NTCT

Image source: The Motley Fool. Thursday, Aug. 6, 2026 at 8:30 a.m. ET VP of Corporate Finance - Scott Dressel President and Chief Executive Officer - Anil Singhal Executive Vice President and Chief Financial Officer - Anthony Piazza Operator: Ladies and gentlemen, thank you for standing by, and welcome to NETSCOUT's First Quarter Fiscal Year 2027 Financial Results Conference Call. [Operator Instructions] As a reminder, this call is being recorded. [Operator Instructions] I would now like to turn the call over to Scott Dressel, NETSCOUT's VP of Corporate Finance. Scott, please go ahead. Scott Dressel: Thank you, operator, and good morning, everyone. Welcome to NETSCOUT's First Quarter Fiscal Year 2027 Conference Call for the period ended June 30, 2026. Joining me today are Anil Singhal, NETSCOUT's President and Chief Executive Officer; Anthony Piazza, NETSCOUT's Executive Vice President and Chief Financial Officer. Please note that the slide presentation accompanies our prepared remarks. You can advance the slides in the webcast viewer to follow our commentary. Both the slides and the prepared remarks can be accessed in multiple areas within the Investor Relations section of our website at www.netscout.com, including the IR landing page and the Quarterly Results page. As discussed in detail on Slide #3, today's conference call will include certain forward-looking statements about NETSCOUT's views on expected results of future performance and business strategy. These statements speak only as of today's date and involve risks, uncertainties and assumptions that may cause actual results to differ materially, including, but not limited to, those described in the company's filings with the Securities and Exchange Commission, including our annual report on Form 10-K and quarterly reports on Form 10-Q. As discussed in detail on Slide #4, today's conference call will also include discussion of certain non-GAAP financial measures that the company believes to be useful for investors. While this slide presentation includes both GAAP and non-GAAP results, other than revenue and balance sheet information, which are presented in accordance with GAAP, we will focus our discussion on non-GAAP financial information. These measures should not be considered in isolation from, or as a substitute for financial information prepared in accordance with GAAP. Reconciliations of all non-GAAP metrics to the nearest GAAP measures are provided in the appendix of the slide presentation and today's financial results' press release, and on our website. I will now turn the call over to Anil for his prepared remarks. Anil? Anil Singhal: Thank you, Scott, and good morning, everyone. We appreciate you joining us today. In the first quarter of fiscal year 2027, we delivered strong top and bottom-line results, as enterprises and service providers continued to rely on NETSCOUT for mission-critical, high-fidelity visibility across increasingly complex digital environments. We executed well against our strategic priorities and believe we are in -- well positioned to achieve our fiscal 2027 objectives of investing in innovation, driving profitable growth, expanding margins, and generating solid free cash flow. Service Assurance performed well, reflecting in part government-related demand, while Cybersecurity delivered results consistent with the prior year. Overall, our first-quarter results reflect disciplined execution and keep us on track with our full-year outlook. Our investments in innovation continue to yield differentiated patented technologies that generate compact, high-fidelity, AI-ready smart data. These capabilities provide customers with a trusted data foundation for advanced analytics, automation, and AI-enabled decision-making across observability, AIOps, service assurance, cybersecurity, and DDoS attack protection solutions. In June, we reached an important milestone with the granting of our 750th patent, demonstrating the strength of our R&D engine and the durability of our technology moat around our Smart Data platform and AI-enabled applications. Digital complexity and fragmented visibility increase the need for trusted data, stronger resilience, and more efficient operations. We believe our portfolio helps customers manage that complexity, reduce risk, and improve efficiency, all of which reinforce the long-term growth potential of our business. With that context, let me turn to Slide 6 for a brief review of our fiscal year 2027 financial performance, for the period ending June 30, 2026. For the first quarter, total revenue increased by 13% to $210 million, compared with $187 million for the same period last year. We expanded both our gross and operating margins nicely in the quarter. Diluted earnings per share was $0.52, compared with $0.34 in the same period last fiscal year. Now let's turn to Slide 7 for some perspective on our business and some market insights. Starting with a review of our Service Assurance offerings. Revenue grew approximately 20% year-over-year, benefiting in part from government-related orders, including orders that were received earlier than anticipated, as our customers advanced their deployment plans. Growth also reflected sales of our newest innovations, including our Omnis Sensor and Streamer products, which make our high-fidelity metadata available in observability, cybersecurity, and AIOps platforms across our partner ecosystem. This enables our customers to leverage the real-time visibility we provide to improve automated workflows and critical investigations across the business. Enterprise customers are turning to our Service Assurance solutions to close visibility gaps created by hybrid cloud, remote work, automation, and AI workloads. These environments are inherently complex, with more traffic paths, potential points of failure, and operational silos across network application observability and security teams. With greater exposure to downtime, the consequences can be significant from an operational, legal, and financial standpoint. Our service provider customers remain focused on reducing network cost and complexity. They are also working to improve automation across fixed, mobile, and edge environments. NETSCOUT's 5G observability solutions give customers end-to-end visibility for standalone 5G networks. They also support mission-critical applications and emerging use cases, including fixed wireless access, network slicing, and immersive services. Carrier spending remains disciplined. Even so, we continue to see opportunities for our solutions to help customers improve efficiency and monetize next-generation network investments. Turning to Cybersecurity, revenue increased approximately 1% year over year. We achieved that growth despite a difficult comparison to prior-year period, which grew in the high-teens due to the timing of some large projects. Both our Enterprise and Carrier Provider customer verticals grew modestly in the quarter, and we continue to view cybersecurity as an important, long-term growth opportunity for NETSCOUT. Our previously disclosed May acquisition of DigiCert's DDoS attack protection business assets, together with our recently announced capacity expansion, reflect a deliberate strategy to scale Arbor Cloud with greater control, efficiency, and speed. By bringing the platform's back-end infrastructure fully in-house, we have created the operational and architectural foundation to invest more quickly and efficiently in capacity. That work culminated in the doubling of our mitigation capability to 33 terabits per second. It also gives us higher -- tighter alignment between infrastructure and threat intelligence, faster innovation cycles, and improved margin potential through immediately accretive recurring revenue. These actions strengthen Arbor Cloud as a more resilient, vertically integrated cloud platform. They also position NETSCOUT to help customers respond to the rapidly escalating scale and complexity of attacks, while delivering consistent, high-performance protection for mission-critical, always-on digital environments. Turning to AI. We believe it is creating a long-term growth opportunity across our portfolio. It is also bringing Service Assurance and Cybersecurity closer together, as customers look for solutions that can automate workflows, support AI-enabled applications, and handle larger volumes of data across hybrid environments. These trends increase the need for [indiscernible] visibility, observability, and cybersecurity. They also reinforce the value of NETSCOUT's smart data. With packet-level precision, automation, and analytics, our AI-ready data -- smart data helps customers find root cause analysis -- root causes faster, improve efficiency, strengthen cyber resilience, and connect more effectively with broader observability, security operations, and emerging agentic AI frameworks. Turning to customer wins, we saw continued demand across both Service Assurance and Cybersecurity. In the quarter, we secured new customers and repeat business from existing customers who are investing in new solutions, upgrades, and maintenance services. These wins demonstrate the continued relevance of our portfolio, the depth of our customer relationships, and the opportunity to expand across our installed base. Highlights from the first quarter included the following: First, we completed multiple government agency related deals in Service Assurance and Cybersecurity with an aggregate value in the low-8 digits that included our Omnis Sensor, Omnis Streamer, and cyber intelligence solutions. And another agency selected NETSCOUT to support modernization and Zero Trust security at the edge. Second, we signed a multi-million dollar agreement with a long-standing international service provider customer. The customer expanded its NETSCOUT cybersecurity portfolio to strengthen DDoS attack protection in response to a heightened threat environment. Third, we secured a 7-figure deal with a U.S. financial institution that included our Omnis KlearSight Sensor. And this solution addresses visibility challenges in large, multi-cluster Kubernetes deployments. The customer selected NETSCOUT for our ability to deliver deep, actionable, real-time insight into system performance, health, and cost drivers for customer-facing banking applications in virtual environments. With that, let's move on to Slide #8 and review our outlook. With a solid start to the fiscal year, we remain focused on profitable growth, healthy free cash flow generation, and long-term shareholder value, and we are reaffirming our full fiscal year '26 -- '27 outlook. Customers remain disciplined in their overall spending, and we are managing the business with that environment in mind. At the same time, we see meaningful, long-term opportunities in AIOps, observability, service assurance and cybersecurity, and DDoS attack protection. We will continue to invest in innovation, with a focus on advanced cybersecurity capabilities, adaptive DDoS protection, and using our data and intelligence to power AI-driven workflows in observability and service assurance, all aimed at enhancing resilience