Summary
SentinelOne grew revenue 121.3% in its fiscal second quarter, to $45.75 million from $20.67 million a year earlier. Results for the six months ended July 31, 2021 tell the same story, with revenue of $83.14 million, up 115.2% from the prior-year period. Annualized recurring revenue reached $198.0 million as of July 31, 2021, up 127% year over year, an acceleration from the 116% growth reported in the prior quarter. That metric matters more than quarterly revenue for a subscription security vendor. Net new ARR was $37 million, and Scalyr, the data platform acquired in February 2021, contributed about $10 million of it. Excluding that deal, organic ARR more than doubled.
Customer momentum held up. The company ended the quarter with over 5,400 customers, up more than 75% year over year, and added over 600 of them sequentially. Customers with ARR above $100,000 grew 140% year over year to 348, up from 145 a year earlier, a sign that larger enterprises are buying. Dollar-based net retention hit a record 129%, against 121% a year ago, while gross retention held at 97%. Growth in the IoT, cloud, and data modules ran at 6X year over year and produced more than 10% of new business. International markets accounted for 32% of revenue and grew 147% year over year.
Profitability metrics moved the other way. Gross profit rose 105.3% to $26.96 million, yet gross margin fell to 58.9% from 63.5%. Cloud infrastructure spending tied to fast XDR adoption explains much of the 4.6 percentage point decline, and management said renegotiated hosting contracts and processing efficiency gains lifted margin from the prior quarter. The GAAP operating loss widened to $67.16 million from $22.56 million, and operating margin slid to -146.8% from -109.1%. Stock-based compensation and headcount growth, not the core subscription economics, drive most of that gap. On a non-GAAP basis the loss from operations was $45.0 million, and non-GAAP operating margin improved both year over year and quarter over quarter. The GAAP net loss widened to $68.16 million from $22.94 million. Diluted net loss per share was -$0.57, narrower than -$0.67 a year earlier, a direction that flips on a year-to-date basis, where the loss per share widened to -$1.59 from -$1.45.
Cash generation remains negative. Operating cash flow was -$41.99 million in the quarter and -$72.79 million for the six months ended July 31, 2021, compared with -$25.51 million in the same period last year. Capital expenditures were $0.90 million in the quarter, reflecting purchases of property and equipment. Free cash flow, a non-GAAP measure, was -$44.7 million for the quarter. The July IPO and concurrent private placement brought in $1.4 billion in net proceeds, which funds the current burn for a long while. Deferred revenue of $184.60 million and remaining performance obligations of $219.10 million show how much contracted work sits behind reported revenue.
Guidance for the third quarter of fiscal 2022 implies revenue growth of 100% to 104% year over year. For the full fiscal year 2022, management continues to expect revenue growth over 100% year over year. Non-GAAP gross margin guidance is 58-59% for the third quarter of fiscal 2022 and 58-60% for the full fiscal year 2022, with the third quarter expected to stay well above the 53% reported in the first quarter of fiscal 2022. The company also issued non-GAAP operating margin guidance for both periods, excluding stock-based compensation and amortization of acquired intangibles. It did not provide comparable GAAP measures, saying a reconciliation was not available without unreasonable effort.
Two risks deserve attention. Management plans to move existing customers onto the Scalyr data backend through the second half, which should create duplicative storage and processing costs before any efficiency payoff arrives. Competition in endpoint security is intense, the company has a limited operating history and a history of losses, and spending is scaling fast as public-company costs land. The IPO lock-up also unwinds in stages: an early window opens September 28, 2021, letting certain employees and former employees sell up to 15% of their shares, with the rest unlocking after third-quarter results. Management also flagged the possibility of releasing a valuation allowance against its Israel deferred tax assets within the next several quarters, which would produce a material income tax benefit.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2022 | Q1 FY2022 | QoQ | Q2 FY2021 | YoY |
|---|---|---|---|---|---|
| Revenue | $45.8M | — | — | — | — |
| Gross profit | $27.0M | — | — | — | — |
| Gross margin | 58.9% | — | — | — | — |
| Research & development | $31.0M | — | — | — | — |
| Sales & marketing | $41.0M | — | — | — | — |
| General & administrative | $22.1M | — | — | — | — |
| Total operating expenses | $94.1M | — | — | — | — |
| Operating income (loss) | -$67.2M | — | — | — | — |
| Operating margin | -146.8% | — | — | — | — |
| Net income (loss) | -$68.2M | — | — | — | — |
| Net margin | -149.0% | — | — | — | — |
| Diluted EPS | -$0.57 | — | — | — | — |
| Net retention rate | 129.0% | — | — | — | — |
Risks
SentinelOne faces intense competition from CrowdStrike, VMware, McAfee, Symantec, Microsoft, and Palo Alto Networks; competitors may bundle or lower prices, leading to price reductions, reduced gross margin, increased net losses, and loss of market share.
