Date: 2026-04-06 Quarter: Q4 FY25 (company Q4 FY2026, ended January 31, 2026; reported March 12, 2026) Market cap: ~4.53B|EV: 3.76B | EV/Run-Rate Rev: 3.5x | Revenue growth: 20.3% YoY
I sold this company at $14 in June 2023 and called the earnings call "an absolute shambles." The ARR misstatement, the miss-and-lower, the shell-shocked management tone — all of it warranted the exit. Three years later, Tomer Weingarten has rebuilt credibility: 8/8 guidance commitments met in FY26, $1B revenue crossed, first profitable fiscal year, and a record bookings quarter. The numbers have earned a second look. But 20% revenue growth is not what I invest in. The question is whether the leading indicators — record $64M NNA, record 95 enterprise customer adds, non-endpoint crossing 50% of bookings — are signalling a re-acceleration that the revenue line hasn't reflected yet. Verdict: Not investable today at 20% growth, but the closest it's been since I sold. Two more quarters of $60M+ NNA and stable gross margins would change the calculus.
| QoQ % | FY22 | FY23 | FY24 | FY25 | Trend |
|---|---|---|---|---|---|
| Q1 | — | 5.8% | 7.0% | 1.6% | Deteriorating |
| Q2 | 30.9% | 12.0% | 6.7% | 5.8% | Decelerating |
| Q3 | 12.5% | 9.9% | 5.9% | 6.9% | Stabilising |
| Q4 | 9.4% | 6.1% | 7.1% | 4.8% | Weak |
Q4 FY25 at 4.8% QoQ annualises to ~20%. That's the slowest Q4 QoQ in the grid. The Q1 FY25 at 1.6% was horrific — seasonal, yes, but 1.6% annualises to 6.5%. If Q1 FY26 repeats that pattern, we're looking at 277Mwhichisexactlywhattheyguided(276-278M). No upside embedded.
Q3 is the encouraging data point. 6.9% QoQ was the best Q3 in two years. But one swallow doesn't make a summer.
| YoY % | FY22-FY23 | FY23-FY24 | FY24-FY25 |
|---|---|---|---|
| Q1 | 70.4% | 39.7% | 22.9% |
| Q2 | 45.8% | 33.1% | 21.8% |
| Q3 | 42.4% | 28.3% | 22.9% |
| Q4 | 38.1% | 29.4% | 20.3% |
Persistent deceleration from 70% to 20% over three years. The deceleration has slowed — Q1-Q4 FY25 was in a tight 20-23% band — but the direction is still down. FY27 guided at ~20%. Management is not calling for re-acceleration.
| | Q1 FY25 | Q2 FY25 | Q3 FY25 | Q4 FY25 | | | Mar-25 | Jun-25 | Sep-25 | Dec-25 | |---|---|---|---|---| | Revenue ($m) | 229.0 | 242.2 | 258.9 | **271.2** | | QoQ % | 1.6% | 5.8% | 6.9% | **4.8%** | | YoY % | 22.9% | 21.8% | 22.9% | **20.3%** | | Incremental Rev ($m) | 3.5 | 13.2 | 16.7 | 12.3 |
$12.3M incremental revenue in Q4 is fine but not exceptional. Compare to Q4 FY24: $14.9M. The sequential add actually shrank YoY. For a company claiming AI-driven TAM expansion, the revenue line doesn't show it yet.
| Q1 FY25 | Q2 FY25 | Q3 FY25 | Q4 FY25 | |
|---|---|---|---|---|
| ARR ($m) | 948 | 1,001 | 1,055 | 1,119 |
| ARR QoQ % | — | 5.6% | 5.4% | 6.0% |
| Net New ARR ($m) | — | 53 | 54 | 64 |
| NNA QoQ change | — | — | +$1M | +$10M |
| Revenue YoY % | 22.9% | 21.8% | 22.9% | 20.3% |
This is a classic leading indicator divergence. ARR growth accelerated from 5.4% to 6.0% QoQ while revenue growth decelerated from 6.9% to 4.8% QoQ. NNA jumped 18% sequentially ($54M to 64M)whileincrementalrevenuefell2616.7M to $12.3M). The bookings engine is strengthening while the P&L hasn't caught up.
