SentinelOne's Q2 2026: Contradictions Emerge on Macroeconomic Impact, AI-Driven Deals, and Revenue Prudence

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

Date of Call: August 28, 2025

Financials Results

• Revenue: $242M, up 22% YOY
• Gross Margin: 79%, maintained at industry-leading level (no prior-year figure provided)
• Operating Margin: 2%, improved by >500 bps YOY

Guidance:

• Q3 revenue expected ~ $256M, up 22% YOY
• FY26 revenue outlook: $998M–$1.02B (midpoint $1.0B), up 22% YOY
• Q3 gross margin ~78.5%
• FY26 gross margin 78.5%–79%
• Q3 operating margin ~4% (~+900 bps YOY)
• FY26 operating margin ~3% (~+600 bps YOY)
• Expect sustained quarterly operating profitability; first full year of operating profit in FY26
• Positive FY26 free cash flow expected, a few points higher than operating margin
• Prompt Security deal expected to close in Q3; immaterial FY26 ARR/revenue; ~80 bps FY26 operating margin headwind; FX a headwind

Business Commentary:

• Revenue and ARR Growth:
• SentinelOne reported a 22% year-over-year increase in revenue to $242 million in Q2 2026, with total ARR crossing $1 billion, marking a significant milestone.

• The growth was driven by broad-based momentum in new customer acquisition and platform adoption by existing customers.

• Endpoint and Platform Solution Growth:

• Approximately half of SentinelOne's quarterly bookings originated from non-endpoint solutions, with Purple AI achieving record momentum, growing triple digits.

• The expansion in platform solutions, particularly in AI, data, and cloud, along with strong endpoint growth, contributed to the overall performance.

• Innovation and Market Expansion:

• The acquisition of Prompt Security introduced a new layer for securing generative AI in real-time, enhancing the Singularity platform's value.

• This move is aligned with companies' urgent demand for visibility, control, and governance in AI usage, opening a new growth frontier for SentinelOne.

• Strong Operating Profitability and Margin Expansion:

• SentinelOne achieved operating profitability of 2% in Q2, with an operating margin improvement of more than 500 basis points year-over-year.
• The company maintained a gross margin of 79%, reflecting healthy pricing and platform unit economics, which support continued investment in services and support.

Sentiment Analysis:

• ARR grew 24% to surpass $1B; Q2 revenue up 22% to $242M; net new ARR of $53M exceeded expectations; gross margin 79% and operating margin reached 2% with >500 bps YOY improvement; five consecutive quarters of positive net income margin (5%); raised full-year revenue outlook while maintaining prudence given macro.

Q&A:

• Question from John Stephen DiFucci (Guggenheim): Is platform adoption driving expansions with existing customers beyond larger initial deals? Any metrics to show Singularity traction?
  Response: Growth was evenly split between new logos and expansions; Purple AI and Data are fastest-growing, with Flex enabling larger, broader platform deals.

• Question from Robbie David Owens (Piper Sandler): Any guardrails for Q3 net new ARR given variability in large deals?
  Response: No formal ARR guidance, but the raised revenue outlook implies a better full-year net new ARR view.

• Question from Brad Alan Zelnick (Deutsche Bank): How new is Flex versus prior practices, and how does a Flex deal impact ARR and revenue?
  Response: Flex is a new unified licensing model driving broader adoption and early 8-figure wins; accounting mirrors other ARR—TCV divided by duration with ratable revenue.

• Question from Joseph Anthony Gallo (Jefferies): When does AI security (Prompt) translate into revenue, and how should we think about the ramp?
  Response: GenAI governance demand is surging; Prompt adds endpoint-centric guardrails—immaterial in FY26 but expected to be a meaningful contributor over time.

• Question from Rudy Grayson Kessinger (D.A. Davidson): Why not raise full-year revenue more after a very strong Q2?
  Response: They raised H2 revenue but remain prudent due to macro and large-deal timing variability.

• Question from Michael Joseph Cikos (Needham): What most drove the net new ARR upside—can you rank contributors?
  Response: Upside was broad-based: strong expansion and new logos, triple-digit Purple AI growth, record Data bookings, and Flex enabling larger multiproduct deals.

• Question from Shrenik Kothari (Baird): Update on non-endpoint GTM ramp, enablement, and comp with Flex?
  Response: Sales enablement and platform motion improved; Flex simplifies selling and accelerates multiproduct adoption.

• Question from Brian Lee Essex (JPMorgan): How is the AI SIEM market evolving between stored/query data vs real-time streaming?
  Response: Enterprises want data control and real-time processing; streaming ingestion is essential to counter AI-driven attacks, an area where SentinelOne leads.

• Question from Ittai Kidron (Oppenheimer): Update on U.S. vs international mix and RPO duration?
  Response: International was 38% of revenue (up Q/Q); RPO grew 26% with relatively stable duration.

• Question from Shaul Eyal (TD Cowen): Long-term revenue uplift from Flex and pipeline health?
  Response: Flex should lift deal size, duration, and platform adoption; pipeline is healthy and growing.

• Question from Roger Foley Boyd (UBS): Update on the Lenovo partnership and contribution assumptions?
  Response: It’s on track and contributing as expected; no specific deal details provided.

• Question from Yun Suk Kim (Loop Capital): Does Flex improve deal visibility or spur early renewals?
  Response: Flex streamlines sales and improves velocity; no push for unnatural early renewals—paced to customer needs.

• Question from Jonathan Frank Ho (William Blair): What drives Singularity Cloud success—runtime focus and architecture?
  Response: They began with runtime protection and now offer broad CNAPP unified with EDR, data lake, and Purple AI, creating compounded customer value.

• Question from Gabriela Borges (Goldman Sachs): Why more prudence on H2 guide versus 90 days ago despite ARR beat?
  Response: H2 guidance improved, but prudence reflects macro, large-deal timing, and federal considerations.

• Question from Trevor James Walsh (Citizens JMP): Who buys AI security—SOC, cloud, or new personas?
  Response: Two buyers: endpoint/DLP teams for employee GenAI use and cloud/AI teams for model runtime—both align with existing relationships.