• Revenue (Q3 FY2025): Approximately $252 million, up 16% year-over-year.
• Diluted Earnings Per Share (Q3 FY2025): $0.94, up 29% from the previous year.
• Revenue (First 9 Months FY2025): Approximately $618 million, down 1% year-over-year.
• Diluted Earnings Per Share (First 9 Months FY2025): $1.70, up 3% year-over-year.
• Service Assurance Revenue (Q3 FY2025): Increased approximately 9%.
• Service Assurance Revenue (First 9 Months FY2025): Down approximately 5.5%.
• Cyber Security Revenue (Q3 FY2025): Increased approximately 29%.
• Cyber Security Revenue (First 9 Months FY2025): Increased approximately 7.4%.
• Gross Profit Margin (Q3 FY2025): 82.8%, up 1 percentage point.
• Operating Profit Margin (Q3 FY2025): 35.6%, compared to 29% in the same quarter last year.
• Free Cash Flow (Q3 FY2025): $39.6 million.
• Cash and Investments (End of Q3 FY2025): $427.9 million.
• Debt (End of Q3 FY2025): $75 million outstanding on a $600 million revolving credit facility.
• Days Sales Outstanding (DSO) (End of Q3 FY2025): 75 days, down from 90 days in the prior year.
• Fiscal Year 2025 Revenue Outlook: $810 million to $820 million.
• Fiscal Year 2025 Non-GAAP EPS Outlook: $2.15 to $2.25.

• Warning! GuruFocus has detected 5 Warning Sign with NTCT.

Release Date: January 30, 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 expectations in Q3 fiscal year 2025 with strong performance across both Cyber Security and Service Assurance product lines.
• Revenue for the third quarter was approximately $252 million, up 16% compared to the prior year period.
• Diluted earnings per share for the third quarter increased by approximately 29% to $0.94.
• Cyber Security revenue increased by approximately 29% in the third quarter, indicating strong growth potential in this segment.
• The company has increased visibility and confidence in achieving its full fiscal year 2025 financial objectives, leading to an updated fiscal year outlook.

Negative Points

• Revenue for the first nine months of fiscal year 2025 was down approximately 1% year over year, reflecting challenges in certain areas.
• Service Assurance revenue for the first nine months decreased by approximately 5%, indicating some struggles in this segment.
• The company experienced an unrealized loss on a foreign investment of approximately $0.07 per share in the third quarter.
• Service Provider customer vertical revenue decreased by 7.2% during the first nine months of fiscal year 2025.
• The company is still in the early stages of evaluating opportunities in the fixed wireless area, with no significant success reported yet.

Q & A Highlights

Q: Could you provide more detail on the unexpected pull-in of orders from service providers and your views on the spending environment? A: Anil Singhal, Chairman of the Board, President, and CEO, explained that the pull-in was due to service providers having more budget available this year, leading to orders being placed earlier than anticipated. He noted that while the business has stabilized, there is significant activity in 5G cloud areas, which could drive future spending.

Q: Can you update us on the emerging opportunity in fixed wireless? A: Anil Singhal stated that while it is still early, they have ongoing evaluations with several customers. The potential spending in this area could be substantial due to traffic volume, and they are exploring creative solutions to manage it.

Q: Are you seeing a new upswing in service provider spending, and what are the new areas of investment? A: Anil Singhal mentioned that while the business has stabilized, growth is expected in areas like cybersecurity, AI, fixed wireless, and 5G slicing. Traditional mobile service assurance may not see significant growth, but new areas present opportunities.

Q: How did Cyber Security products perform in Q3, and what is the outlook for future growth? A: Jean Bua, CFO, noted that service provider cybersecurity grew in the mid-20s percentage-wise, while enterprise cybersecurity grew in the mid-30s. Anil Singhal added that while current growth is around 7%, they expect better performance next year, particularly from new products like Omni Cyber Security.

Q: Can you sustain the current growth rates in cybersecurity? A: Anil Singhal expressed optimism about sustaining and potentially improving growth rates, driven by new product introductions and increased interest in cybersecurity solutions. He indicated that more detailed guidance would be provided in the next quarter.

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