NETSCOUT — Second Quarter Fiscal Year 2027 Earnings Summary

Financial Performance:

• Total revenue grew 1.4% to $222.2 million in Q2 FY2027, compared to $219.0 million in Q2 FY2026.
• Product revenue decreased 5.1% to $89.9 million (40% of total revenue) from $94.7 million in the prior year period.
• Service revenue increased 6.4% to $132.3 million (60% of total revenue) from $124.3 million in the prior year period.
• GAAP income from operations was $37.6 million (16.9% margin) compared to $32.5 million (14.8% margin) in the prior year.
• Non-GAAP income from operations was $62.9 million (28.3% margin) compared to $58.1 million (26.5% margin) in the prior year.
• GAAP net income was $34.4 million ($0.47 per diluted share) compared to $25.8 million ($0.35 per diluted share) in the prior year.
• Non-GAAP net income was $52.8 million ($0.71 per diluted share) compared to $45.1 million ($0.62 per diluted share) in the prior year.
• Adjusted EBITDA was $66.5 million (29.9% of revenue) compared to $60.7 million (27.7% of revenue) in the prior year.
• First-half FY2027 total revenue increased 6.6% to $432.6 million compared to $405.8 million in the prior year.
• First-half FY2027 GAAP net income was $56.2 million ($0.76 per diluted share) compared to $22.1 million ($0.30 per diluted share) in the prior year.
• First-half FY2027 Non-GAAP net income was $91.3 million ($1.23 per diluted share) compared to $69.8 million ($0.95 per diluted share) in the prior year.
• First-half FY2027 Adjusted EBITDA was $113.4 million (26.2% of revenue) compared to $90.0 million (22.2% of revenue) in the prior year.
• As of September 30, 2026, cash, cash equivalents, and short and long-term marketable securities totaled $571.3 million, down from $705.1 million as of March 31, 2026.
• The company had no debt outstanding under its $600 million revolving credit facility as of September 30, 2026.
• Product backlog was $20.9 million as of September 30, 2026, including $15.4 million of fulfillable backlog, compared to $39.8 million and $27.7 million, respectively, in the prior year period.

Guidance and Future Outlook:

• NETSCOUT reaffirmed its full-year FY2027 outlook.
• Revenue is projected to range from $885.0 million to $915.0 million, implying 4.7% year-over-year growth at the midpoint.
• GAAP net income per diluted share is projected to range from $1.55 to $1.70.
• Non-GAAP net income per diluted share is projected to range from $2.65 to $2.80, implying 9.9% year-over-year growth at the midpoint.

Business Segments and Product Lines:

• In September, the company unveiled nGenius Copilot, an AI-powered conversational extension to nGeniusONE®.
• In September, the company launched MCP connectivity for its Omnis AI Insights solution to provide AI assistants and agents on-demand access to AI-Ready Smart Data.
• In September, the company expanded its data platform to provide trusted operational context for enterprise AI, aiming to improve MTTK and reduce AI token consumption.
• In August, the company enhanced the Arbor Edge Defense (AED) solution to safeguard against DDoS attacks that bypass CDN defenses.
• In August, the company extended the Adaptive DDoS Protection (ADP) solution to enable service providers to automatically detect and mitigate outbound DDoS attack traffic.
• In October, the company hosted the ENGAGE 2026 summit attended by over 400 customers and partners from more than 30 countries.
• In October, the company released its "DDoS Threat Intelligence Report, Issue 17," highlighting shifts in attack volume, mitigation deployment locations, and service disruption tactics.

Market and Competitive Landscape:

• Management views the customer AI journey as a multi-year opportunity rather than a near-term cycle.
• The company positions itself to expand within its installed base and capture new opportunities as customer AI investments mature.
• The company serves the world's largest enterprises, service providers, and public sector organizations.

Risks and Challenges:

• Forward-looking statements note risks including macroeconomic factors, slowdowns in the market for advanced networks, service assurance, and cybersecurity solutions.
• Risks include a volatile foreign exchange environment, dependence on broad-based acceptance of network performance management solutions, and competition from companies with greater financial resources.
• Risks include the potential for lower than expected demand, difficulty retaining key executives, and the ability to recognize expected gains from the acquisition of DigiCert, Inc.'s DDoS protection business.

Management Commentary and Tone:

• Anil Singhal, President & CEO, stated that second-quarter results were consistent with expectations and first-half performance keeps the company on track for fiscal year 2027.
• Management noted that government-related orders benefited the first quarter and shaped the second quarter comparison.
• Management highlighted that continued focus on cost discipline drove operating margin expansion from the prior year.
• Management expressed commitment to shareholder returns, citing the repurchase of approximately $77 million of common stock during the quarter.
• Management reaffirmed the full-year outlook while executing on a strategy to drive revenue growth, expand margins, and generate solid free cash flow.

Other Key Points:

• The company repurchased 2.0 million shares of common stock for approximately $77 million during the second quarter.
• The $600 million revolving credit facility expires in October 2029.
• Non-GAAP financial measures were revised beginning in the third quarter of fiscal year 2026 to no longer adjust for acquisition-related depreciation expense, as such amounts are not currently material.
• Prior-period non-GAAP financial measures presented have been recast to conform to the current presentation.