and service reliability for our customers. We will also maintain disciplined cost management and a balanced approach to capital allocation to support attractive returns for our shareholders. Finally, we are looking forward to hosting customers and partners at our annual ENGAGE Technology and User Summit in Texas in October. This year's theme is Moving from Proactive to Predictive, and reflects an important shift in our markets. Customers want to move beyond monitoring. They want to detect issues earlier, predict outcomes faster and more accurately, explain what's happening, and automate more decisions. ENGAGE 2026 will demonstrate how NETSCOUT's AI-ready smart data provides the trusted data foundation for that shift. That includes support for observability, cybersecurity, AIOps, and emerging agentic operations, while also helping customers control costs and keep their data secure and on premises. We will feature our newest innovations, including nGenius Copilot, which gives users access to smart data in natural language. We will also showcase evidence-driven cybersecurity incident response and AI-powered adaptive DDoS attack protection. With that, I will turn the call over to Tony for a review of our financial performance and our outlook. Anthony Piazza: Thank you, Anil, and good morning, everyone. We appreciate you joining us. I'll start by walking you through the key financial metrics for our first quarter of fiscal year 2027. After that, I'll share some additional commentary on our second quarter and full fiscal year 2027 financial outlook. As a reminder, other than revenue and balance sheet information, which are on a GAAP basis, this review focuses on our non-GAAP results. All reconciliations with our GAAP results appear in the presentation appendix. I will note the nature of any such comparisons accordingly. Also, all comparisons are on a year-over-year basis unless otherwise noted. Slide number 10 details the results for the first quarter of fiscal year 2027. Total revenue was $210.4 million, up 12.7% from the same period last fiscal year. The quarter benefited in part from government-related orders, including some that were awarded ahead of our expectations, positively impacting revenue timing. Product revenue totaled $86 million, up 17.8% compared with the same period -- same prior year period. Service revenue was $124.4 million, an increase of 9.4% year-over-year, benefiting from revenue contributed by the recently acquired cloud DDoS business and from favorable timing of certain service renewal orders compared to the prior year. For fiscal year 2027, we continue to expect Service revenue to grow in the low-single-digits. We ended the first quarter with total product backlog of approximately $33 million, which included $28 million of fulfillable backlog. In the first quarter, the gross profit margin increased 190 basis points to 80.6%, reflecting higher product gross margins due to favorable product mix. Quarterly operating expenses were $126 million, up 4.6% year over year, primarily reflecting overhead costs associated with the recent DDoS acquisition, higher sales commissions on increased revenue, and the timing of variable incentive compensation expense. The operating margin improved 660 basis points to 20.8%, reflecting revenue growth, favorable product mix, and disciplined expense management. We delivered net income of $38.6 million, or diluted earnings per share of $0.52, an increase over the year ago quarter's net income of $24.7 million, or $0.34 per diluted share. Let's turn to Slide 11, where I'll walk you through the key revenue trends by product lines and customer verticals. For the first quarter of fiscal year 2027, Service Assurance revenue increased by 19.7%, and Cybersecurity revenue grew by 0.6%. During the same period, Service Assurance accounted for 67% of total revenue, and Cybersecurity accounted for the remaining 33%. As noted earlier, Service Assurance benefited in part from government-related orders, including some received earlier than expected, while Cybersecurity faced a more difficult comparison, as the same quarter in the prior year grew approximately 18%. Turning to our customer verticals. For the first quarter, Enterprise revenue grew by 19.1% and Service Provider revenue grew by 3.3%. During the same period, Enterprise accounted for 63% of our total revenue, and Service Provider accounted for the remaining 37%. Additionally, no customer accounted for more than 10% of our revenue for the first quarter of fiscal year 2027. Turning to Slide 12, for the first quarter of fiscal year 2027, the U.S. represented 59% of revenue and international represented 41% of revenue. Slide 13 shows key balance sheet items and free cash flow for the period. We ended the first quarter of fiscal year 2027 with $668.5 million in cash, cash equivalents, and short and long-term marketable securities, compared with $705.1 million at the end of fiscal year 2026. Free cash flow was $44.3 million for the first quarter. The reduction in cash primarily reflects the May 1 acquisition of the DDoS assets of DigiCert, Inc., which we previously disclosed and discussed as a subsequent event on our Q4 FY'26 earnings call. We did not repurchase shares during the first quarter and remain committed to our share repurchase program. Let's move to Slide 14 for our fiscal year 2027 outlook and some additional color on the second quarter. As Anil noted earlier, we are reaffirming our full fiscal year 2027 outlook provided last quarter. We continue to expect year-over-year growth in both revenue and earnings, with the following assumptions for the full fiscal year. Revenue in the range of $885 million to $915 million. Non-GAAP EPS in the range of $2.65 to $2.80. A non-GAAP effective tax rate of approximately 20%, and weighted average diluted shares outstanding of approximately 74 million to 75 million. 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. As a result, we expect first-half revenue growth in the mid-single-digits. We expect Q2 EPS to grow in the high-single-digits, driven in part by our ENGAGE conference shifting from Q2 in the prior year to Q3 this fiscal year. In summary, we delivered a strong first quarter and solid start to our fiscal year. We remain focused on executing against our fiscal year 2027 objectives. Our capital allocation priorities remain consistent, investing in profitable growth, maintaining a strong financial position, and returning excess capital to shareholders over time primarily through share repurchases. Longer term, we believe NETSCOUT is well positioned to support customers as their network, security, and operations environments become more complex. Our enterprise -- our expertise in Cybersecurity, Service Assurance, and network observability, together with our AI-ready Smart Data platform, gives customers a trusted foundation for digital transformation and AI-enabled operations. That concludes my review of our financial results and outlook. Please note that we plan to attend the B. Riley's Consumer and TMT Conference in New York in September. We look forward to seeing some of you there. With that, let's open it up for questions. Operator? Operator: [Operator Instructions] Our first question will come from Matt Hedberg with RBC Capital Markets. Simran Biswal: This is Simran on for Matt Hedberg. Congrats on the quarter. My first question is that you noted that Q1 benefited from like the government-related orders that were received earlier than expected. Could you quantify or just give more color on like how much got pulled in and how we should think about that impacting linearity for Q2 in terms of those orders? Anthony Piazza: Sure. 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. Simran Biswal: Okay. And then just on some of the traction around your innovations like Sensor and Streamer. How should we think about that contribution for the year? And then just more generally, what's resonating well with customers? Anil Singhal: Well, I -- so first thing is that our Service Assurance growth include that Omnis revenue. That's how we are categorizing it right now. And so we have less than 10 customers of that solution already. And people are really hungry, and not just people, but AI algorithms can do a great job, but they also need a great data set. So we see a strong demand for what we are doing and especially since this is -- can be plugged in as a software module to our existing Service Assurance solution, one of the challenges we need to watch out for is what is the sales cycle looks like because these are big AI projects, and those are the two dynamics we are managing right now. Anthony Piazza: So I believe we see a lot of excitement at the customer level. We see a solid pipeline for this area. But I mean, customers are still experimenting. And so as they do that and decide on what their AI strategy is, then we'll probably start to see more. I think last quarter, we said for the full year it was about $15 million for FY '26. If I were to annualize the first quarter, it's growing nicely for the year. So we expect good contribution. But again, it's still small. So we'll update people as the year goes on. Operator: Our next question will come from Erik Suppiger with B. Riley Securities. Erik Suppiger: Congrats on a good quarter. To your first comment, it sounds like Federal accelerated. So can you comment a little bit about what you're expecting for Federal as we enter the fiscal year-end for the -- for Q2? And then your Rest of World was down. Does that reflect slowing in the Middle East with the conflict going on there? Or how should we think of the Rest of World business since that's been a growth driver in the past? Anthony Piazza: Yes. So from a Federal government perspective, it tends to run in the mid to high single digits as a percentage of total revenue. For Q1, it ran in the mid-teens area. So it was strong. We have a nice, solid pipeline of Federal deals. But as you know, with the Federal government, it's all about magnitude and timing of funding. But we're optimistic about the Federal government right now. As far as the rest of the world... Erik Suppiger: Just to be clear on that, I thought you said that you did not have any 10% customers, but you guys wrote in aggregate in Federal, is that to suggest that Federal in aggregate was in the mid... Anthony Piazza: Correct. Erik Suppiger: Did you say the mid-single digits? Or did you say mid-teens? Anthony Piazza: Mid-teens. Yes. So the Federal revenue is made up of multiple customer and so no one customer, the whole thing. With regard to Rest of World, from our perspective, it's really just timing of deals. We don't see any trends in that right now. Operator: Our next question will come from Kevin Liu with K. Liu & Company. Kevin Liu: Just on the Cybersecurity side of things. I'm curious if you heard anything from customers about the impact of the [indiscernible] model introduction and how fears over AI and the like could affect things? Just wondering if that's either held up or maybe accelerated some deals and generally how you think that impacts deal cycles as we move forward? Anil