Summary
SentinelOne's FY2023 Q3, the quarter ended October 31, 2022, delivered another set of triple-digit growth numbers. Revenue rose 106% year over year to $115.3 million. Annualized recurring revenue also grew 106% to $487.4 million. Customer count topped 9,250, up about 55%, and the company added over 600 customers in the quarter. Customers with ARR over $100,000 grew 99% to 827. Dollar-based net retention rate was 134%. Management credited expansion of endpoints, additional modules, and subscription tier upgrades. International revenue represented 36% of total revenue and grew 124% year over year. Net new ARR was $49 million. Singularity Cloud was again the fastest-growing solution. The company said it secured three new major federal agencies and hosted its inaugural LABScon conference. Management also flagged a tougher demand backdrop. Enterprises are watching IT budgets, sales cycles are longer, and larger deals face more approval friction.
Profitability metrics improved even as losses grew in absolute terms. GAAP gross profit rose 108.4% to $74.3 million. Gross margin was 64.4%, up 0.8 percentage points from the prior-year quarter. Operating loss was -$104.1 million, and the loss widened 54.4%. Operating margin was -90.2%, up 30.0 percentage points. Net loss was -$98.9 million, and the loss widened 44.1%. Diluted net loss per share was -$0.35, and the loss widened 34.6%. On a non-GAAP basis, gross margin was 71% compared with 67%, and operating margin improved 26 percentage points year over year. Management said the quarter again met the Rule of 60, and it expects a sixth consecutive quarter of more than 25 percentage points of non-GAAP operating margin improvement.
Year-to-date figures show the same shape. Revenue was $296.1 million, up 112.8%. Gross profit was $191.7 million, up 134.5%. Net loss was -$285.0 million, and the loss widened 42.9%. Diluted net loss per share was -$1.03, and the loss narrowed 25.9%. Cash generation remains the weak spot. Operating cash flow was -$59.7 million for the quarter, down 247.1% year over year, and -$171.2 million for the nine months, down 90.2%. Capital expenditures were $0.73 million in the quarter, down 54.1%, and $4.83 million year to date, up 47.7%. Free cash flow, which the company reports separately from operating cash flow, was -$64.7 million in the quarter compared with -$20.7 million a year earlier. Deferred revenue was $354.4 million, up 71.3%, and remaining performance obligations were $517.4 million, up 94.9%.
Guidance covers the fourth quarter of fiscal 2023 and the full fiscal year 2023. For the fourth quarter, management guided to revenue growth of about 90% year over year and non-GAAP gross margin of about 72%. For the full fiscal year 2023, the outlook calls for revenue growth of 105% year over year and non-GAAP gross margin of 71.0% to 71.5%, an increase from prior guidance of 70.5% to 71%. The full-year non-GAAP operating margin range was also improved, reflecting a 6 percentage point improvement at the midpoint. Management said it expects the macro conditions that weighed on third-quarter growth to persist in the fourth quarter, and it is taking a more prudent approach to investment, streamlining teams and elevating leaders.
Risks listed in the filings include intense competition in cybersecurity, a history of losses, integration of the Attivo Networks acquisition, defects or vulnerabilities in the platform, managing rapid growth, COVID-19 effects, rising interest rates and inflation, and geopolitical uncertainty, including the conflict in Ukraine. The company also notes the risk of securities class action litigation. Liquidity looks comfortable: cash, cash equivalents and investments were $1.2 billion as of October 31, 2022, against an accumulated deficit of $906.7 million.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2023 | Q2 FY2023 | QoQ | Q3 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $115.3M | $102.5M | +12.5% | $56.0M | +105.9% |
| Gross profit | $74.3M | $66.2M | +12.2% | $35.7M | +108.4% |
| Gross margin | 64.4% | 64.6% | -0.2 pp | 63.7% | +0.8 pp |
| Research & development | $52.2M | $55.0M | -5.0% | $34.8M | +50.2% |
| Sales & marketing | $84.0M | $79.0M | +6.3% | $41.3M | +103.2% |
| General & administrative | $42.2M | $40.4M | +4.3% | $27.0M | +56.5% |
| Total operating expenses | $178.4M | $174.4M | +2.3% | $103.0M | +73.1% |
| Operating income (loss) | -$104.1M | -$108.2M | +3.8% | -$67.4M | -54.4% |
| Operating margin | -90.2% | -105.5% | +15.3 pp | -120.3% | +30.0 pp |
| Net income (loss) | -$98.9M | -$96.3M | -2.6% | -$68.6M | -44.1% |
| Net margin | -85.7% | -94.0% | +8.2 pp | -122.5% | +36.7 pp |
| Diluted EPS | -$0.35 | -$0.35 | ±$0.00 | -$0.26 | -$0.09 |
| Net retention rate | 134.0% | 137.0% | -3.0 pp | 130.0% | +4.0 pp |
Risks
MD&A and risk factors state that current macroeconomic conditions, including inflation and rising interest rates, have caused a lengthening of the sales cycle for some prospective customers that the company attributes to higher cost-consciousness around IT budgets, which could delay revenue and harm operating results.
The company faces intense competition in endpoint security from CrowdStrike, VMware, Trellix, Symantec, Microsoft and Palo Alto Networks; risk factors state competitive pressures may result in price reductions, fewer orders, reduced revenue and gross margin, increased net losses and loss of market share.
Channel partners generated 90% and 92% of revenue for the three months ended October 31, 2022 and 2021, respectively, and largest channel partner Exclusive Networks generated 18% of revenue in both periods; loss or underperformance of key partners could harm sales and operating results.
As a cybersecurity provider, the company faces particularly intense attack efforts; risk factors note state-supported and geopolitical-related cyberattacks may increase with Russia's invasion of Ukraine, and a breach or perceived incident could harm reputation, create regulatory exposure and reduce customer confidence.
MD&A reports net cash used in operating activities of $171.2 million for the nine months ended October 31, 2022, compared with $90.0 million in the prior-year period, and principal liquidity of $0.7 billion in cash, cash equivalents and short-term investments as of October 31, 2022, down from $1.7 billion as of January 31, 2022; the company may need additional equity or debt financing, causing dilution or restrictive terms.
The company is highly dependent on CEO Tomer Weingarten and other key employees and faces intense competition for cybersecurity personnel in the San Francisco Bay Area and Israel; failure to hire, retain and motivate qualified personnel could disrupt operations and growth.
The company closed the Attivo acquisition in May 2022 for $351.5 million in cash plus 6.0 million Class A shares, and risk factors detail integration, diversion of management, dilution and unanticipated liability risks from acquisitions and strategic investments.
SaaS KPIs
All quarters →Non-GAAP gross margin
Annualized recurring revenue (ARR)
Non-GAAP operating margin
Free cash flow
Net New ARR
Total customers
Customers Added
Dollar-Based Net Retention Rate
Customers with ARR over $100,000
Summary, forecast, risks and KPIs are extracted from SentinelOne, Inc.'s SEC filings for Q3 FY2023 (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.