Per my analytical framework: "When revenue looks steady but 2+ leading indicators show acceleration for 2+ quarters, the market is likely underpricing future growth."
Counterpoint: ARR YoY growth itself is still decelerating (~24% to ~22%). The NNA acceleration is one quarter old. I've seen false signals before — S itself gave me a false signal in 2022 when ARR "looked hunky-dory" before the misstatement blew up.
| Q2 FY25 | Q3 FY25 | Q4 FY25 | |
|---|---|---|---|
| $100K+ customers | 1,513 | 1,572 | 1,667 |
| Net adds | 54 | 59 | 95 |
| Sequential acceleration | — | +9% | +61% |
| $1M+ customers | — | — | 153 (+20% YoY) |
95 net new $100K+ customers in Q4 is a step-change. +61% sequential acceleration. This isn't noise — this is a fundamentally different go-to-market velocity. Combined with $1M+ customers at 153 (+20% YoY), the enterprise motion is working.
| Metric | Q4 FY24 | Q4 FY25 | Change |
|---|---|---|---|
| 3+ solutions | 39% | 65% | +26pp |
| 4+ solutions | 19% | 42% | +23pp |
| 5+ solutions | 9% | 22% | +13pp |
| Purple AI attach (Q4 licenses) | — | >50% | New |
| Non-endpoint % of bookings | <50% | >50% | Crossed |
The platform adoption curve is non-linear. 22% of enterprise customers on 5+ solutions vs 9% a year ago — that's a 2.4x increase. This should translate to higher blended ACV and eventually faster revenue growth, but the lag is clearly longer than I'd like.
NRR at 109% for $100K+ customers. Gross retention 96%. That means expansion is only +13pp net. For context, CRWD has historically been 120%+. This tells me the installed base is not self-expanding fast enough. Growth depends on new logo acquisition — which is expensive and less predictable.
The platform adoption data (65% on 3+ solutions) should eventually lift NRR, but 109% today is a leading indicator of 20% growth, not 30%.
| Q1 FY25 | Q2 FY25 | Q3 FY25 | Q4 FY25 | Trend | |
|---|---|---|---|---|---|
| GM% [GAAP] | 75.3% | 75.0% | 73.8% | 72.6% | -2.7pp in 4 quarters |
| GM% [Non-GAAP] | 79.0% | 79.0% | 79.0% | 78.0% | First break below 79% |
This is the wrong direction for a software company pivoting to platform and profitability. 2.7pp GAAP gross margin compression in four quarters is significant. Possible drivers:
Management did not address GM compression proactively on the call. No analyst raised it either. This is a gap in the narrative. If GM continues compressing 1pp per quarter, the 10% non-GAAP OM guide for FY27 becomes very hard to achieve — you can't expand operating margins while gross margins are shrinking unless opex leverage is extraordinary.
| Q1 FY25 | Q2 FY25 | Q3 FY25 | Q4 FY25 | FY25 | FY27 Guide | |
|---|---|---|---|---|---|---|
| OM% [Non-GAAP] | -1.7% | 2.2% | 6.8% | 5.7% | 3.5% | ~10% |
| OM% [GAAP] | -38.2% | -33.3% | -28.3% | -29.5% | -32.1% | — |
Non-GAAP OM hit 6.8% in Q3 then pulled back to 5.7% in Q4. Sequential deterioration. The FY27 guide of 10% requires a 650bp improvement from FY26's 3.5%. Management's answer: "no significant headcount growth." That's a one-time lever, not a sustainable engine.