Singhal: I think there are two areas, Kevin. So first in the DDoS area, we had announced a option to our product called ADP and which is basically AI-enabled automation support and things like that, for our DDoS solution. So that is going well and it's still early in the adoption cycle. On the Cybersecurity, on the Omnis side, we have not focused on that right now because we see a lot of demand on the Service Assurance side with AI. But at some point, we'll be able to use our Omnis Sensor and Streamer solution for security use cases also. But right now, the focus is on AI and ADP on the DDoS side and on the Service Assurance side with AI. Kevin Liu: Understood. And then maybe one for Tony. Just on the inventory increase in the quarter, it's kind of up to the highest levels we've seen in a few years. I'm just wondering if there's any particular driver of that? And what sort of implications that might have for your product gross margin in terms of mix shift as we make our way through the year? Anthony Piazza: Yes. So as you know, there's some supply chain challenges out there resulting from these AI data center build-out. So some of the equipment is more challenging to get and the prices are increasing. And so we are working with our vendors that participate in our COTS program, so customers can buy the software from us and the hardware from the vendors, to try to secure inventory and control the prices on that side. But additionally, NETSCOUT has purchased incremental inventory, which you saw, because the inventory went up about $7 million in the quarter, to secure that inventory so that we can help mitigate any challenges that customers might have as they think about purchasing the equipment. Because, although from a equipment perspective, it's not that significant for NETSCOUT because NETSCOUT is primarily a software vendor. Customers may change their buying behaviors if they can't get the equipment and it could impact software. So what we're doing is working multiple solutions to proactively mitigate that issue for our customers. And thus far, we've been successful, and we haven't experienced issues in that area. So that's what we're doing with the inventory. Operator: There are no further questions in the queue. So I'd like to close out today's call. Thank you for joining, ladies and gentlemen, and we appreciate your participation. You may now disconnect. 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This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. NetScout (NTCT) Q1 2027 Earnings Call Transcript was originally published by The Motley Fool

Cisco Systems CSCO) is set to report its fiscal fourth-quarter results after the closing bell on Wednesday, Aug. 12, putting the networking giant back in the spotlight as investors assess whether its impressive momentum can continue. CSCO has been one of the market’s stronger performers, with enthusiasm surrounding artificial intelligence (AI) infrastructure demand and an accelerating networking refresh cycle helping support investor sentiment. With Cisco’s stock soaring nearly 60% year to date and just 5% from a 52-week and all-time high of $130 a share, its upcoming earnings report could determine whether there is enough fundamental support to extend the rally. The key question for investors is whether Cisco's improving growth profile and rapidly expanding AI opportunity justify buying CSCO ahead of earnings or whether much of the optimism is already reflected in its valuation. Image Source: Zacks Investment Research As shown in the EPS surprise performance chart above, Cisco stock surged after reporting its most recent Q3 results in May and has now soared +170% over the last two years. This comes as Cisco delivered an impressive fiscal third quarter, reporting record revenues of $15.8 billion, up 12% year over year. Non-GAAP earnings increased 10% to $1.06 per share. The top and bottom line results exceeded the high end of management's guidance and comfortably topped Wall Street’s expectations by roughly 2%, respectively. Image Source: Zacks Investment Research Perhaps more encouraging was the strength of Cisco's underlying demand trends. Total product orders jumped 35% YoY and increased 19% when excluding hyperscale customers. Networking product order growth accelerated to more than 50%. Cisco's traditional networking franchise is also benefiting from what it characterized as a major multi-year campus networking refresh cycle (private networks that link buildings and infrastructure within a specific area). Campus networking orders increased by more than 25% in Q3, while data center switching orders surged by more than 40%. Those trends give Cisco an encouraging setup heading into its Q4 report. Management previously guided for fourth-quarter revenue to hit a new quarterly peak of between $16.7 billion and $16.9 billion. Cisco also projected Non-GAAP earnings to be at a new quarterly high of  $1.16-$1.18 per share, with the company expecting a non-GAAP gross margin of 65.5%-66.5% and an operating margin of 34%-35%. It’s also noteworthy that Cisco raised its full-year outlook following its Q3 results, now expecting full-year revenue at $62.8-$63 billion and adjusted earnings of $4.27-$4.29 per share, compared with its previous guidance of $61.2-$61.7 billion in revenue and $4.13-$4.17 in adjusted EPS. Notably, the Zacks Consensus calls for Cisco’s Q4 sales to increase nearly 15% to $16.85 billion, with Q4 EPS expected to rise 18% to $1.17 per share (Current Qtr below). Analyst consensus expectations call for annual revenue to be up 11% to $62.95 billion, with FY26 EPS projected to rise 12% to $4.28. Image Source: Zacks Investment Research AI remains one of the most important pieces of the Cisco investment story. Demand from hyperscale customers has accelerated substantially. Cisco booked $5.3 billion of AI infrastructure orders through the first three quarters of fiscal 2026 and subsequently raised its full-year AI order expectation to $9 billion from $5 billion. Management also increased its fiscal 2026 AI infrastructure revenue expectation to $4 billion from $3 billion. That momentum is significant because Cisco is increasingly positioned to participate in the massive infrastructure buildout needed to connect AI clusters and data centers. As AI workloads become larger and more complex, networking performance becomes increasingly critical, creating opportunities for Cisco's switching, routing, optics and related technologies. Investors will want to pay close attention to management's latest AI order numbers on Wednesday. Another increase in AI expectations could reinforce the argument that Cisco is transitioning from a mature networking company into a more meaningful beneficiary of the AI infrastructure investment cycle. Conversely, any slowdown in hyperscale orders could disappoint investors given the increasingly optimistic expectations embedded in the stock. Cisco also remains an attractive cash-return story. The company returned $2.9 billion to shareholders through dividends and share repurchases during its fiscal third quarter. That included approximately $1.7 billion in dividends and $1.3 billion in stock buybacks. It’s noteworthy that Cisco still had $9.6 billion remaining under its current share-repurchase authorization. Meanwhile, Cisco most recently had $16.6 billion in cash and equivalents. This combination of substantial cash generation, dividends and buybacks provides investors with an additional source of returns beyond potential stock-price appreciation. CSCO offers a respectable 1.38% annual dividend yield, noticeably above the benchmark S&P 500’s 1.01% average, while many of its tech peers remain primarily focused on growth and don’t pay dividends. Cisco’s 49% payout ratio also suggests there is room for future dividend hikes. Image Source: Zacks Investment Research At current levels, Cisco stock is trading at around 30X forward earnings. This is a noticeable but not overly stretched premium to the S&P 500’s 22X and its Zacks Computer-Networking Industry Average of 18X, which includes peers such as Digi International DGII) and NetScout Systems NTCT). That said, it’s also worth mentioning that CSCO is near its decade-long high of 35X forward earnings and is well above its 10-year median of 16X. Image Source: Zacks Investment Research Cisco Systems enters its fiscal fourth-quarter earnings report with several powerful catalysts working in its favor. Surging AI infrastructure demand, a major enterprise networking refresh cycle, strong product orders and substantial shareholder returns have strengthened the company's investment case. At the same time, expectations have risen alongside CSCO shares. That makes Wednesday's earnings announcement particularly important, as investors will be looking for evidence that the company can sustain its elevated growth trajectory into fiscal 2027. While it's easy to see how investors have remained enthusiastic about Cisco Systems stock, CSCO currently lands a Zacks Rank #3 (Hold). Keeping that in mind, the plausibility of higher highs will certainly depend on a strong Q4 report and guidance that helps justify what has already been an extensive rally. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Cisco Systems, Inc. (CSCO) : Free Stock Analysis Report Digi International Inc. (DGII) : Free Stock Analysis Report NetScout Systems, Inc. (NTCT) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Interested in NetScout Systems, Inc.? Here are five stocks we like better. NetScout reported strong fiscal Q1 2027 results, with revenue up 12.7% to $210.4 million and non-GAAP EPS rising to $0.52 from $0.34. Service assurance revenue led growth, increasing 19.7%, while enterprise revenue rose 19.1%. Government orders worth approximately $10 million to $15 million were pulled into the first quarter, which is expected to make second-quarter comparisons more difficult. Management anticipates roughly flat Q2 revenue but reaffirmed its full-year revenue guidance of $885 million to $915 million and EPS guidance of $2.65 to $2.80. NetScout expanded its cybersecurity capabilities after acquiring DigiCert’s DDoS protection assets, bringing Arbor Cloud infrastructure in-house and doubling mitigation capacity to 30 terabits per second. Gross margin increased to 80.6% and non-GAAP operating margin improved to 20.8%. 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. → Meta’s Earnings Drop Shows Wall Street Wants More Than Ad Growth 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 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%. → 4 Oil and Gas ETF Plays as Prices Stay Sky-High 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. → Ulta's Growth Is Real, But So Are the Risks 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 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. 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. 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. 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. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "NetScout Systems Q1 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for August 2026.

