SentinelOne Gears Up to Post Q1 Earnings: Buy, Sell or Hold the Stock?

SentinelOne is set to release its fiscal first-quarter 2026 earnings on May 28, with analysts anticipating EPS of $0.02 on revenues of $228 million, representing a 22.4% year-over-year increase; the company's Q4 2025 results showed strength with revenue up 29% to $225.5 million and net new ARR at $60 million. While the retirement of a legacy solution may create near-term ARR headwinds, SentinelOne's focus on AI-driven solutions and platform expansion, with over 40% of enterprise clients using multiple modules, positions it for continued growth, despite underperforming its industry peers over the last three months.

Analysis

SentinelOne is scheduled to report its first-quarter fiscal 2026 results on May 28, with consensus estimates anticipating earnings per share (EPS) of 2 cents and revenues of $228 million, indicating a 22.4% year-over-year growth. This follows a robust fiscal fourth quarter 2025 where revenue increased 29% year-over-year to $225.5 million, surpassing estimates, and net new Annual Recurring Revenue (ARR) reached $60 million, bringing total ARR to $920 million (a 27% year-over-year increase). International revenue was a strong contributor, surging 36% and constituting 37% of total quarterly revenues. The company also demonstrated strong gross margins and an operating margin beat of over 400 basis points in Q4, with EPS at 4 cents compared to a 2 cents loss in the prior year. For the upcoming Q1, SentinelOne guided revenues of approximately $228 million (22% YoY growth) and net new ARR in the low $30 million range, which includes an anticipated $5 million churn due to the retirement of a legacy deception solution. This strategic shift towards higher-margin, AI-driven offerings is expected to exert temporary pressure on ARR growth and net retention. The Q1 operating margin is guided near negative 2%, reflecting seasonal expenses and platform investments, while gross margin is expected to remain strong at around 79%. Despite these near-term pressures, the company's AI-driven solutions like Purple AI and AI SIEM, which secured over 300 deals in Q4, and strong platform adoption, with over 40% of large enterprise customers using three or more modules, are key growth drivers. However, SentinelOne's shares have underperformed recently, losing 2.8% over the past three months, contrasting with the Zacks Security industry's 8.3% rise and significant gains from peers like Okta (+38.7%) and CrowdStrike (+19.8%), though it performed better than Fortinet (-3.7%). The stock trades at a 32.5% discount from its 52-week high. From a valuation perspective, SentinelOne's forward 12-month price-to-sales ratio is 6.04X, which the article describes as higher than the sector’s 6.12X and a slight premium, though this ratio is below its own three-year average. The Zacks model does not conclusively predict an earnings beat, as SentinelOne has an Earnings ESP of 0.00%, despite carrying a Zacks Rank #3 (Hold). The overall outlook suggests a strategic transition phase, balancing short-term growth moderation with a focus on long-term scalability and profitability through AI and platform expansion, keeping its goal of surpassing $1 billion in revenues and ARR for fiscal 2026 intact.

Key Decisions for Investors

• Investors should closely scrutinize the upcoming Q1 fiscal 2026 net new ARR figure, particularly how it compares to the guided low $30 million range after accounting for the $5 million legacy product churn, to gauge the underlying strength of SentinelOne's core AI-driven offerings.
• Consider the recent share price underperformance and current valuation multiples against the company's demonstrated ability to grow revenue and ARR significantly, its strategic shift towards higher-margin AI solutions, and its clear path towards improving operating leverage.
• Monitor management's commentary on May 28 regarding the adoption rates of its Singularity platform modules, particularly the newer AI SIEM and Purple AI solutions, as sustained traction in these areas is critical for validating the long-term growth narrative, especially given the Zacks model does not predict an earnings beat.
• Evaluate SentinelOne's progress towards its fiscal 2026 targets of exceeding $1 billion in revenue and ARR, and its ability to maintain strong gross margins (guided around 79% for Q1) while improving operating margins, as key indicators of successful execution on its platform strategy.