NetScout Systems Q1 Earnings Call Highlights
NetScout Systems (NASDAQ:NTCT) reported first-quarter fiscal 2027 revenue growth of 13%, citing demand for its service assurance offerings, government-related orders and contributions from its recently acquired cloud DDoS business. The company reaffirmed its full-year outlook, while cautioning that some government orders arrived earlier than anticipated and are expected to affect second-quarter comparisons.
For the quarter ended June 30, 2026, NetScout reported revenue of $210.4 million, up 12.7% from $186.7 million in the prior-year period. On a non-GAAP basis, net income was $38.6 million, or $0.52 per diluted share, compared with $24.7 million, or $0.34 per share, a year earlier.
President and CEO Anil Singhal said the results reflected demand for high-fidelity visibility across complex enterprise and service-provider technology environments. He said customers are using NetScout’s data and analytics capabilities for observability, AIOps, service assurance, cybersecurity and DDoS attack protection.
Service Assurance Leads Revenue Growth
Service assurance revenue rose 19.7% year over year during the quarter, while cybersecurity revenue increased 0.6%. Service assurance represented 67% of total revenue, with cybersecurity accounting for the remaining 33%.
Singhal said service assurance benefited partly from government-related demand, including orders received before the company had anticipated as customers advanced deployment plans. The business also benefited from sales of its Omnis Sensor and Omnis Streamer products, which provide metadata for observability, cybersecurity and AIOps platforms.
Chief Financial Officer Tony Piazza said government-related orders pulled into the first quarter totaled about $10 million to $15 million. Without those orders, he said, quarterly revenue would have increased at a mid-single-digit rate, consistent with the company’s expectations for first-half growth and its full-year outlook.
Federal government revenue typically represents a mid- to high-single-digit percentage of total company revenue, Piazza said. In the first quarter, it reached the mid-teens as a percentage of revenue, spread across multiple customers. No individual customer accounted for more than 10% of NetScout’s revenue during the quarter.
Enterprise revenue grew 19.1%, while service-provider revenue rose 3.3%. Enterprise customers represented 63% of quarterly revenue, and service providers represented 37%. The United States contributed 59% of revenue and international markets contributed 41%.
Cybersecurity Strategy Includes Expanded DDoS Capacity
Cybersecurity revenue grew modestly against a difficult comparison, as the prior-year period had increased about 18% due to the timing of large projects, management said. Singhal said cybersecurity remains a long-term growth opportunity for the company.
NetScout completed its acquisition of DigiCert’s DDoS attack protection business assets on May 1. The company said the acquisition and a subsequent infrastructure expansion enabled it to bring Arbor Cloud’s backend infrastructure in-house and double mitigation capacity to 30 terabits per second.
Singhal said the changes are intended to provide tighter alignment between infrastructure and threat intelligence, faster innovation cycles and improved margin potential through recurring revenue. The company is also developing AI-enabled automation capabilities for its DDoS offerings, though Singhal described adoption as being in an early stage.
Among customer wins, NetScout cited multiple service assurance and cybersecurity deals with government agencies that had an aggregate value in the low eight digits. The deals included Omnis Sensor, Omnis Streamer and Omnis Cyber Intelligence products. Another government agency selected the company to support edge modernization and zero-trust security.
NetScout also signed a multimillion-dollar agreement with a long-standing international service-provider customer to expand DDoS protection, and it secured a seven-figure deal with a U.S. financial institution for its Omnis KlearSight Sensor, designed to address visibility issues in large Kubernetes deployments.
Margins Expand as Revenue Rises
Product revenue increased 17.8% to $86 million, while service revenue rose 9.4% to $124.4 million. Service revenue benefited from the acquired cloud DDoS business and favorable timing of certain service-renewal orders, Piazza said. For the full year, the company continues to expect service revenue growth in the low single digits.
Non-GAAP gross margin expanded 190 basis points to 80.6%, driven by favorable product mix. Operating expenses increased 4.6% to $126 million, reflecting costs associated with the DDoS acquisition, higher sales commissions tied to increased revenue and the timing of variable incentive compensation.
Non-GAAP operating margin improved 660 basis points to 20.8%, supported by revenue growth, product mix and expense management. NetScout ended the quarter with approximately $33 million in total product backlog, including $28 million of fulfillable backlog.
The company reported $668.5 million in cash equivalents and short- and long-term marketable securities, down from $705.1 million at the end of fiscal 2026. Piazza attributed the decline primarily to the DigiCert asset acquisition. First-quarter free cash flow was $44.3 million, and NetScout did not repurchase shares during the quarter.
Outlook Reaffirmed Despite Second-Quarter Timing Effects
NetScout reaffirmed its fiscal 2027 guidance for revenue of $885 million to $915 million and non-GAAP diluted earnings per share of $2.65 to $2.80. The outlook assumes a non-GAAP effective tax rate of about 20% and weighted average diluted shares of roughly 74 million to 75 million.
For the second quarter, management expects revenue to be broadly consistent with the prior-year period, due to the first-quarter acceleration of government orders and a strong prior-year comparison. The prior-year second quarter saw revenue growth of nearly 15% and benefited from orders accelerated from the third quarter.
NetScout expects first-half revenue growth in the mid-single digits and second-quarter earnings-per-share growth in the high single digits. Piazza said the EPS outlook also reflects the company’s ENGAGE conference moving to the third quarter this fiscal year from the second quarter in the prior year.
About NetScout Systems (NASDAQ:NTCT)
NetScout Systems, Inc is a leading provider of network performance management, service assurance and cybersecurity solutions. The company designs and delivers hardware and software platforms that capture and analyze real-time and historical packet data, enabling IT teams and service providers to monitor application performance, troubleshoot network issues and defend against distributed denial-of-service (DDoS) attacks. NetScout's flagship offerings include the nGeniusONE service assurance platform and the InfiniStream packet broker, which together provide end-to-end visibility across hybrid and multi-cloud environments.
Founded in 1984 and headquartered in Westford, Massachusetts, NetScout has built a reputation for scalable and resilient monitoring infrastructure.
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