Samsara IOT reported non-GAAP earnings of 7 cents per share in third-quarter fiscal 2025, beating the Zacks Consensus Estimate of 4 cents. The company registered earnings of 4 cents per share in the year-ago quarter.

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Revenues came in at $322 million, up 36% year over year. The figure beat the Zacks Consensus Estimate by 3.65%.

IOT’s shares have gained 65.2% compared with the Zacks Computer and Technology sector’s rise of 32.4% in the year-to-date period.

Considering impressive fiscal third-quarter performance, Samsara initiated a strong fiscal 2025 guidance for revenues and earnings. This is expected to boost share price momentum.

IOT’s Q3 Top-Line Details

IOT concluded the fiscal third quarter with Annual Recurring Revenues (ARR) of $1.34 billion, up 35% year over year. It added 170 customers with more than $100,000 in ARR and a record 100 customers with more than $1 million in ARR, underscoring the increasing adoption of its platform by large enterprises.

The number of customers with ARR surpassing $100,000 reached 2,303 and increased 38% year over year. The average ARR per $100,000-plus customer also increased to $318,000 from $307,000, which is notable.

The company achieved a dollar-based net retention rate of 115% for core customers and 120% for large customers, highlighting strong customer satisfaction and ongoing product adoption.

In the third quarter of fiscal 2025, Samsara made significant strides in expanding its product offerings, including the Asset Tag product, which had more than 100% quarter-over-quarter growth in Annual Contract Value (ACV).

New features such as video-based safety applications, telematics, and equipment monitoring were incorporated into customer solutions, leading to increased adoption and expansion opportunities.

In the third quarter of fiscal 2025, Samsara introduced Samsara Intelligence, which included tools like Samsara Assistant (a generative AI tool) and Intelligent Experiences to make smarter decisions. This AI-based product suite, trained on the company’s vast data set, was pivotal in driving operational improvements for its customers.

The expansion of IoT into international markets has been a key catalyst. This led to a quarterly record, with 17% of new ACV generated from international regions, particularly due to strong performance in Mexico and Europe.

Samsara launched new product features tailored to local markets, such as Low Bridge Strikes and Electronic Brake Performance Monitoring System in Europe and Engine Immobilizer 2.0 in Mexico. These features resonated well with local customers, leading to increased engagement and product adoption.

IOT’s Operating Details

In the reported quarter, non-GAAP gross profit rose 39.5% year over year to $249.8 million. The gross margin expanded 220 basis points to 78%.

Total operating expenses increased 28.3% year over year to $219.5 million, mainly due to higher research and development (up 26.7% year over year), sales and marketing (up 31.1% year over year) and general and administrative costs (rising 29.5% year over year).

Operating income was $33.9 million compared with $12.7 million reported in the year-ago quarter.

IOT’s Balance Sheet & Cash Flow Details

As of Nov. 2, 2024, cash and cash equivalents were $160.3 million compared with $159.2 million as of Aug. 3, 2024.

In the fiscal third quarter, the company reported cash provided by operating activities of $36 million compared with $18.1 million in the prior quarter.

Adjusted free cash flow was $31.2 million compared with $13.1 million reported in the previous quarter. Adjusted free cash flow margin for the fiscal third quarter was 10%.

IOT Raises Fiscal 2025 Guidance

For the fourth quarter of fiscal 2025, Samsara expects revenues between $334 million and $336 million, representing 21-22% year-over-year growth.

The non-GAAP operating margin is anticipated to be 9%.

Non-GAAP earnings for the fiscal fourth quarter are expected to be between 7 and 8 cents per share.

For fiscal 2025, Samsara expects revenues between $1.237 billion and $1.239 billion, representing 32% year-over-year growth.

The non-GAAP operating margin is anticipated to be 7%.

Non-GAAP earnings for the fiscal 2025 are expected to be between 22 and 23 cents per share.

IOT’s Zacks Rank & Stocks to Consider

Currently, Samsara has a Zacks Rank #3 (Hold).

C3.ai AI, Broadcom AVGO and Ciena CIEN are some better-ranked stocks in the broader sector that investors can consider. 

AI, Broadcom and Ciena each carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

C3.ai shares have gained 30.6% year to date. AI is scheduled to release second-quarter fiscal 2025 results on Dec. 9.

Broadcom shares have gained 52.8% year to date. AVGO is scheduled to release fourth-quarter 2024 results on Dec. 12.

Ciena shares have gained 60.5% in the year-to-date period. Ciena is scheduled to release fiscal fourth-quarter 2024 results on Dec. 12.

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