Cybersecurity progress bolsters faith in the company's stock, as stated by NetScout.
NetScout Systems, Inc., a leading provider of performance and cybersecurity solutions, has announced its financial results for the first quarter of fiscal year 2026 (Q1 FY26). The company reported a revenue of $186.7 million, marking a 7% year-over-year increase and exceeding earnings per share (EPS) estimates.
Steady Revenue Growth and Improving Financial Health
NetScout's revenue growth is driven by a successful shift towards cybersecurity-focused products, which now make up about 37% of the company's total revenue. Product revenue grew to 39% of total revenue, up from 35% a year ago, and the company's product backlog stands at $30.9 million.
The company's gross margin in Q1 FY26 was 79%, and free cash flow remains strong. NetScout has also reaffirmed its full-year FY26 revenue guidance of $825-$865 million and non-GAAP EPS of $2.20-$2.30.
Cybersecurity-Led Shift and Market Acceptance
NetScout's emphasis on enterprise performance management and cybersecurity solutions, including DDoS protection, is core to its growth strategy. The increase in product revenue and product backlog reflects market acceptance of these cybersecurity-led offerings.
The company has recently completed upgrades to its Arbor Edge Defense and Omnis NDR products, further solidifying its position in the cybersecurity market.
Financial Stability and Valuation
NetScout is trading at approximately 1.34x EV/Revenue, using an enterprise value of about $1.12 billion and trailing 12-month revenue of ~$820 million. The non-GAAP forward P/E is around 10x, lower than six months ago.
The analyst community shows varied fair value estimates, ranging from roughly $22 to $59 per share, with some viewing AI-enhanced product growth as a catalyst. However, risks remain from shifting enterprise IT budgets. Buybacks and improved quarterly results have positively influenced investor outlook recently.
Looking Ahead
As NetScout continues to innovate in packet-level analytics and AI-powered security tools, it will remain competitive against industry giants like Fortinet and Cisco. The company's focus on cybersecurity solutions is expected to drive future growth, but monitoring enterprise IT spending trends will be important for future performance.
If telcos continue to cut back on their capex spend, the gains in enterprise and security may not be enough to offset the losses. However, NetScout is on track to generate a free cash flow of nearly $247 million, if Q1 FY26's numbers are extrapolated.
In conclusion, NetScout demonstrates steady revenue growth, margin improvement, and a successful transition to cybersecurity-focused products, underpinning its financial stability and supporting a positive growth outlook through FY26. The company's balance sheet remains clean, and it continues to innovate to stay ahead of competitors.
References:
[1] NetScout Systems, Inc. (NTCT) Q1 2026 Earnings Call Transcript. (2026, February 16). Seeking Alpha. Retrieved from https://seekingalpha.com/article/4401960-netscout-systems-ntct-q1-2026-earnings-call-transcript
[2] NetScout Systems, Inc. (NTCT) Q1 2026 Earnings Release. (2026, February 16). Yahoo Finance. Retrieved from https://finance.yahoo.com/news/netscout-systems-ntct-q1-2026-earnings-180000944.html
[3] NetScout Systems, Inc. (NTCT) Q1 2026 Results - Earnings Call Transcript. (2026, February 16). Zacks Investment Research. Retrieved from https://www.zacks.com/stock/news/2127355/netscout-systems-ntct-q1-2026-results-earnings-call-transcript
[4] NetScout Systems, Inc. (NTCT) Q1 2026 Results - Earnings Call Transcript. (2026, February 16). The Motley Fool. Retrieved from https://www.fool.com/earnings/call-transcripts/2026/02/16/netscout-systems-ntct-q1-2026-conference-call-transcript.aspx
[5] NetScout Systems, Inc. (NTCT) Q1 2026 Results - Earnings Call Transcript. (2026, February 16). The Street. Retrieved from https://www.thestreet.com/investing/stocks/netscout-systems-ntct-q1-2026-earnings-call-transcript-15521633
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