NetScout Systems (NTCT) came out with quarterly earnings of $0.52 per share, beating the Zacks Consensus Estimate of $0.39 per share. This compares to earnings of $0.34 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of +33.33%. A quarter ago, it was expected that this provider of products that gauge network performance would post earnings of $0.46 per share when it actually produced earnings of $0.52, delivering a surprise of +13.04%. Over the last four quarters, the company has surpassed consensus EPS estimates four times. NetScout, which belongs to the Zacks Computer - Networking industry, posted revenues of $210.42 million for the quarter ended June 2026, surpassing the Zacks Consensus Estimate by 7.19%. This compares to year-ago revenues of $186.75 million. The company has topped consensus revenue estimates four times over the last four quarters. The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call. NetScout shares have added about 51.6% since the beginning of the year versus the S&P 500's gain of 12.8%. While NetScout has outperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock? There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately. Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions. Ahead of this earnings release, the estimate revisions trend for NetScout was mixed. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #3 (Hold) for the stock. So, the shares are expected to perform in line with the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. It will be interesting to see how estimates for the coming quarters and the current fiscal year change in the days ahead. The current consensus EPS estimate is $0.73 on $229.36 million in revenues for the coming quarter and $2.71 on $903.4 million in revenues for the current fiscal year. Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Computer - Networking is currently in the bottom 31% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. Another stock from the same industry, Intrusion Inc. (INTZ), has yet to report results for the quarter ended June 2026. The results are expected to be released on August 11. This company is expected to post quarterly loss of $0.10 per share in its upcoming report, which represents no change from the year-ago quarter. The consensus EPS estimate for the quarter has remained unchanged over the last 30 days. Intrusion Inc.'s revenues are expected to be $1.5 million, down 19.8% from the year-ago quarter. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report NetScout Systems, Inc. (NTCT) : Free Stock Analysis Report Intrusion Inc. (INTZ) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

- Delivers Strong First Quarter Results Providing Solid Start to the Fiscal Year; Reaffirms Full Year Outlook - WESTFORD, Mass., August 06, 2026--(BUSINESS WIRE)--NETSCOUT SYSTEMS, INC. (NASDAQ: NTCT), a leading provider of network observability, AIOps, carrier service assurance, cybersecurity, and DDoS attack protection, announced financial results for its first quarter ended June 30, 2026. Remarks by Anil Singhal, NETSCOUT’s President & Chief Executive Officer: "We delivered strong first quarter results, providing a solid start to our fiscal year 2027. Performance was driven by our Service Assurance offering, which benefited in part from government-related orders, some of which were received earlier than anticipated. Growth also reflected traction in some of our newest innovations, including our Omnis Sensor and Streamer solutions. Our Cybersecurity revenue was consistent with the prior year against a strong comparison. Together, these underscore how enterprises and service providers continue to rely on NETSCOUT for mission-critical, high-fidelity visibility across increasingly complex digital environments and reflect our continued focus on technology advancements across our portfolio. Additionally, in June, we marked a major milestone in NETSCOUT’s 40-year history of innovation with the issuance of our 750th patent. "We are reaffirming our fiscal year 2027 outlook as we continue to execute on our strategy to drive revenue, expand margins, and generate solid free cash flow. As customers accelerate adoption of new AI-enabled applications, we are well positioned to deliver the intelligence that strengthens network resilience, improves operational efficiency, and supports confident, data-driven decision-making." First Quarter Financial Results: FY2027 compared with FY2026 Total revenue grew 12.7% to $210.4 million, compared with $186.7 million. GAAP income from operations was $14.5 million, or 6.9% of total revenue. This compares with a GAAP loss from operations of $6.6 million, or negative 3.5% of total revenue. Non-GAAP income from operations was $43.7 million, or 20.8% of total revenue, compared with $26.6 million, or 14.2%. GAAP net income was $21.8 million, or $0.29 per diluted share, compared with GAAP net loss of $3.7 million, or a loss of $0.05 per diluted share. Non-GAAP net income was $38.6 million, or $0.52 per diluted share, compared with $24.7 million, or $0.34 per diluted share. Adjusted EBITDA was $46.9 million, or 22.3% of total revenue, compared with $29.3 million, or 15.7%. A reconciliation of GAAP and non-GAAP results is included in the financial tables below. As of June 30, 2026, cash, cash equivalents, and short and long-term marketable securities totaled $668.5 million, compared with $705.1 million as of March 31, 2026, primarily reflecting the impact of the previously disclosed acquisition of DigiCert's DDoS attack protection business assets. Financial Outlook For fiscal year 2027, NETSCOUT is reaffirming its outlook, reflecting anticipated continued growth and margin expansion: Revenue 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 to range from $1.55 to $1.70; and Non-GAAP net income per diluted share to range from $2.65 to $2.80, implying 9.9% year-over-year growth at the midpoint. A reconciliation between GAAP and non-GAAP fiscal year 2027 outlook is in the financial tables below. Recent Highlights In July, NETSCOUT announced the doubling of Arbor Cloud mitigation capacity to 33 terabits per second, building directly on our May acquisition of DigiCert’s DDoS attack protection business assets. Together, these actions reflect a deliberate strategy to scale Arbor Cloud with greater control, efficiency, and speed by bringing the platform fully in-house, enabling faster and more efficient capacity investment, tighter alignment between infrastructure and threat intelligence, accelerated innovation, and improved margin potential from recurring revenue, while strengthening our ability to deliver resilient, high-performance protection against increasingly complex and large-scale attacks. In June, NETSCOUT was awarded its 750th patent for "Systems and Methods for Performing Computer Network Service Chain Analysis." The patent portfolio covers a broad spectrum of technologies, including packet capture and real-time analysis at carrier and enterprise scale; DDoS attack detection, classification, and automated mitigation; mobile network performance monitoring, 5G service assurance, and radio access network observability; network detection and response; artificial intelligence and machine learning-driven analytics; adaptive threat detection; and smart data that is primed for AI and agentic AI workloads. Conference Call Instructions: NETSCOUT will host a conference call to discuss its first quarter financial results and full fiscal year 2027 financial outlook: August 6, 2026 at 8:30 a.m. ET Webcast live at https://ir.netscout.com/investors/overview/default.aspx Dial-in to (800) 267-6316, or (203) 518-9783 for international callers, code NTCTQ127. To access a replay, call (800) 839-3734, or (402) 220-2976 internationally, available today after 12:00 p.m. ET for approximately one week or listen on NETSCOUT’s website for one year. Use of Non-GAAP Financial Information: To supplement the financial measures presented in NETSCOUT's press release in accordance with accounting principles generally accepted in the United States (GAAP), NETSCOUT also reports the following non-GAAP measures: non-GAAP gross profit, non-GAAP income from operations, non-GAAP operating margin, non-GAAP net income, non-GAAP diluted net income per share, and adjusted EBITDA. Non-GAAP gross profit removes expenses related to the amortization of acquired intangible assets, share-based compensation expense, and acquisition-related depreciation expense from gross profit (GAAP). Non-GAAP income from operations includes the aforementioned adjustments related to non-GAAP gross profit and also removes executive transition costs and restructuring charges from income from operations (GAAP). Non-GAAP operating margin is non-GAAP income from operations expressed as a percentage of revenue. Non-GAAP net income includes the foregoing adjustments related to non-GAAP income from operations and also removes the income tax effects of such adjustments as well as any loss on extinguishment of debt from net income (GAAP). Non-GAAP diluted net income per share is non-GAAP net income divided by total outstanding shares on a diluted basis. Adjusted EBITDA includes the aforementioned adjustments related to non-GAAP net income and also removes interest and other expense, income tax expense, and depreciation from net income (GAAP). Beginning in the third quarter of fiscal year 2026, we have renamed non-GAAP EBITDA from operations to adjusted EBITDA. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures included in the attached tables within this press release. These non-GAAP measures are not prepared in accordance with GAAP, should not be considered an alternative for measures prepared in accordance with GAAP (gross profit, income from operations, operating margin, net income, and diluted net income per share), and may have limitations because they do not reflect all NETSCOUT’s results of operations as determined in accordance with GAAP. These non-GAAP measures should only be used to evaluate NETSCOUT’s results of operations in conjunction with the corresponding GAAP measures. The presentation of non-GAAP information is not meant to be considered superior to, in isolation from, or as a substitute for results prepared in accordance with GAAP. NETSCOUT believes these non-GAAP financial measures will enhance the reader’s overall understanding of NETSCOUT’s current financial performance and NETSCOUT's prospects for the future by providing a higher degree of transparency for certain financial measures and providing a level of disclosure that helps investors understand how the Company plans and measures its own business. NETSCOUT believes that providing these non-GAAP measures affords investors a view of NETSCOUT’s operating results that may be more easily compared to peer companies and also enables investors to consider NETSCOUT’s operating results on both a GAAP and non-GAAP basis during and following the integration period of NETSCOUT’s acquisitions. Presenting the GAAP measures on their own, without the supplemental non-GAAP disclosures, might not be indicative of NETSCOUT’s core operating results. Furthermore, NETSCOUT believes that the presentation of non-GAAP measures when shown in conjunction with the corresponding GAAP measures provides useful information to management and investors regarding present and future business trends relating to its financial condition and results of operations. NETSCOUT management regularly uses supplemental non-GAAP financial measures internally to understand, manage and evaluate its business and to make operating decisions. These non-GAAP measures are among the primary factors that management uses in planning and forecasting. About NETSCOUT NETSCOUT SYSTEMS, INC. (NASDAQ: NTCT) protects the connected world from cyberattacks and performance and availability disruptions through its unique visibility platform and solutions powered by its pioneering deep packet inspection at scale technology. As a leading provider of network observability, AIOps, carrier service assurance, cybersecurity, and Distributed Denial-of-Service (DDoS) attack protection solutions, NETSCOUT serves the world’s largest enterprises, service providers, and public sector organizations. Learn more at www.netscout.com or follow @NETSCOUT on LinkedIn, X, or