NetScout Systems, Inc.

What they do

NETSCOUT sells enterprise network observability, carrier service assurance, AIOps, cybersecurity and DDoS protection solutions built on its deep packet inspection technology. Service providers and enterprises, including local, state and federal government agencies, use the products to monitor network performance, ensure delivery of mission-critical applications, and defend networks from attack. Most offerings are designed to produce Smart Data, a high-fidelity data foundation derived from real-time network activity across legacy, hybrid and cloud-native environments.

Revenue drivers

• Service revenue — