflected through win rates, that's reflected through channel contribution. And we're obviously working with more and more automation throughout pretty much every avenue we have. All of those should be somewhat of contributors in this fiscal year, but the vast majority of it is really a poor contribution for the out years and strategic decisions we're taking right now to continue and sustain growth in the years to come.

And operator, I want to jump in here for a second. We're under the impression that folks on the webcast could not hear the first question or the response. So I just want to repose it and allow Tomer and Barbara to answer. It was a question about ARR growth expectations for fiscal '26, as well as Q4 fiscal '25. Tomer, if you want to address that again?

Yes, of course. So in fiscal '25, as I mentioned, we continue to deliver leading revenue growth in the industry over 30%. Win rates remained really strong and our pipeline is growing even further. We see a lot of interest from new and larger enterprises, and this just means more awareness for SentinelOne than ever before. There's strong adoption of our platform solutions. We've quadrupled the number of customers on the enterprise that are using one or more -- sorry, four or more modules by SentinelOne. And we successfully reaccelerated and improved net new ARR growth in the second half of full year '25. In FY '26, we expect to grow net new ARR as well. And if you adjust it for the end of sale decision that we're taking here, it would actually be up mid to high-single digits. So we feel very confident in the opportunity and the trajectory. I just feel like the underlying strength of the business, if you kind of think about it as new and upsell is just very strong, and it's being masked a bit by that end of life decision, which is a longer-term decision that we believe is necessary. There's a lot of change happening in software today. But I feel like for us, this focus on data and AI mandates starting to prune away some of the legacy capabilities. I believe a lot of companies should be going down that path. So for us, that's the focus. The underlying strength of the business, coupled with obviously strategic long-term decisions.

And then following up on Q4 '25, we delivered flat year-over-year net new ARR in Q4 as planned. We did have some impact from churn related to the retirement of our legacy deception solution. To the extent that we adjust that out, our Q4 net new ARR would have grown in mid-single digits in Q4 '25.

Thank you, operator. We can go to the next question, please.

Our next question comes from John DiFucci with the company, Guggenheim Securities. John, your line is now open.

Thank you. So this quarter, forgetting even about the deception product and some attrition because of that. If I look at just new ARR and I take into account normal attrition, which I know is really small, it actually grew a little bit, which is I think about half of our companies actually showed growth in new ARR, only about half. And Barbara, thanks for all that color on the guide, which makes me think I might be able to answer this, but let me ask it anyway. You talked about the assumptions on the demand environment or the macro and you said about new normal. And so I'm thinking you're thinking, okay, the backdrop is consistent. But this implies your guidance that you expect SentinelOne to perform better against that backdrop, a little bit, not a ton. And I know you want to beat your number -- hit your goals or exceed them. So can you expand a little bit more, just a little more color as to why you think you're going to perform a little bit better this year than you did last year? And I'm thinking about new ARR. Thanks.

Thanks, John. I appreciate the question. So if you kind of step back a little bit and you look first at fiscal year '25, we did improve our new business growth in the second half of fiscal '25. We expect this trend to continue into FY '26 where we expect full year net new ARR to be up 2% year-over-year, so at around $200 million, and that is including impact of the $10 million, about $10 million of churn related to deception. So deception is a bit of a headwind. More than -- or about half of that will occur in Q1. So a headwind kind of front loaded and then we would expect our net new ARR growth sequentially to improve from thereafter.

Yeah. And maybe let me add a couple of points there, John. I mean the one thing that obviously is very different for us is just the adoption of the platform modules. And if you couple that with the ramped sales force, I think we're entering this year on a much stronger note. AI is going to be a tremendous driver and I think everybody understands already. Just to give you some context there, we've done more than 300 AI deals in Q4. I mean that is most likely more than any other security vendor out there. And we definitely see more traction for these solutions. Now obviously, we're accounting for some of the things that we are pruning away. But all-in-all, we feel like there's quite a bit of momentum in the business. Our pipelines point to that. Again, the maturity of the sales force, all of those, I think, are the contributing factors. And then I think that what allows Barbara, not to put words in your mouth, to really put kind of an achievable bar or a good starting point for the year for us.