Facebook. Forward-Looking Statements This press release contains forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. Examples of forward-looking statements include statements regarding our future financial performance or position, liquidity, results of operations, business strategy, plans and objectives of management for future operations, and other statements that are not historical fact. You can identify forward-looking statements by their use of forward-looking words such as "may," "will," "anticipate," "expect," "believe," "estimate," "intend," "plan," "should," "seek," or other comparable terms. Investors are cautioned that such forward-looking statements in this press release include, without limitation, statements regarding NETSCOUT continuing to execute on its strategy to drive revenue growth, margin expansion, and solid free cash flow, and believes it is well positioned to deliver the intelligence that strengthens network resilience, improves operational efficiency, and supports confident, data-driven decision making; NETSCOUT’s financial outlook and expectations; NETSCOUT’s strategic objectives, plans, commitments, aspirations and goals. Actual results could differ materially from those indicated in the forward-looking statements due to known and unknown risks, uncertainties, assumptions, and other factors, including macroeconomic factors and slowdowns or downturns in economic conditions generally and in the market for advanced networks, service assurance and cybersecurity solutions specifically; the volatile foreign exchange environment; the Company’s relationships with strategic partners and resellers; dependence upon broad-based acceptance of the Company’s network performance management solutions; the presence of competitors with greater financial resources than the Company has, and their strategic response to the Company’s products; the Company’s ability to retain key executives and employees; potential lower than expected demand for the Company’s products and services; and the Company’s ability to recognize the expected gain from its acquisition of the assets of DigiCert, Inc.’s DDoS protection business. The risks included above are not exhaustive. For a more detailed description of the risk factors associated with the Company, please refer to the "Management’s Discussion and Analysis of Financial Condition and Results of Operations" and "Risk Factors" sections of the Company’s filings with the Securities and Exchange Commission, including but not limited to, our annual report on Form 10-K and quarterly reports on Form 10-Q. Any forward-looking information in this press release is as of the date of this press release, and NETSCOUT undertakes no obligation to update such information unless required by law. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. NETSCOUT’s financial guidance is based on estimates and assumptions that are subject to significant uncertainties. ©2026 NETSCOUT SYSTEMS, INC. All rights reserved. NETSCOUT and the NETSCOUT logo are registered trademarks or trademarks of NETSCOUT SYSTEMS, INC. and/or its subsidiaries and/or affiliates in the USA and/or other countries. View source version on businesswire.com: https://www.businesswire.com/news/home/20260806214859/en/ Contacts Investor Contact Scott Dressel, VP, Corporate Finance978-614-4000, [email protected] Media Contact Chris Lucas, AVP, Marketing & Corporate Communications978-614-4124, [email protected]

This article first appeared on GuruFocus. Release Date: August 06, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. NetScout Systems Inc (NASDAQ:NTCT) delivered strong first-quarter results with total revenue increasing 13% year-over-year to $210 million, exceeding expectations. The company expanded both gross and operating margins significantly, with operating margin improving 660 basis points to 20.8%. Service assurance revenue grew approximately 20% year-over-year, driven by government-related orders and strong demand for new innovations like Omnisensor and streamer products. NetScout Systems Inc (NASDAQ:NTCT) reached a significant milestone with the granting of its 750th patent, demonstrating the strength of its R&D engine and technology moat. The company successfully doubled its DDoS mitigation capability to 33 terabits per second through the recent acquisition and capacity expansion, positioning it for growth in cybersecurity. NetScout Systems Inc (NASDAQ:NTCT) generated solid free cash flow of $44.3 million in the first quarter and reaffirmed its full-year fiscal 2027 outlook. Cybersecurity revenue growth was modest at approximately 1% year-over-year, facing a difficult comparison to the prior year's high-teens growth. The first quarter benefited from approximately $10 million to $15 million of government-related orders pulled forward, which will create a challenging comparison for the second quarter. NetScout Systems Inc (NASDAQ:NTCT) expects second-quarter revenue to be broadly consistent with the prior year period due to the acceleration of orders into Q1 and a strong prior-year comparison. The company is experiencing supply chain challenges and increasing prices for equipment due to AI data center buildouts, requiring proactive inventory management. Customers remain disciplined in their overall spending, and AI-related projects are still in the experimentation phase, which could lengthen sales cycles. Rest of World revenue declined in the quarter, though management attributes this to timing of deals rather than a broader trend. Warning! GuruFocus has detected 7 Warning Sign with NTCT. Is NTCT fairly valued? Test your thesis with our free DCF calculator. Q: Could you quantify how much of the Q1 revenue was pulled forward from government-related orders received earlier than expected, and how should we think about the impact on Q2 linearity? A: Tony Piazza (EVP & CFO): The orders pulled into Q1 were approximately $10 million to $15 million, primarily government-related. If we normalize the quarter for this pull-forward, revenue would have grown in the mid-single-digits, which is consistent with our expectations for the first half of the fiscal year and our full-year outlook. Q: Can you provide more color on the traction and contribution from newer innovations like Omnisensor and Omni Streamer, and what is resonating with customers? A: Anil Singal (President & CEO): Service assurance revenue, which includes Omnis revenue, grew about 20% year-over-year. We already have less than 10 customers for the new Omnisensor and Streamer solutions. There is strong demand because AI algorithms need a great data set, and our high-fidelity metadata plugs in as a software module to existing service assurance solutions. The main dynamic we are managing is the sales cycle length, as these are large AI projects. Tony Piazza added that while there is excitement and a solid pipeline, customers are still experimenting with their AI strategies. For FY26, this area contributed about $15 million, and annualizing Q1 shows it is growing nicely, though it remains small. Q: Can you comment on what you are expecting for federal business as we enter Q2, and does the Rest of World decline reflect slowing in the Middle East? A: Tony Piazza (EVP & CFO): Federal government business typically runs in the mid to high single-digits as a percentage of total revenue, but in Q1 it ran in the mid-teens, which was strong. We have a solid pipeline of federal deals, though timing and magnitude of funding are always factors. Regarding Rest of World, the decline is really just a matter of deal timing, and we don't see any negative trends in that region right now. Q: Have you heard anything from customers about the impact of AI model introductions and fears over AI exploits, and how might that affect deal cycles in cybersecurity? A: Anil Singal (President & CEO): In the DDoS area, we announced an AI-enabled automation option called Adaptive DDoS Protection (ADP), which is in the adoption cycle and going well. On the cybersecurity side for Omnis, we have not focused on AI yet because we see more demand on the service assurance side. However, we will eventually use our Omnisensor and Streamer solutions for security use cases. Currently, the focus is on AI and ADP for DDoS and AI for service assurance. Q: Inventory increased to the highest levels in a few years. What is driving this, and what are the implications for product gross margin and mix shift? A: Tony Piazza (EVP & CFO): There are supply chain challenges resulting from AI data center build-outs, making some equipment harder to get and prices higher. We are working with vendors in our COTS program to secure inventory and control prices. NETSCOUT purchased incremental inventory (up about $7 million in the quarter) to proactively mitigate any challenges customers might face. While equipment is not significant for us as a software vendor, we want to prevent customers from changing buying behavior due to equipment shortages. So far, we have been successful and have not experienced issues. Q: Can you elaborate on the strength in service assurance revenue, which grew approximately 20% year-over-year, and the drivers behind it? A: Anil Singal (President & CEO): The growth benefited from government-related orders, including some received earlier than anticipated as customers advanced deployment plans. It also reflected sales of our newest innovations, including Omnisensor and Streamer products, which make high-fidelity metadata available across observability, cybersecurity, and AIOps platforms. Enterprise customers are using these solutions to close visibility gaps created by hybrid cloud, remote work, automation, and AI workloads. Q: Cybersecurity revenue grew only about 1% year-over-year. Can you explain the performance and the difficult comparison you mentioned? A: Anil Singal (President & CEO): Cybersecurity revenue increased approximately 1%, which was achieved despite a difficult comparison to the prior-year period that grew in the high teens due to the timing of large projects. Both enterprise and service provider verticals grew modestly in the quarter. We continue to view cybersecurity as an important long-term growth opportunity for NETSCOUT. Q: Can you provide more details on the DDoS acquisition and the capacity expansion to 33 terabits per second? A: Anil Singal (President & CEO): The May acquisition of the DDoS attack protection business assets, combined with our capacity expansion, reflects a strategy to scale our cloud with greater control, efficiency, and speed. By bringing the platform's back-end infrastructure fully in-house, we created the foundation to invest more quickly in capacity, culminating in doubling our mitigation capability to 33 terabits per second. This gives us tighter alignment between infrastructure and threat intelligence, faster innovation cycles, and improved margin potential through immediately accretive recurring revenues. Q: What is the outlook for Q2 and the full fiscal year 2027 given the strong Q1 results? A: Tony Piazza (EVP & CFO): We are reaffirming our full fiscal year 2027 outlook: revenue in the range of $885 million to $915 million and non-GAAP EPS of $2.65 to $2.80. For Q2, we expect revenue to be broadly consistent with the prior year period, reflecting the acceleration of orders into Q1 and a strong comparison when revenue grew nearly 15%. We expect Q2 EPS to grow in the high-single-digits, driven in part by our Engage conference shifting from Q2 in the prior year to Q3 this fiscal year. Q: Can you highlight some of the key customer wins in the quarter that demonstrate the relevance of your portfolio? A: Anil Singal (President & CEO): We completed multiple government agency-related deals in service assurance and cybersecurity with an aggregate value in the low eight digits, including Omnisensor, Omni Streamer, and cyber intelligence solutions. We also signed a multimillion-dollar agreement with a long-standing international service provider to strengthen DDoS attack protection. Additionally, we secured a seven-figure deal with a U.S. financial institution for our Omnis ClearStack Sensor to address visibility challenges in large Kubernetes deployments. For the complete transcript of the earnings call, please refer to the full earnings call transcript.