GAAP operating margin actually worsened in Q4 (-29.5% vs -28.3% in Q3). GAAP operating loss was $79.9M — essentially flat with Q4 FY24's $80.3M. No real GAAP progress in a year.
| FY22 | FY23 | FY24 | FY25 | |
|---|---|---|---|---|
| SBC ($m) | 164 | 217 | 268 | 298 |
| SBC/Rev % | 38.9% | 34.9% | 32.6% | 29.7% |
SBC/Revenue is trending down (40% to 30%) — that's progress. But $298M of SBC on 1, 001Mrevenuemeans * *30centsofeveryrevenuedollargoestostockcomp. * *Non − GAAPprofitabilityisrealbutbuiltbyexcludingaveryrealcost.At328.8Mdilutedsharesand 13.50/share, the annual SBC is ~6.7% of market cap. That's aggressive.
The share buyback (12.2M shares in FY26) offsets some dilution — share count actually declined QoQ in Q4 (-3.9M). But the FY27 diluted share guide of ~352M implies continued net dilution of ~7% from current levels, even after buybacks.
| FY22 | FY23 | FY24 | FY25 | |
|---|---|---|---|---|
| Annual FCF ($m) | -52 | -29 | 41 | 52 |
| FCF Margin | -12.3% | -4.7% | 5.0% | 5.2% |
The annual progression is clean: FCF has improved every year. $52M FCF on $1B revenue is a 5.2% margin.
But Q4 FCF was -$2.3M (computed: $52M FY annual minus Q1-Q3). Not great for the close of your milestone year. Seasonality in billings timing, perhaps, but management is guiding FY27 FCF margin at ~10% — doubling from here. That requires consistent quarterly FCF positivity, which Q4 didn't deliver.
Midpoint $277M implies +2.1% QoQ and ~21% YoY. This is management's tightest guidance pattern — they guided Q4 FY25 at $271M and delivered 271.2M(+0.1277M. No upside expected.
1, 200Mmidpointimplies 50M incremental revenue per quarter average. Conservative if NNA sustains at 64M(whichimplies 70M annualised incremental revenue per quarter as ARR converts). But management doesn't guide for upside — they've proven that across 8 consecutive met-but-barely-beat guides.
The 650bp jump from 3.5% to 10% is the boldest call in this guide. It hinges on:
Management credibility here is good but untested at this scale. They've met every guide, but this is their first guide calling for material margin expansion.
| Metric | S | CRWD (context) |
|---|---|---|
| Run-rate revenue ($m) | 1,085 (Q4 x 4) | ~4,200 |
| EV/Run-rate Revenue | 3.5x | ~18x |
| Revenue growth | 20% | ~24% |
| Non-GAAP OM | 5.7% Q4 / 3.5% FY | ~25% |
| Non-GAAP P/E (FY27 guide) | ~37x ($0.35 EPS x 352M = $123M) | ~90x |
| Net cash / mkt cap | 17% | — |
| PEG (EV/Rev / growth) | 0.18 | 0.75 |
| Rule of 40 | 20% + 5.2% = 25.2 | ~34 |
S trades at a 5x discount to CRWD on EV/Revenue for 4pp less growth. The PEG of 0.18 is absurdly cheap for any software company with 78% gross margins. If FY27 guidance is met (0.35EPS, 123M non-GAAP net income), forward P/E is ~37x — but on actual run-rate earnings ($0.07 Q4 x 4 = $0.28 x 341M = $95M), it's ~48x.
The re-rating math is simple: if S traded at even 6x forward revenue (still less than half of CRWD), the market cap would be ~$7.9B including net cash — 74% upside from here. At 8x, it's $10.3B — 127% upside.
