SentinelOne's Q2 2026 Earnings Call: Contradictions Uncovered in ARR, Revenue Growth, and Strategic Partnerships

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%
• Operating Margin: 2%, improving by more than 500 bps YOY

Guidance:

• Q3 revenue expected ~$256M (+22% YOY)
• FY26 revenue outlook raised to $998M–$1.02B (~$1.0B midpoint; +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 and first full year of operating profit in FY26
• FY26 free cash flow positive and a few points higher than operating margin
• Prompt Security deal to close in Q3; minimal FY26 revenue/ARR, ~80 bps FY26 operating margin headwind; FX headwinds included

Business Commentary:

• Revenue and ARR Growth:
• SentinelOne, Inc. reported a 24% year-on-year growth in total ARR, surpassing $1 billion, and achieved record second quarter net new ARR with over 20% growth.

• The growth was driven by strong execution, business momentum, and rising demand for its AI-powered cybersecurity solutions, along with contributions from new customer acquisitions and existing customer expansions.

• Platform Adoption and Innovation:

• Approximately half of the company's quarterly bookings came from non-endpoint solutions, highlighting the expanding value of its broader platform.

• The growth in platform solutions, including AI, data, and cloud solutions, was driven by strong adoption by new and existing customers, demonstrating the value and differentiation of the Singularity platform.

• Strategic Acquisitions:

• SentinelOne acquired Prompt Security for approximately $180 million, enhancing the Singularity platform's ability to secure generative AI in enterprises.

• The acquisition was driven by the urgent need to address the risks and exposures introduced by widespread GenAI adoption and the recognition of AI's transformative impact on cybersecurity.

• Operating Leverage and Financial Performance:

• The company achieved an industry-leading gross margin of 79% and operating profitability of 2%, with a net income margin increasing to 5% in Q2.
• The strong financial performance was a result of disciplined pricing strategies, healthy platform unit economics, and a focus on driving operating leverage alongside top-tier growth.

Sentiment Analysis:

• “Total ARR grew 24% and crossed $1 billion.” “We’re raising our full year revenue outlook.” “Revenue grew 22% year-over-year to $242 million.” “We maintained an industry-leading gross margin of 79%.” “We achieved operating profitability of 2%... operating margin improving by more than 500 basis points year-over-year.” “Fifth consecutive quarter of positive net income margin… 5% in Q2.”

Q&A:

• Question from John Stephen DiFucci (Guggenheim): Is the Singularity platform driving not just larger initial deals but also broader expansion within the base? Any metrics to illustrate this?
  Response: Growth was broad-based with an even split between new logos and expansions; Purple AI and Data are fastest-growing, and Flex is enabling larger, multi-solution lands and expansions.

• Question from Robbie David Owens (Piper Sandler): Any guardrails for Q3 net new ARR given variability in large deals?
  Response: They don’t guide ARR, but the updated revenue outlook implies an improved view of net new ARR for the full year.

• Question from Brad Alan Zelnick (Deutsche Bank): How new is Flex versus prior practices, and how do Flex deals flow through ARR and revenue?
  Response: Flex is a new, flexible licensing model driving larger, multi-product deals (including an 8-figure win); financially, ARR is TCV divided by duration and revenue is recognized ratably.

• Question from Joseph Anthony Gallo (Jefferies): When does AI security translate into revenue, given Prompt's immaterial near-term ARR?
  Response: GenAI usage is surging; Prompt addresses governance and DLP-like controls at the endpoint, expected to be a significant contributor over time.

• Question from Rudy Grayson Kessinger (D.A. Davidson): Why not raise revenue more after a very strong Q2?
  Response: Second-half outlook improved, but guidance remains prudent due to macro, federal, and large-deal timing considerations.

• Question from Michael Joseph Cikos (Needham): What primarily drove the net new ARR upside this quarter?
  Response: Upside was broad-based: strong expansions and new logos, triple-digit growth in Purple AI, record Data contribution, and larger deal sizes aided by Flex.

• Question from Brian Lee Essex (JPMorgan): How is the SIEM market evolving between stored/queryed data vs real-time streaming?
  Response: Enterprises want control of data and real-time processing; machine-speed attacks require real-time ingestion/analytics, 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 duration relatively stable.

• Question from Shaul Eyal (TD Cowen): Long-term revenue uplift potential from Flex and pipeline health?
  Response: Early days, but Flex should boost deal sizes, duration, and platform adoption; pipeline is very healthy and growing.

• Question from Gabriela Borges (Goldman Sachs): Why be more prudent on the back-half guide versus 90 days ago despite ARR beat?
  Response: They raised the second-half outlook but remain cautious due to macro, federal, and large-deal timing variability.