Thank you. That all makes sense. Appreciate the color.

Our next question comes from Jonathan Ho with the company, William Blair. Jonathan, your line is now open.

Hi. Good afternoon. Could you maybe give us a little bit of additional color in terms of your exposure on the federal government side and perhaps what you're seeing in terms of what your customers are saying or what your sales force is saying there? Thank you.

Yeah. There's definitely a level of unknown and uncertainty. There's no question that there's a lot of change that's happening. With that, we've actually seen our federal pipeline expand. So there's definite -- it's a definite source of demand for us. I would also say for the type of offering that we can cater to for federal agencies, and especially given that we're one of the only security vendors that can sell AI into a FedRAMP High type of an environment. In many cases, we actually create cost synergies. We allow these agencies to actually save on their data ingestion costs. We allow them to save on operational costs, and that positions us really well even in a macro in that arena that cause for more cost saving and prudence. So all-in-all, I think we're still treating federal as a source of strength. At the same time, I would say, there is maybe some unclarity on deal timing and budgets, and we're just working at the pace of the customer, but demand remains strong.

Our next question comes from Shaul Eyal with the company, TD Cowen. Shaul, your line is now open.

Thank you. Hi. Good afternoon. Tomer, I had a question on deception. What's driving that decision? And maybe is some of deception capabilities from a product perspective are being displaced by some of the Singularity AI-driven capabilities?

Yes. Thanks for the question, Shaul. The biggest thing with deception is just it's a legacy code base that we acquired with Attivo. As a matter of fact, it actually has even hardware components. For us, that's obviously not a long-term business we want to be in. And the cost of maintenance is creeping up while the ROI is not really showing up. So for us, it's a very simple decision of realigning resources into the high yielding elements of our business. And to the latter part of your question, AI is most definitely going to be a consolidator of capabilities. And I think deception is one of them to a certain extent. You can think about identity. You can think about many elements of the broader security platform you're seeing out there as capabilities that can be delivered as agentic AI instead of a fully-fledged product. And I think that's what we're seeing is the progression, at least of our Purple AI capability set. That's why we're already including it in most of our Singularity offerings. We believe philosophically that AI, GenAI capabilities for software products are going to become table stakes. If you're not going to have them, you're going to be much less relevant, and we're using that to seed growth to kind of get customers accustomed to it and to drive more usage while we build more and more tiers and more and more agentic capabilities. So that's what we see for the coming fiscal year, and that's how we kind of couch all of it with that base. The majority of it is deception. There's a couple of other small components in there, but that's just, I think, in a broader sense, how we're thinking about the shift from legacy code bases to newer offerings, AI based, which is something, again, I think you'll start seeing a lot of other companies go down the path.

Our next question comes from Shrenik Kothari with the company, Baird. Shrenik, your line is now open.

Great. Hi. This is Zach Schneider on for Shrenik. Thanks for taking the question. So obviously, your emerging product portfolio is becoming an increasingly critical growth driver. And you highlighted data and AI as your fastest-growing solution. But maybe are there any specific solutions that stand out in terms of adoption velocity, cross-sell success? Have there been any surprises, either outperformers that are scaling faster than expected or areas where traction has been slower than anticipated? Would love to just get a sense of what's working best and where there's still white space to accelerate adoption. Thanks.

I definitely mentioned AI is one of these Purple AI, the capability, 300 deals in the quarter plus, I mean, that is remarkable. With that, AI SIEM for us has also been a source of strength. So the coupling of these two also just makes us much more strategic for these types of customers. So I would definitely call out AI SIEM and Purple AI as the two main drivers of growth. Cloud security for us, I mean, we started selling the complete unified cloud security suite for us. We've done a record deal with cloud security in Q4. So all of those are really progressing nicely. And we will continue -- I think continue to drive those as the most strategic touch points with customers.