NetScout Systems (NTCT) could be a solid addition to your portfolio given a notable revision in the company's earnings estimates. While the stock has been gaining lately, the trend might continue since its earnings outlook is still improving. The upward trend in estimate revisions for this provider of products that gauge network performance reflects growing optimism of analysts on its earnings prospects, which should get reflected in its stock price. After all, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements. This insight is at the core of our stock rating tool -- the Zacks Rank. The five-grade Zacks Rank system, which ranges from a Zacks Rank #1 (Strong Buy) to a Zacks Rank #5 (Strong Sell), has an impressive externally-audited track record of outperformance, with Zacks #1 Ranked stocks generating an average annual return of +25% since 2008. For NetScout Systems, there has been strong agreement among the covering analysts in raising earnings estimates, which has helped push consensus estimates considerably higher for the next quarter and full year. The chart below shows the evolution of forward 12-month Zacks Consensus EPS estimate: For the current quarter, the company is expected to earn $0.39 per share, which is a change of +14.7% from the year-ago reported number. Over the last 30 days, the Zacks Consensus Estimate for NetScout has increased 24.24% because one estimate has moved higher while one has gone lower. The company is expected to earn $2.71 per share for the full year, which represents a change of +9.3% from the prior-year number. The revisions trend for the current year also appears quite promising for NetScout, with two estimates moving higher over the past month compared to no negative revisions. The consensus estimate has also received a boost over this time frame, increasing 12.3%. Thanks to promising estimate revisions, NetScout currently carries a Zacks Rank #2 (Buy). The Zacks Rank is a tried-and-tested rating tool that helps investors effectively harness the power of earnings estimate revisions and make the right investment decision.You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. Our research shows that stocks with Zacks Rank #1 (Strong Buy) and 2 (Buy) significantly outperform the S&P 500. While strong estimate revisions for NetScout have attracted decent investments and pushed the stock 23.3% higher over the past four weeks, further upside may still be left in the stock. So, you may consider adding it to your portfolio right away. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report NetScout Systems, Inc. (NTCT) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Image source: The Motley Fool. Thursday, May 7, 2026 at 8:30 a.m. ET Chairman and Chief Executive Officer — Anil K. Singhal Executive Vice President and Chief Financial Officer — Anthony F. Piazza we will focus our discussion on non-GAAP financial information. These measures should not be considered in isolation from or as a substitute for financial information prepared in accordance with GAAP. Reconciliation of all non-GAAP metrics to the nearest GAAP measures are provided in the appendix of the slide presentation in today's financial results press release and on our website. I will now turn the call over to Anil for his prepared remarks. Anil? Anil Singhal: Thank you, Scott, and good morning, everyone. We appreciate you joining us today. NetScout delivered strong fiscal year 2026 top and bottom line results, driven by growth across both our Cybersecurity and Service Assurance offerings. Our performance in the fiscal year helped us achieve the key strategic objectives we laid out a year ago, including accelerating product innovation, driving annual revenue growth and expanding margins. We also strengthened our innovation engine through the introduction of differentiated capability across the portfolio, including AI-ready smart data, expanded observability, enhanced edge visibility and adaptive threat protection. We accomplished this in what continues to be a dynamic operating environment, underscoring the strength of our strategy and the consistency of our execution. These results have further reinforced our financial foundation and position NetScout to drive continued innovation, revenue growth and margin improvement in fiscal year 2027. At the same time, we believe market trends across AI, observability and network security are expanding our opportunity set and creating additional revenue for long-term value creation. With that context, let me turn to Slide #6 for a brief review of our fourth quarter and full fiscal year 2026 financial performance for the period ended March 31, 2026. For the fourth quarter, total revenue was approximately $203 million compared with $205 million for the same period last fiscal year, which was in line with our expectations given the shift in customer order timing to the prior quarter as we discussed on our Q3 earnings call. Diluted earnings per share was $0.52, consistent with the same period last fiscal year. For the full fiscal year, which is more representative of the business and the underlying market trends, revenue increased by 4.5% to approximately $860 million, driven by growth in both our Cybersecurity and Service Assurance offerings. We expanded both our gross and operating margins year-over-year and delivered nearly 12% growth in diluted earnings per share at $2.48, exceeding the high end of our guidance range. Now let's turn to Slide #7 for some perspective on our business and some market insights. Starting with a review of our service assurance offerings. The revenue for the full fiscal year increased approximately 3% year-over-year, driven by growth in the enterprise customer vertical with strong contributions from both federal and nonfederal government-related spending. Our Enterprise customers continue to rely on our Service Assurance solutions to advance their digital transformation initiatives. In turn, we are investing in innovation, particularly with respect to observability and AI and to help our customers drive greater efficiency, reduce risk and accelerate troubleshooting and lower costs. An example of this innovation during the year is our Omnis Sensor and Omnis streamer, which work together as an integrated AIOps solution that transforms high-fidelity network packet data into actionable intelligence. Also, our sensor and streamer products include Agentic AI interfaces that enable efficient and cost-effective integration with multi-vendor AI solutions, which facilitate automation and reduces total cost of ownership for our customers. Among our Carrier Service Provider customers, we continue to see measured 5G investment as they balance build-outs with monetization, and we expect this to continue into our fiscal year 2027. At the same time, emerging opportunities such as fixed wireless access, 5G network slicing and AIOps initiative have the potential to drive revenue and cost efficiency for a Communication Service Provider. We believe NETScout is well positioned to support this transition. Our 5G observability solution provides end-to-end visibility for 5G stand-alone slices to support high-performance services such as immersive gaming and large-scale sporting events as well as mission-critical application and services. Moving to our Cybersecurity offerings. Revenue for the full fiscal year increased approximately 8%, with growth across both our Enterprise and Service Provider verticals. Cybersecurity continues to grow faster than the company average and is an increasingly important driver of our long-term revenue growth and margin expansion. Our latest DDoS Threat Intelligence report, which was released in March 2026, assesses the current global threat environment, including newer AI-powered attacks. Foundational services such as DNS and NTP remain under persistent pressure and recent botnet attacks on government, financial and transportation infrastructure show how quickly threat actors can disrupt critical services with either legacy tools or by using AI to increase the scale and sophistication of their attacks. Large coordinated attacks are outpacing traditional defenses and organizations are increasingly turning to automated intelligent protection to keep up. NetScout is well positioned to help customers protect their digital services. Many of our newest innovations support distributed detection and mitigation solutions to provide a more robust and resilient adaptive DDoS protection environment. Additionally, as noted in our earnings release, we just completed a tuck-in acquisition of the assets of DigiCert Incorporation's DDoS protection business that brings the back-end infrastructure of our Arbor Cloud network to fully in-house. We believe this transaction provides us with a greater control of the platform and a clearer path to scaling cloud-based services over time while providing immediate incremental recurring revenue in the cloud DDoS space. Before touching on some of our recent customer wins, I would like to briefly discuss AI and what we believe this new era would mean for NetScout over time. We believe AI will create additional opportunities for both Service Assurance and Cybersecurity by amplifying the need for network visibility and protection. As networks grow more complex and cyber threats increasingly leverage AI tools, we believe the need for adaptive real-time visibility and intelligence protection will continue to rise. These dynamics play directly to NetScout's strengths. We have long been recognized for our packet level approach to network detection, investigation and response. Now our patented deep-packet inspection and metadata aggregation capabilities can generate complex, high fidelity, AI-ready smart data at scale that is purpose-built for advanced analytics like never before. More importantly, we are not competing with foundational AI models. Instead, we are leveraging our differentiated data and domain expertise to enable automation that integrates into our customers' broader observability and AI workflows, helping to enhance visibility and operationalize AI within those environments. From a financial perspective, we believe AI advancement could reinforce the durability of both our cybersecurity and service assurance businesses by supporting upgrade cycles and expanding use cases across our installed base. Taken together, we view AI as a promising opportunity that enhances the value of what we already do best and extends our relevance within customers' critical infrastructures over the long term as they develop and implement their broader AI strategies and initiatives. Turning