Release Date: May 08, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

NetScout Systems Inc (NASDAQ:NTCT) exceeded fourth-quarter revenue expectations, driven by strong performance in its cybersecurity product line. The company achieved non-GAAP EPS growth for fiscal year 2025 due to effective cost management initiatives. NetScout Systems Inc (NASDAQ:NTCT) reported a strong financial foundation and strategic direction entering fiscal year 2026, positioning it well for long-term growth. The cybersecurity offerings delivered nearly 7% year-over-year revenue growth, driven by strong momentum within the enterprise customer vertical. The company maintained high gross profit margins and improved operating profit margins due to cost reduction actions.

Negative Points

Service assurance revenue declined approximately 4% year-over-year, partly due to the divestiture of the test optimization business. Non-GAAP diluted earnings per share for the fourth quarter decreased by approximately 5% year-over-year. The service provider customer vertical revenue decreased by 10.1% during fiscal year 2025. There is ongoing economic uncertainty that may influence customer behavior, which the company is actively monitoring. The company faces challenges with delayed sales cycles and potential timing issues with customer orders.

Q & A Highlights

Warning! GuruFocus has detected 4 Warning Sign with NTCT.

Q: Could you elaborate on how tariffs might impact your business and if your guidance accounts for any macroeconomic uncertainties? A: Currently, we haven't seen significant impacts from tariffs, and our guidance does account for some uncertainties. We are observing some delayed sales cycles, but our guidance range covers these uncertainties. We will continue to monitor customer sentiments closely, especially during upcoming conferences in Europe and Asia. - Anil Singhal, CEO

Q: With strong momentum in cybersecurity, what are your expectations for next year, and which products are customers most excited about? A: We expect continued momentum in cybersecurity, particularly with our adaptive DDoS and broader cybersecurity solutions. Our service assurance business is also evolving into the broader observability market, which presents significant opportunities. We anticipate growth in both service assurance and cybersecurity markets over the next few years. - Anil Singhal, CEO

Q: Have you seen any pull-forward in demand due to tariffs, and how does this reflect in your product backlog? A: We haven't observed any pull-forward due to tariffs. Historically, during post-COVID, when hardware components were scarce, there was a shift towards software. We might see similar trends if tariffs impact hardware components, potentially benefiting software growth. - Jean Bua, CFO

Story Continues

Q: Are customers showing more interest in software-only solutions, or is demand for traditional systems still strong? A: While our solutions require hardware, we've unbundled them to push software solutions, maintaining high margins. Most customers prefer our software solutions due to better pricing and discounts, and we haven't seen significant changes due to tariffs. - Anil Singhal, CEO

Q: Has there been any impact on your government and defense business from geopolitical tensions, and how does this factor into your fiscal '26 guidance? A: There was a refresh cycle in our product line contributing to last year's numbers, and we expect more. However, we haven't seen any significant impact yet, but we are monitoring the situation closely. - Anil Singhal, CEO

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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