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    NTCT
    Earnings call· Jun 2026(Q1 FY27)

    NETSCOUT SYSTEMS Q1 FY27 earnings call NTCT

    Aug 6, 2026 Source

    Executive summary

    NetScout Systems Q1 FY27 — Strong Top and Bottom-Line Growth Driven by Government Orders

    NetScout delivered a strong first quarter, exceeding top and bottom-line expectations, primarily driven by accelerated government orders and robust Service Assurance performance. The company reaffirmed its full-year FY27 outlook, emphasizing continued investment in AI-ready smart data and cybersecurity, while maintaining disciplined cost management and capital allocation. Management highlighted the increasing demand for high-fidelity visibility in complex digital environments, positioning NetScout for long-term growth in observability, AIOps, and DDoS protection.

    Highlights

    5

    • Total revenue increased by 12.7% to $210.4 million, exceeding expectations due to early government orders.

    • Non-GAAP diluted EPS grew by 52.9% to $0.52, up from $0.34 in the prior year.

    • Non-GAAP gross profit margin expanded by 190 basis points to 80.6%, driven by favorable product mix.

    • Non-GAAP operating margin improved by 660 basis points to 20.8%, reflecting revenue growth and disciplined expense management.

    • Service Assurance revenue grew by 19.7% year-over-year, benefiting from government-related demand and new innovations.

    Concerns

    3

    • Service Provider revenue growth was modest at 3.3%, reflecting continued disciplined spending by carriers.

    • Cybersecurity revenue growth was only 0.6% year-over-year, facing a difficult comparison to the prior year's high-teens growth.

    • Cash, cash equivalents, and marketable securities decreased to $668.5 million from $705.1 million, primarily due to the acquisition of DigiCert's DDoS assets.

    Guidance & targets

    8
    CategoryTargetConfidence
    Full-year FY27 Revenue
    $885 million to $915 million
    high materiality
    High
    Full-year FY27 Non-GAAP EPS
    $2.65 to $2.80
    high materiality
    High
    Full-year FY27 Non-GAAP effective tax rate
    approximately 20%
    medium materiality
    High
    Full-year FY27 Weighted average diluted shares outstanding
    approximately 74 million to 75 million
    medium materiality
    High
    Full-year FY27 Service revenue growth
    low-single-digits
    medium materiality
    Medium
    Q2 FY27 Revenue
    broadly consistent with the prior-year period
    high materiality
    Medium
    Q2 FY27 EPS growth
    high-single-digits
    high materiality
    Medium
    H1 FY27 Revenue growth
    mid-single-digits
    medium materiality
    Medium

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    Service Assurance
    Benefited from government-related orders, including some received earlier than anticipated, and sales of Omnis Sensor and Streamer products.
    		—19.7%——
    Cybersecurity
    Achieved growth despite a difficult comparison to the prior-year period, which grew in the high-teens. Both Enterprise and Carrier Provider verticals grew modestly.
    		—0.6%——
    Enterprise
    Accounted for 63% of total revenue in Q1 FY27.
    		—19.1%——
    Service Provider
    Accounted for 37% of total revenue in Q1 FY27. Carrier spending remains disciplined.
    		—3.3%——

    Operational metrics

    12
    Non-GAAP gross profit margin
    80.6%up 190 bps YoY
    Q1 FY27
    Non-GAAP operating expenses
    $126 millionup 4.6% YoY
    Q1 FY27
    Non-GAAP operating margin
    20.8%improved 660 bps
    Q1 FY27
    Non-GAAP net income
    $38.6 millionup from $24.7 million YoY
    Q1 FY27
    Non-GAAP EPS
    $0.52up from $0.34 YoY
    Q1 FY27
    Cash and investments balance
    $668.5 milliondown from $705.1 million at FY26 end
    Q1 FY27

    Reduction primarily reflects the May 1 acquisition of DDoS assets of DigiCert, Inc.

    Patents granted
    750
    Q1 FY27

    Reached an important milestone with the granting of the 750th patent.

    DDoS mitigation capability
    33 terabits per seconddoubled
    Q1 FY27

    Culminated in the doubling of mitigation capability after bringing the platform's back-end infrastructure fully in-house.

    Product revenue
    $86 millionup 17.8% YoY
    Q1 FY27
    Service revenue
    $124.4 millionup 9.4% YoY
    Q1 FY27
    Government-related orders pulled in
    $10 million to $15 million
    Q1 FY27

    Primarily government related orders that were received earlier than anticipated, positively impacting Q1 revenue timing.

    Inventory
    up $7 million
    Q1 FY27

    Incremental inventory purchased to secure supply and mitigate supply chain challenges related to AI data center build-outs.

    Industry KPIs

    4
    MetricValueDetails
    Capital returnNo shares repurchased
    Backlog order book$33 millionUSD
    Orders backlog qualitySolid start to fiscal year
    Revenue mix by product customer typeService Assurance: 67%, Cybersecurity: 33%%

    Orderbook & backlog

    1
    Total product backlog$33 millionJune 30, 2026

    Includes $28 million of fulfillable backlog.

    Product announcements

    2
    ProductTypeDetails
    nGenius Copilotlaunch
    AI-powered Adaptive DDoS Attack Protectionupdate

    Deals & partnerships

    1
    DigiCert, Inc.Acquisition of DDoS attack protection business assets

    Acquired DigiCert's DDoS attack protection business assets in May. This acquisition, combined with capacity expansion, allows NetScout to scale Arbor Cloud with greater control, efficiency, and speed by bringing the platform's back-end infrastructure fully in-house.

