SailPoint's Q2 2026: Contradictions Emerge on Identity Security Demand, SaaS Mix, and ARR Growth

The above is the analysis of the conflicting points in this earnings call

Date of Call: September 09, 2025

Financials Results

• Revenue: $264M, up 33% YOY
• Operating Margin: 20.4% adjusted operating margin, up 980 bps YOY

Guidance:

• Q3 ARR expected at $1.029B, up 26.5% YOY.
• FY26 ARR outlook raised to $1.11B, up 26.6% YOY (prior 25.5%).
• Q3 revenue expected at $270M, up 15% YOY; TTM revenue to surpass $1B.
• Q3 adjusted subscription gross margin ~82%.
• Q3 adjusted operating margin ~16%; diluted shares ~562M; adjusted EPS ~$0.06.
• FY26 revenue outlook raised to $1.055B, up 22.4% YOY (prior 20.6%).
• FY26 adjusted operating income $179M (17% margin); diluted shares ~565M; adjusted EPS $0.21.
• 2H FY26 FCF ≈$85M (~1/3 Q3, ~2/3 Q4).

Business Commentary:

• Revenue and ARR Growth:
• SailPoint reported Q2 2026 revenue of $264 million, an increase of 33% year-over-year, with annual recurring revenue (ARR) reaching $982 million, up 28% year-over-year.

• The growth was driven by strong demand for the breadth of identity security controls and increased SaaS ARR of $623 million, growing 37% year-over-year.

• Strong Customer Demand and Expansion:

• The company saw a 48% year-over-year increase in customers with ARR greater than $1 million and a 27% increase in customers with ARR greater than $250,000.

• This expansion reflects the strong demand for comprehensive identity security solutions that can support enterprise scale and complexity.

• Product Innovation and New Market Opportunities:

• SailPoint's emerging add-on modules, such as machine identity security, data access security, and non-employee risk management, saw record-breaking momentum, with ARR across these offerings more than doubling compared to the same period last year.

• This growth is attributed to the market's appetite for advanced enterprise-grade identity solutions amid evolving threats such as AI and machine identities.

• Accelerated Application Management:

• The introduction of SailPoint Accelerated Application Management aims to transform how enterprises govern and secure applications at scale, enabling organizations to quickly onboard and deeply govern hundreds of applications.
• This offering is expected to boost the company's ability to deliver faster time to value, reduce application sprawl, and lower risk associated with identity and access management.

Sentiment Analysis:

• Q2 revenue was $264M, up 33% YOY, with adjusted operating margin expanding 980 bps to 20.4% and record $50M operating cash flow. ARR reached $982M, up 28% YOY (SaaS ARR up 37%). Management raised FY26 revenue outlook to $1.055B (22.4% YOY) and ARR outlook to $1.11B (26.6% YOY), and increased FY26 operating income guidance to $179M (17% margin).

Q&A:

• Question from Brian Essex (JPMorgan Chase & Co.): Please unpack guidance, the impact of federal term renewals on ARR/non-SaaS ARR, any methodology changes, and confidence into the seasonally heavy federal quarter.
  Response: Q2 included a $7M revenue timing shift from 100% renewal of Fed term contracts (recognized upfront); no ARR impact; guidance remains prudent with continued beat-and-raise cadence and strong second-half confidence.

• Question from Meta Marshall (Morgan Stanley): Why the implied net new ARR decel in Q3 from Q2, and what supports a pickup in Q4?
  Response: Q2 faced a very tough comp; on a 2-year CAGR net new ARR is >40%; Q3 is a prudent starting point with intent to maintain beat-and-raise through the second half.

• Question from Todd Weller (Stephens Inc.): Where are you seeing the most opportunity in machine identity and how do you compete?
  Response: SailPoint focuses on discovery and ownership assignment of machine identities, then applies lifecycle governance—differentiating from certificate/authentication-centric tools and addressing emerging machine attack vectors.

• Question from Jonathan Ruykhaver (Cantor Fitzgerald & Co.): How does AI-driven connector integration tie into agent identity security and monetization?
  Response: Governing AI agents requires tightly linking identity with deep data entitlements and security context; SailPoint is building this entitlement-aware, real-time approach into agent governance, with more details and monetization at Navigate.

• Question from Robbie Owens (Piper Sandler & Co.): Are we at a modernization tipping point given legacy footprints and your record new logos?
  Response: Migrations are accelerating across both legacy and installed base, with AI/agent readiness creating urgency to modernize onto SailPoint’s platform.

• Question from Gabriela Borges (Goldman Sachs): How should we think about SaaS vs Term mix over the next 12 months?
  Response: Net new bookings remain predominantly SaaS (~90% target; Q2 was 86%); Q3 may skew slightly more term due to Fed seasonality, but overall SaaS adoption is steady to accelerating.

• Question from Saket Kalia (Barclays Bank PLC): Pricing for machine vs human identities, and color on last year’s tough net new ARR comp?
  Response: Machine identities price at ~30–35% uplift to workforce; autonomous agents akin to human pricing; last year’s Q2 had outsized migrations and expansion, making for tough comps, while current SaaS new logo ARR and attach rates are strong.

• Question from Patrick Edwin Colville (Scotiabank): How are enterprise governance bake-offs changing amid new competitors?
  Response: In mid-to-large enterprise, the competitive set and win rates are largely unchanged; converged newcomers see limited success mainly in lower-end enterprise where buyers are less sophisticated.

• Question from Tal Liani (BofA Securities): Will expanding privileged access displace traditional identity, and does identity become bundled into broader platforms?
  Response: Enterprise-wide privilege will require dynamic, identity-context controls—not legacy PAM at scale; SailPoint’s 125M identities and open integrations position it to connect identity/data with multiple security platforms, not a single bundle.

• Question from Gregg Moskowitz (Mizuho Securities USA LLC): How will Savvy assets enhance Accelerated Application Management, and who do you compete with?
  Response: Savvy boosts rapid app discovery/visibility, while SailPoint adds deep governance and automated lifecycle provisioning; many rivals can connect for visibility but lack depth—SailPoint aims to be both deep and wide.