But I don't buy on valuation alone. Revenue growth trajectory drives re-rating, and 20% doesn't excite anyone.
| Prior Belief | Updated Belief |
|---|---|
| I sold S in June 2023 after management lost credibility via ARR misstatement. Trust was broken. | Trust has been partially rebuilt. 8/8 guides met in FY26. New CFO appointed. But the scar matters — I need a higher bar for re-entry. |
| S was losing to CRWD — "five times the size and growing much faster" | CRWD at 24% growth vs S at 20% — gap has compressed from 5:1 to ~1.2:1 on growth rates. But CRWD still has 4x the ARR and 2x the market share. S is not winning this war. |
| Consumption revenue was "not that big yet" (Dec 2023 analysis) | Platform adoption has exploded: 65% on 3+ solutions, non-endpoint >50% of bookings. The consumption/platform thesis I was sceptical about has materialised, just 2 years later than bulls predicted. |
| ARR was the key leading indicator but couldn't be trusted after the misstatement | ARR credibility appears restored. The Q4 $64M NNA record and $100K+ customer adds record are the strongest booking signals since I followed this company. |
| Growth would continue decelerating toward irrelevance | Growth has stabilised at ~20-23% across FY25, not accelerated but stopped decelerating. Leading indicators suggest potential for stabilisation or modest re-acceleration — but this is a thesis, not yet a fact. |
Language shift to profitability. Management volunteered the 10% OM target and headcount freeze before analysts asked. This is a company pivoting its narrative from "growth at any cost" to "profitable scale." As someone who watched them burn cash at -115% GAAP OM in FY22, the pivot is welcome — but late.
AI is the dominant narrative. 8+ unprompted AI references. Purple AI >50% attach rate, Prompt Security doubling sequentially. Management is betting the next growth wave on AI security products. This is the right strategic bet, but monetisation proof is one quarter old.
Cloudflare win is notable. A major cloud-native company choosing S over incumbents for employee endpoint — specifically described as "displacing a competitor." This is anecdotal but the right kind of anecdotal (enterprise, named, competitive displacement).
Seasonal improvement claim. Management says H1/H2 is normalising from 40/60 to 50/50. If true, Q1 and Q2 should be less volatile. But Q4 at 4.8% QoQ was the weakest Q4 in the grid, so the seasonal improvement hasn't fully materialised yet.
CFO transition. Sonalee Parekh appointed. Barry Badgett served as interim. Routine transition — no red flag. But new CFOs sometimes reveal skeletons. Watch the first quarter she reports.
Prior thesis (June 2023): BROKEN — sold on miss-and-lower + management credibility loss.
Current assessment: NOT INVESTABLE — but on the watchlist.
The company is doing the right things: platform diversification, AI product bets, operational discipline, margin expansion, share buybacks. The valuation is absurdly cheap relative to peers. The leading indicators are the strongest they've been since I followed the company.
But:
| Condition | Threshold | Why It Matters |
|---|---|---|
| NNA sustainability | $60M+ for Q1-Q2 FY26 | Confirms bookings engine, not one-off |
| Gross margin stabilisation | GAAP GM > 72%, Non-GAAP > 78% | Proves platform mix isn't margin-destructive |
| Revenue growth floor | YoY > 20% for 2+ more quarters | Prevents drift to 15% territory |
| NRR improvement | > 112% | Shows installed base self-expanding |
| Q1 FY26 beat magnitude | > 1% beat on revenue | Breaks the "0.1% beat" pattern; shows guide conservatism |
If conditions 1 and 2 are met by Q2 FY26 earnings (September 2026), I would consider a 5% starter position.
The brief flags two quarters with outsized GAAP net losses vs operating losses:
Full-year FY25 GAAP net loss was -$451M on $1B revenue. That's a -45% net margin. The non-GAAP net income of $68M is a $519M swing. The gap between GAAP and non-GAAP reality is enormous. This isn't just SBC — there are material below-the-line items inflating the GAAP loss.
Atlas scored S at Conviction 3/5 with a "FAIL on growth gate." I agree with:
Where I add nuance:
No position. Watchlist. Revisit after Q2 FY26 earnings (September 2026).
The valuation is compelling. The leading indicators are encouraging. Management has rebuilt credibility. But I need more proof — specifically on gross margin stability and NNA sustainability — before I commit capital to a 20% grower where I was once burned badly.
If the re-entry conditions are met, entry at ~$13-14 (where it is now) would be excellent risk/reward. A 6x forward P/S re-rating alone would deliver 74% upside.
-wsm
(No position in S)