to customer wins, both Service Assurance and Cybersecurity continue to gain traction. In addition to new customers, we continue to secure a significant amount of repeat business from loyal customers buying new solutions and upgrades along with maintenance services. Two wins from the fourth quarter were: A mid-seven-figure deal with a large European telecom that has been a longtime Cybersecurity and Service Assurance customer. They upgraded their DDoS protection with our Adaptive DDoS offering and our Distributed Threat Mitigation System to enhance their cyber protection. Our adaptive's DDoS mitigates all types of multi-vector attacks before they can impact critical services, while DMS provides enterprise-level protection across both cloud and edge environments with physical and virtual platforms and multiple usage configurations. This client also values our subscription model, which includes support and maintenance and a flexible scale-up and scale-down approach to minimize license wastage. A second deal in the low-seven- figures was with a new customer that is a global leader in chip manufacturing for a variety of industries, including automotive, mobile communications and data centers. This contract included our engineered solution to maintain traffic visibility and address system reliability issues across the network that spans multiple countries. They chose NetScout because of our reputation and ability to provide the critical solutions required to manage the complex interdependency of their networks and applications. With that, let's move to Slide #8 to review our outlook. In fiscal year 2026, we returned the business to revenue growth, improved margins, expanded profitability, delivered strong free cash flows and continue to advance our product capability across both Cybersecurity and Service Assurance. Looking ahead, we are excited about the year in front of us and are leaning into this momentum. We see significant opportunities over the long term to leverage NetScout's deep expertise in cybersecurity and network observability together with our AI-ready data platform to help customers advance their AI and digital transformation initiatives and to manage an increasingly complex digital environment where network performance, availability and security are mission-critical. We believe we are well positioned to drive profitable growth, generate strong free cash flow and enhance long-term shareholder value. These growth dynamics are reflected in our fiscal year 2027 outlook, which Tony will review during his remarks. While we remain mindful of the macro environment, ongoing carrier spending discipline and demand trends across both enterprise and service provider customers, our priorities remains clear. We aim to drive sustained revenue growth by executing against a healthy pipeline with particular emphasis on Cybersecurity and enterprise-led Service Assurance. At the same time, we'll continue to invest in innovation across AI, observability and DDoS protection as well as maintain a disciplined focus on cost management and a balanced capital allocation strategy. We are energized by what lies ahead and look forward to updating you on our progress throughout the year. With that, I will turn the call over to Tony for a review of our financial performance and our outlook for fiscal year 2026 -- 2027. Anthony Piazza: Thank you, Anil, and good morning, everyone. We appreciate you joining us today. I'll start by walking you through the key financial metrics for our fourth quarter and full fiscal year 2026. After that, I'll share some additional commentary on our fiscal year 2027 outlook. As a reminder, other than revenue and balance sheet information, which are on a GAAP basis, this review focuses on our non-GAAP results. All reconciliations with our GAAP results appear in the presentation appendix. I will note the nature of any such comparisons accordingly. Also, as comparisons are on a year-over-year -- also all comparisons are on a year-over-year basis, unless otherwise noted. Slide #10 details the results for the fourth quarter and full fiscal year 2026. Focusing on our fourth quarter performance first. Total revenue was $203 million, down 1% from the same period last fiscal year. This reflects the impact of timing-related order shifts discussed on last quarter's earnings call as certain orders originally expected in Q4 were pulled forward into Q3 as customers utilize remaining calendar year-end budgets. Product revenue totaled $80.7 million compared with $89.5 million last fiscal year, reflecting the timing and mix of certain orders across quarters. Service revenue increased 5.9% year-over-year to $122.3 million, driven by underlying growth and favorable timing of service renewal orders and the mix associated with an enterprise license agreement. We ended the fourth quarter with total product backlog of approximately $50 million, which included $45.8 million of fulfillable backlog. This compares to total product backlog of approximately $33 million, including $25.1 million of fulfillable backlog at the end of the same period in 2025. Our gross profit margin was 79.7% in the fourth quarter, an increase of 0.5 percentage points for the same period -- from the same period in the prior year, reflecting higher gross -- product gross margin due to favorable product mix. Quarterly operating expenses were $117.9 million, up 2.4% year-over-year, primarily related to the timing of variable incentive compensation expense. Our operating margin was 21.6% compared with 23.1% in the same period last fiscal year. We delivered diluted earnings per share of $0.52 for both periods. Moving to the full fiscal year 2026. Revenue increased $4.5 million to 859. -- 4.5% to $859.5 million. Product revenue increased 2.8% to $370.1 million and service revenue increased 5.7% to $489.3 million. As mentioned earlier and in prior quarters, product revenue was impacted by a year-over-year shift in the classification of revenue associated with an enterprise license agreement, reflecting the nature of the customer's composition mix. Service revenue correspondingly benefited from this classification shift as well as the timing of renewals, including back maintenance. Our gross profit margin rose 0.8 percentage points to 80.8%, driven by an increased product margin attributable to higher volume and a favorable product mix. Annual operating expenses increased 2.9% from the prior year. We reported an operating profit margin of 25.4%, up 1.7 percentage points compared to the prior year based on higher revenue, enhanced product margin -- gross margin and disciplined cost management. Diluted earnings per share increased nearly 12% to $2.48. Our annual non-GAAP effective tax rate was 19.9% compared to 19% in the prior year, which benefited from a valuation gain in a foreign investment with favorable tax treatment. Let's turn to Slide 11, where I'll walk you through the key revenue trends by product lines and customer verticals. For the full fiscal year 2026, Service Assurance revenue increased by 2.6% and Cybersecurity revenue grew by 7.8%. During the same period, Service Assurance accounted for approximately 64% of total revenue and Cybersecurity accounted for the remaining 36%. Cybersecurity continues to grow faster than the company average. And over time, we expect it to become a larger portion of our mix, which should be a positive driver of growth. Turning to our customer verticals. For the full fiscal year 2026, Enterprise revenue grew by 5.4% and Service Provider revenue grew by 3.3%. During the same period, Enterprise accounted for approximately 58% of our total revenue and Service Provider accounted for the remaining 42% Additionally, no customer accounted for more than 10% of our revenue for the quarter or the full fiscal year 2026. Turning to Slide 12. This shows our revenue mix between the United States and international markets. For the full fiscal year 2026, the United States represented 55% of revenue and international represented the remaining 45% of revenue. Slide 13 shows some key balance sheet items along with our free cash flow for the period. We ended fiscal year 2026 with $705.1 million in cash, cash equivalents and short- and long-term marketable securities, representing an increase of $212.7 million since the end of fiscal year 2025. Free cash flow was $150.1 million for the fourth quarter and a near record high of $285.4 million for the full fiscal year. During fiscal year 2026, we repurchased approximately 2.5 million shares of our common stock at an average price of $24.29 per share for a total of approximately $61 million under our share repurchase program. From a debt perspective, at year-end, we had no outstanding balance on our $600 million revolving credit facility, which expires in October 2029. To briefly recap some other balance sheet items, accounts receivable net was $151.5 million, representing a decrease of $12.2 million since March 31, 2025. Days Sales Outstanding at the end of the fourth quarter was 62 days compared with 68 days in the same period in the prior year. This change in DSO in the fourth quarter reflects the timing and composition of bookings as well as working capital enhancement initiatives. Let's move to Slide 14 for our outlook. I will focus my remarks on our revenue and non-GAAP earnings per share targets for fiscal year 2027. As Anil noted, we expect to build on our current momentum by driving sustained revenue growth and expanding profitability. For fiscal year 2027, we anticipate revenue in the range of $885 million to $915 million and a non-GAAP diluted earnings per share in the range of $2.65 and $2.80, both representing year-over-year growth on the top and bottom lines. This outlook incorporates the DigiCert DDoS asset acquisition that Anil mentioned during his remarks, which is expected to be immediately accretive and assumes an initial annualized revenue run rate contribution of approximately $20 million, with a partial benefit for fiscal year 2027 given the May 1 transaction close. For the full fiscal year, we expect our non-GAAP effective tax rate to be approximately 20% and weighted average diluted shares outstanding of approximately 74 million to 75 million shares. Our guidance reflects a growing contribution from our Cybersecurity offerings and awareness of the trends in our Service Assurance offerings, including continued spending discipline in the carrier market as well as the current dynamic macro environment. Additionally, I'd like to provide some color on the first quarter of fiscal year 2027. We expect revenue to grow in the