Okay. Thank you.

Our next question comes from Rudy Kessinger with the company, D.A. Davidson. Rudy, your line is now open.

Hey, guys. Thanks for taking my question. I'm curious if you look at the second half of this year in net new ARR, obviously it improved quite a bit from the first half. But if you were to maybe strip out some of the benefit from the displacements from CrowdStrike that were specifically due to the outage that would have otherwise likely not have occurred. What would that second half net new ARR growth have looked like?

I'm not sure we can strip out, and I'm not sure that you can think about it in such a distinct way. To us, and I mentioned it in the opening question, what is changing the most is consideration. And even customers that maybe chose to stay with the incumbent, they're still entertaining and considering what they're going to do next. So a lot of folks are doing anything in an unplanned fashion. But once they go through that cycle, and it could be one year or two years out, sometimes the consideration is very different. So as I mentioned, to us, the way we look at it is something structurally had shifted. I think that creates more consideration for SentinelOne. And all-in-all, I think that what we've seen is somewhat of incremental contribution. I think it's much more smoothened out than one would imagine. I think maybe folks were expecting some upticks. It's not an uptick type contribution, it's smoothened, it's gradual, and we believe it's also here to stay, which is the most important part.

Our next question comes from Tal Liani with the company, Bank of America. Tal, your line is now open.

Hi, guys. I wanted to just understand the guidance. So your guidance is about $7 million, $8 million below the consensus and $20 million for the year. Guidance for the next quarter is $7 million, $8 million below. And part of it is because of the deception, part of it is -- I'm trying to understand. So can you quantify the deception -- first of all, the deception impact on the guidance on the revenues, not on the ARR? And then second, what are the good things and the bad things that drove you to kind of guide slightly below the Street because your message is very strong, and I can see the numbers in the historicals, but the numbers are slightly weaker. Thanks.

So from a deception perspective, I'll first cover that for net new ARR. So for FY '26 the impact is about $10 million of churn for the year, and Q1 is about half of that. On a revenue perspective for the full year, deception has about a 1 point headwind on FY '26 revenue.

Got it. So the rest of it -- the rest of the guidance, like, the slight weakness versus the Street. Is there anything you want to highlight why you're guiding below the Street? The growth rate is decelerating from last year? So what's the source of this deceleration?

I think what we're trying to factor at the end of the day is just the unknowns. And we truly believe this is a good starting point for us. There's a lot of factors in play. There's a lot of shifts happening in software. We believe we're making the right responsible decisions here. So all in all, we're just factoring in everything that we believe and know. And obviously, our goal is always to overachieve and that's going to be my job. Barbara sets the guidance, I try to overachieve it. But all-in-all, we believe, again, that captures everything we know today.

Our next question comes from Eric Heath with the company, KeyBanc. Eric, your line is now open.

Hey, thanks for taking the question. Maybe just one housekeeping one. Just wanted to clarify deception and the decision to end-of-life that was factored in the guidance as of last quarter. And then, Tomer, the question I wanted to ask is on pricing. You called out some adjustments to pricing. So just curious if you could elaborate a little bit more about what that means and if it's some sort of credit model that we're seeing a lot of vendors do to enable more adoption, more modules across the platform. Thanks.

So I'll cover the first one. We did factor that into the guidance. There was some churn in Q4.

And as for pricing, I mean, the first thing I'll open and say is that pricing has been very stable for us. So it's not about discounting and it's not about needing to tweak our pricing model. But obviously, customers are looking for more flexible ways to procure. And I think that's where we don't see a lot of downside in going down the path of allowing some of these more flexible terms, given that the expansion you seen in our capabilities set is significant. I mean, our platform today is seven capabilities with about 30 something modules. That's a lot and customers like to try out a lot of different capabilities that we have. So moving into a pricing model that allows them access to the entire platform is something that we believe is going to be a beneficial, and that's the direction that we're heading towards.

