SentinelOne revenue rises after CrowdStrike shutdown. Is now a golden opportunity to buy stocks?

SentinelOne (NYSE: S) looks like one of the best-positioned companies to take advantage of the recent global IT disruption caused by rival cybersecurity vendor CrowdStrike (NASDAQ: CRWD).

On August 27, SentinelOne reported its fiscal second quarter 2025 results, showing revenue growth and a transition to profitability on an adjusted earnings basis. With the opportunities ahead of the company, investors should take a serious look at its stock.

Strong revenue growth continues

In the fiscal quarter that ended July 31, SentinelOne’s revenue rose 33 percent to $198.9 million, beating estimates of $197 million. The company made strong progress in international markets, where revenue grew by 36%.

Its annual recurring revenue (ARR) — the annual value of customer subscription and consumption-based contracts — rose 32% to $806 million. It added $44 million in new ARR in the quarter. The number of customers delivering ARR of $100,000 or more increased 24% to 1,233 at the end of the quarter.

SentinelOne said new products such as Data, Purple AI and Cloud were gaining traction. On the earnings call, management noted particular strength in Purple AI, saying it saw a “double-digit attachment rate for PurpleAl across all eligible endpoints sold in the second quarter.” She highlighted this new offering, saying it leads to 80 percent faster threat hunting and investigations.

Gross margin showed a strong improvement, reaching 75% from 70% a year earlier. Its adjusted gross margin, which excludes stock-based compensation expense, rose from 77% to 80%.

In terms of profitability, SentinelOne posted an adjusted profit of $3.5 million, compared to a loss of $24.6 million in the year-ago period. Operating cash flow was $2.3 million, while free cash flow was negative $5.5 million. The company ended the quarter with more than $1.1 billion in net cash and short- and long-term investments on the books.

Looking ahead, management estimated that fiscal third quarter revenue would be approximately $209.5 million, which would represent an increase of approximately 27.5%. An adjusted gross margin of 79% is sought.

For the fiscal year, SentinelOne expects revenue to grow 31% to about $815 million. That’s up from its previous revenue forecast of $808 million to $815 million. It guided for an adjusted gross margin of 79%, compared to its previous outlook of 78% to 79%.

Management indicated that the company is prepared to take advantage of the fallout from CrowdStrike’s IT outage and said that interest in its platform has increased as a result. In the letter to shareholders, he wrote: “Some of the world’s largest enterprises are now evaluating and appreciating the scale and superiority of the Singularity platform over competitive offerings – and are pleasantly surprised.”

The story continues

Is this an opportunity to buy shares?

SentinelOne’s stock has rallied following CrowdStrike’s misstep, but it still trades at quite a discount to rivals like the aforementioned CrowdStrike and Palo Alto Networks (NASDAQ: PANW) based on forward selling price (P/S).

Some of that gap can be attributed to SentinelOne’s nascent profitability, but the company appears to have reached an inflection point and should see strong earnings growth in the coming years. At the same time, it is much smaller than CrowdStrike and Palo Alto. It wouldn’t take a lot of incremental business gains for its earnings to have a big impact on the company’s financials.

SentinelOne seems like the best-positioned company to benefit from CrowdStrike’s disruption. At the same time, its shares are attractively priced relative to peers, and the top line saw strong growth even before the break. As such, I would take this opportunity and be a buyer of this innovative name in cyber security.

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Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends CrowdStrike and Palo Alto Networks. The Motley Fool has a disclosure policy.

SentinelOne revenue rises after CrowdStrike shutdown. Is now a golden opportunity to buy stocks? was originally published by The Motley Fool