mid-single digits range and earnings per share to increase at approximately twice the rate of revenue growth compared with that same -- with the same quarter last fiscal year. So in summary, we delivered on our fiscal year 2026 strategic objectives through new innovations, a return to revenue growth and enhanced margins, resulting in strong performance for the fiscal year. Looking ahead to fiscal year 2027, we plan to build on this momentum by advancing innovation, sustaining revenue growth, further improving profitability and continuing to generate strong free cash flow. Our capital allocation priorities remain consistent, investing in the business for profitable growth, maintaining a strong financial position and returning excess capital to shareholders primarily through share repurchases. We currently have capacity under our share repurchase authorization and subject to market conditions, intend to be active in the market during fiscal year 2027. With a strong cash position, no drawn revolver and ongoing free cash flow generation, we have meaningful flexibility to support our growth initiatives and shareholder returns with a clear focus on long-term value creation. That concludes my formal review of our financial results and outlook. I would also like to note that we will be participating in the Annual Needham Technology, Media and Consumer Conference as well as the Annual B. Riley Securities Institutional Investor Conference in May. I look forward to engaging with many of you there. With that, let's open it up for questions. Operator? Operator: Our first question is from Matthew Hedberg with RBC Capital Markets. Sanika Merchant: This is Sanika Merchant on for Matt Hedberg. Congrats on the quarter. I guess to start, could you talk more about the broader macroeconomic landscape and what demand trends have been like? More specifically, are you seeing any uncertainties from tariffs, AI supply chain dynamics or the war in Iran? And has there been any impact to close rates as a result? Anil Singhal: I think there is a general concerns about what could happen tomorrow. But so far, we have not seen a big impact. We have a strong financial position. We have partners who are supplying the hardware, and we have been able to procure in advance. So overall, the impact on us and even the tariff impact was minimal. So it has not been a big impact on us so far, but we are still cautious about what could happen because of what's happening with Iran war and other thing. But so far, the direct impact has been minimal on NetScout. And yes, just one more thing. So yes, people are always cautious and hold budgets. And that's why sometimes those are flushed in the December quarter, and we benefit from that. So I think overall, while our internal conditions and chances have improved substantially as a result of innovation on -- during the last year, the external environment is -- could get worse, and that's why we are cautiously optimistic on our guidance. Sanika Merchant: Got it. And as a quick follow-up, could you tell us more about how the Fed business performed this quarter and any trends you're seeing there? Anthony Piazza: So the Fed business was good for NetScout for the full fiscal year. Federal generally runs in the mid- to high single digits of total revenue. And this year, fiscal year ran at the high end of that particular range. And so we see good -- we have a strong pipeline in the federal business, but it was really high for us in fiscal year '26. And so therefore, one of the things we're cognizant in the Service Assurance business is if that trend starts to normalize back to what we've seen in the past. But right now, we're seeing good federal traction and a nice pipeline. Operator: And we'll move next to Erik Suppiger with B. Riley Securities. Erik Suppiger: Solid quarter, very good. One, can you just -- last quarter, you had indicated that I think the sensor and streaming business was about $15 million for the first 3 quarters of the fiscal year. Can you give us an update on that? And then we saw some legal actions taken against some of these large botnets where the governments cross-country governments were shutting down some of these botnets. I'm curious if you think that's going to reduce the threat landscape and are customers responding at all to that in terms of their purchasing? Anil Singhal: Yes. So the business which you talked about, about $15 million, we were in the range, somewhere between $10 million and $15 million. And so this is good news as we just launched this solution later in the fiscal year. Regarding the DDoS.. Erik Suppiger: Just to be clear, are you saying you were $10 million to $15 million for fiscal '26. Or was that in the fourth quarter? Anil Singhal: Fiscal year '26. And it was in the second half mostly because the product was introduced only in -- at our ENGAGE conference in October. Anthony Piazza: I think, Erik, like Anil said, that's a relatively new product. We're pleased with the first year out here. And we see opportunity even within some of our backlog, there's some opportunity we already have in there. So we see the opportunity there. I think with regard to some of these sensors and streamers, which target bringing DPI to the observability space and the AI space. I think what we're finding is that there's tremendous interest in this right now. And so we're talking to customers about it, but customers are still trying to figure out what their AI strategy and execution is. And so we're working through that. So even though we've gotten some good initial traction and we see good opportunity, it does take a little while for these type of.. Anil Singhal: Another thing is there is an indirect impact because this strengthens our value proposition of a smart data company. And it makes our core business more sticky because this runs -- our AI solution runs on the foundation of Service Assurance and DDoS solutions. As to your other question about government taking action on the DDoS, I mean that was sort of backward looking. I think these actions were too late for people to be able to fully helped by that. So that will continue. hackers will keep finding new ways. Our product will be used in the initial stage at some point, partly because of some of our innovations and other people who are helping the industry in cybersecurity area, the government will then identify and take some action. And this doesn't reduce the need for our solution and it doesn't reduce the threat landscape, which we'll see in the coming years. Anthony Piazza: I think what we've seen in our threat reports and what's been highlighted by us and others is that AI is actually just accelerating threat landscape. So I don't know that taking out any one party is going to impact the long-term trajectory of the threat landscape. Operator: And we will move next to Kevin Liu with K.Liu & Company. Kevin Liu: Just kind of on the topic of enterprise customers and what they're doing with AI. I'm curious with a lot of your larger, more regulated players, what are you seeing them doing in terms of kind of moving from pilots into more production use cases? And ultimately, do you feel NetScout gets a lot of incremental workloads to kind of monitor and secure there? Or do you think it's more just kind of a shift in kind of what they monitor within their own networks? Anil Singhal: Yes. So Kevin, on the -- I mean, obviously, monitoring the AI infrastructure is an extension of our monitoring and protecting. So the new infrastructure, there's always incremental business that's going to keep the core business growing. But the real AI opportunity for incremental revenue besides that is playing in the agentic AI space, whereas our data either was not easy to consume by third parties. But even if it was consumed, it was not mixed with other data sets so easily. So the promise of agentic AI driving automation is to be able to mix NetScout data with other data set to drive good outcomes. And in that said, we believe our data set may be the most important because it's only available from us in this current form at a scalable level. And yet it's a multiplier to the rest of the data set who generally tell you what is going wrong or what's happening, but not necessarily provide the context of why. And that's what why we do. So I think it's going to highlight the value of our data beyond our existing customer and use cases, which was a dream for last so many -- I mean, last couple of decades. And now it might come through with all the things happening in the AI area. Kevin Liu: A quick follow-up on that. How quickly do you think kind of these agentic AI use cases manifest? Is that within your fiscal '27 or kind of more beyond that? And then just on the backlog that you're carrying today, how much of -- it's up meaningfully year-over-year and sequentially. So just wondering how much of that is kind of due to maybe supply chain constraints impacting your ability to ship versus just kind of timing of orders closed in the quarter? Anil Singhal: I'll let Tony cover after I answer the first question about AI traction. So I think we have to look at there is a lot of investment going on. As you know, part of the supply chain problem is because people by buying a lot of hardware for the AI infrastructure. But it's going to take some time. But I feel that the indirect impact on NetScout core business is already happening. For example, our AI solution runs as a software module on top of the existing deployments. So that makes those deployment more sticky. And even if we -- if the pace of adoption in terms of third-party solution consuming our data, AI solution consuming our data, it may take some time. I think it will have an impact on the core business in the short term. And that's why we have provided this new guidance for the coming year. Anthony Piazza: And then, Kevin, on the backlog, it's really more about timing. It was some large orders that really came in at the end of the quarter and the customer didn't need them yet. And so we've prioritized what had to go out. So it's really more timing. It didn't have anything to do really with any supply chain constraints. Kevin Liu: All right. Great. Congrats on a strong quarter and outlook. Operator: Thank you. This does conclude the Q&A session, and it also concludes the conference call. Thank you for joining us today. You may disconnect at any time. Before you buy stock in NetScout Systems, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and NetScout Systems wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. 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