Our next question comes from Trevor Walsh with the company, Citizens. Trevor, your line is now open.

Great. Thank you for taking the questions. Tomer and team, I appreciate the new disclosures around a module or solutionary adoption that you overlaid across the seven, it's great to see. Just curious if that's just more reporting for us here on this call or if you align the more solution selling orientation for the sales team, and if what playbooks you're maybe running around grouping those together? And then on related lines, one of your peers/competitors has talked about within cloud security, things moving more towards detection response, SIEM, the SOC taking over more of, I guess, like that whole piece of the pie and that benefiting them and others like you have maybe a more runtime agent based approach. So kind of along the lines of just selling multiple pieces of the platform. Do you agree with where the things are going there in security -- cloud security specifically and how that all aligns to, again what you're doing from a larger selling multiple solutions across the platform. Thanks.

I think the biggest thing is that we want to provide flexibility. I think unlike some other vendors, we don't force customers to take kind of an all or nothing approach. So we have all the capabilities. We can -- as an example, sell you a fully-fledged cloud security suite that contains all the CNAPP capabilities and best-of-breed runtime workload protection. At the same time, we don't mind going into environment and delivering best-of-breed worker protection and working in tandem with another CNAPP provider. To us, it's really about flexibility. And we're seeing customers adopt more and more of our capabilities once they've experimented with at least one capability. Typically, when you look at what we do, it's almost always best of breed. I mean you're talking about Gartner customer choice for endpoint protection and customer Gartner customer choice for cloud security and Gartner customer choice for MDR and Product of the Year for AI. So obviously, what we do is at the forefront in each and every one of these fields. And we have fully inclusive capabilities that are akin to every other platform and every other leading platform, I should say, in the market today. But the emphasis is sell what customers need, sell to the need and sell to what they want to address today versus trying to deal with futures. We're definitely seeing the expansion coming as evidenced in the numbers, and that's why we're also moving towards those more flexible pricing platform structures that can allow customers to then over time, consume more from our capability set.

Our last question comes from Andrew Nowinski with the company, Wells Fargo. Andrew, your line is now open.

Thank you for squeezing me in. So just maybe two quick housekeeping questions. First, did the deception products have an impact on the decline in your NRR when it went down to 110% this quarter? And then second, you gave the cloud and data analytics ARR of $170 million back in Q2. And given that it's a high priority for your investments, I'm just wondering if you could break those two out again in Q4 here or perhaps tell us how much you expect them to contribute to that $200 million in net new ARR for FY '26. Thank you.

So we're not going to be disclosing per product ARR at this point. We will give an update potentially later on in the year. On the NRR front, there was no, I would say, material impact on Q4 NRR. We do expect that, that's going to be a headwind to NRR, the deception end of sale, specifically in Q1. And I think once we clear that headwind, I think you'll see NRR maybe in a more healthy place. So that, I think, kind of is the way that we're looking at it today.

I would now like to pass the conference back over to Tomer Weingarten for closing remarks. Tomer, you may proceed.

Thank you. We delivered a strong end to fiscal year '25 and see significant opportunity ahead in fiscal '26. We continue to lead the industry with best-in-class technology. I'm especially pleased with our AI innovations, which we believe will transform cybersecurity in the coming years. We're at the forefront of an AI revolution, driving the next wave of security innovation. Our product and go-to-market strategy are fully aligned to deliver premier AI cybersecurity. And this is driving broader platform adoption among new and existing customers. We're delivering strong revenue growth and margin expansion and achieved new profitability milestones with more to come. Thank you again to our customers, partners, shareholders and Sentinels around the world.

That will conclude today's conference call. Thank you for your participation, and enjoy the rest for your day.