    Risks & headwinds

    3
    Difficult comparison for Cybersecurity revenueQ1 FY27

    Cybersecurity revenue grew 0.6% YoY in Q1 FY27, compared to high-teens growth in the prior-year period.

    Mitigation: Company views cybersecurity as an important, long-term growth opportunity and has strengthened Arbor Cloud through acquisition and capacity expansion.

    Disciplined customer spendingOngoing

    Service Provider revenue grew only 3.3% YoY in Q1 FY27.

    Mitigation: Managing the business with this environment in mind, focusing on solutions that help customers improve efficiency and monetize next-generation network investments. Investing in innovation to address customer needs for managing complexity and reducing risk.

    Supply chain challenges for AI data center build-out equipmentOngoing

    Inventory increased by approximately $7 million in Q1 FY27.

    Mitigation: Proactively purchasing incremental inventory and working with COTS program vendors to secure equipment and control prices, mitigating potential impact on software sales.

    What to watch in Q2 FY27

    5

    Q2 FY27 Revenue performance

    Q2 FY27
    CurrentQ1 FY27 revenue up 12.7% to $210.4M (benefited from $10M-$15M pull-in)
    TargetBroadly consistent with prior-year period

    Why it matters

    To assess if the Q1 pull-in of government orders and strong prior-year comparison significantly impacts Q2 revenue, and if the underlying growth trajectory remains on track for H1 mid-single-digits.

    For the second quarter, we expect revenue to be broadly consistent with the prior-year period, reflecting the previously mentioned acceleration of orders into Q1 and a strong comparison with the prior year's second quarter when revenue grew nearly 15% and benefited from orders accelerated from the third quarter.

    Q&A highlights

    5

    How much of the government-related orders were pulled into Q1, and how does this impact the linearity for Q2?

    Approximately $10 million to $15 million in government-related orders were pulled into Q1. Without this acceleration, Q1 growth would have been in the mid-single-digits, consistent with the full-year outlook and expected first-half performance. This pull-in contributes to the expectation of Q2 revenue being broadly consistent with the prior year.

    “So the orders that were pulled in were $10 million to $15 million, primarily government related. If I were to normalize the quarter, it would have grown in the mid-single-digits, which would be consistent with where we see the first half of the fiscal year and consistent with where -- our full year outlook.”

    asked by Simran Biswal · answered by Anthony Piazza

    2 min read6 chapters

    Detailed Narrative

    01

    Strong Q1 Performance and Full-Year Outlook Reaffirmation

    NetScout delivered strong Q1 FY27 results with total revenue up 12.7% to $210.4 million and non-GAAP diluted EPS increasing to $0.52. This performance was partly due to $10 million to $15 million in government-related orders being received earlier than anticipated. The company reaffirmed its full fiscal year 2027 outlook, projecting revenue between $885 million and $915 million and non-GAAP EPS of $2.65 to $2.80, indicating confidence in its strategic execution despite customer spending discipline.

    02

    Service Assurance and Cybersecurity Segment Performance

    Service Assurance revenue grew by 19.7% year-over-year, benefiting from government demand and sales of new Omnis Sensor and Streamer products. Cybersecurity revenue saw modest growth of 0.6%, facing a tough comparison to the prior year's high-teens growth. Service Assurance accounted for 67% of total revenue, while Cybersecurity made up 33%. The company views cybersecurity as a long-term growth opportunity, supported by its recent acquisition and capacity expansion.

    03

    Innovation and AI-Ready Smart Data

    NetScout continues to invest in innovation, reaching its 750th patent, highlighting its R&D strength. The company's Smart Data platform generates high-fidelity, AI-ready data, crucial for advanced analytics, automation, and AI-enabled decision-making across observability, AIOps, service assurance, and cybersecurity. New innovations like nGenius Copilot, which provides natural language access to smart data, and AI-powered adaptive DDoS attack protection, are being showcased to customers.

    04

    Strategic Expansion in DDoS Protection

    The May acquisition of DigiCert's DDoS attack protection business assets and subsequent capacity expansion are key to scaling Arbor Cloud. By bringing the platform's back-end infrastructure in-house, NetScout doubled its mitigation capability to 33 terabits per second. This move aims to improve control, efficiency, speed, and margin potential through accretive recurring revenue, strengthening Arbor Cloud's resilience against escalating attack complexities.

    05

    Customer Wins and Market Demand

    Key customer wins in Q1 included multiple government agency deals in the low-8 digits for Service Assurance and Cybersecurity solutions, a multi-million dollar agreement with an international service provider for DDoS protection, and a 7-figure deal with a U.S. financial institution for Omnis KlearSight Sensor to address Kubernetes visibility challenges. These wins demonstrate the relevance of NetScout's portfolio and its ability to expand within its installed base.

    06

    Capital Allocation and Financial Position

    NetScout ended the quarter with $668.5 million in cash, cash equivalents, and marketable securities, down from $705.1 million due to the DigiCert DDoS asset acquisition. Free cash flow for the quarter was $44.3 million. The company remains committed to its share repurchase program, though no shares were repurchased in Q1. Capital allocation priorities focus on profitable growth, maintaining a strong financial position, and returning excess capital to shareholders.

    AI-generated summary of the company’s earnings call. Not investment advice.