Is SentinelOne Stock a Buy on the Dip as Revenue Continues to Soar?

SentinelOne (NYSE: S) reported its fiscal second-quarter results, surpassing revenue estimates and increasing guidance. Despite the stock drop following the release, the cybersecurity firm's revenue climbed 21% to $292 million in Q2, beating the previous forecast of $289 million to $291 million. Adjusted earnings per share (EPS) doubled from $0.04 to $0.08, meeting the high end of its $0.06 to $0.08 guidance.

Annual recurring revenue (ARR), which includes subscription and consumption-based contracts, grew 23% to $1.16 billion, with new net ARR at $56 million, up 4%. SentinelOne's artificial intelligence (AI) security solutions, Purple AI and Prompt Security, saw their ARR triple year over year. Cloud security ARR accelerated for the third consecutive quarter, and data lake and AI SIEM solutions gained traction, now accounting for over half of ARR.

Non-endpoint solutions make up more than half of ARR, with the new Flex program comprising more than 10% of ARR. SentinelOne's dollar-based net retention rate improved year over year and sequentially for customers spending $100,000 or more in ARR. Remaining performance obligations surged 45% to $1.7 billion, driven by larger and longer contracts with customers.

The company projected fiscal third-quarter revenue of $309 million to $311 million, equating to 20% growth, and adjusted EPS between $0.08 to $0.09. For the full year, it expects revenue growth of 20% to $1.2 billion to $1.21 billion, with adjusted EPS between $0.30 and $0.32. With $813 million in cash and no debt, SentinelOne is investing in growth opportunities and stock buybacks.

Despite not making Stock Advisor's 10 best stocks list, SentinelOne's P/S ratio of 6 times is cheaper than peers CrowdStrike (37 times) and Palo Alto Networks (22 times). If revenue accelerates, SentinelOne stock could see significant upside.