The company has incurred net losses in all periods since inception, and net loss widened to $68.2 million in FY2022 Q2 from $22.9 million in FY2021 Q2 and to $130.8 million in FY2022 year to date from $49.6 million in FY2021 year to date; operating expenses are expected to increase.
Gross margin decreased to 58.9% in FY2022 Q2 from 63.5% in FY2021 Q2, down 4.6 percentage points, and MD&A attributes the decline primarily to cloud infrastructure expansion, support personnel growth, and higher stock-based compensation; continued cloud costs could pressure profitability.
Channel partners generated a substantial majority of revenue, and Exclusive Networks represented 19% of revenue for FY2022 Q2 and SHI International represented 9% for FY2022 Q2 versus 13% for FY2021 Q2; partner agreements are non-exclusive, lack set terms, and may be terminated at any time.
The platform is hosted through AWS, and outages, capacity constraints, AWS policy changes, or termination could interrupt service, harm customer relationships, and require costly migration; hosting costs will increase as the customer base grows.
As a cybersecurity provider, SentinelOne is a target and has faced and will continue to face attacks; an actual or perceived breach or platform failure to detect threats could harm reputation, create liability, and trigger regulatory fines under CCPA and GDPR of up to €20 million or 4% of annual global turnover.
The COVID-19 pandemic and uncertain macroeconomic conditions could reduce information technology spending, lengthen sales cycles, and hurt collections; MD&A notes a modest adverse impact including lengthening sales cycles for some prospective customers, while positive pandemic-driven demand may slow as offices reopen.
Large enterprise and government sales cycles are long and unpredictable, and MD&A says COVID-19 has lengthened the sales cycle for some prospective customers; ratable revenue recognition means downturns in new sales or renewals may not be immediately reflected.
Success depends on CEO Tomer Weingarten and other key employees, and competition for cybersecurity talent is intense in the San Francisco Bay Area and Israel; headcount grew from over 540 employees as of July 31, 2020 to over 980 employees as of July 31, 2021, increasing retention and integration challenges.
Rapid revenue and headcount growth strains management, operational, and financial systems; if the company cannot scale processes and controls efficiently, deployments may be delayed, costs may rise, and demand may be reduced.
International expansion subjects SentinelOne to GDPR and U.K. GDPR data processing obligations, evolving tax rules such as OECD BEPS, foreign currency fluctuations, and local compliance risks; these could increase compliance costs and the global effective tax rate.
Dual class common stock gives Class B holders 20 votes per share, with Class B holders holding approximately 99.1% of voting power and directors, executives, and 5% holders holding approximately 64.2% as of July 31, 2021, limiting other stockholders' ability to influence corporate matters.
Lock-up and market standoff agreements begin to expire starting September 28, 2021, with approximately 40 million Class B shares and convertible securities potentially eligible for sale and 4,230,000 Class B shares pledged by CEO Tomer Weingarten as collateral, which could pressure the stock price.
SentinelOne offers a ransomware warranty of $1,000 per affected endpoint capped at $1 million per 12 months; if insurance does not cover claims or customers misuse the warranty, the company could incur significant expense and reputational harm.
SaaS KPIs
All quarters →Non-GAAP gross margin
Annualized recurring revenue (ARR)
Customers with ARR of $100,000 or more
Non-GAAP operating margin
Free cash flow
Net New ARR
Total customers
Dollar-Based Net Retention Rate (NRR)
Customers Added
Summary, forecast, risks and KPIs are extracted from SentinelOne, Inc.'s SEC filings for Q2 FY2022 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 2, 2026.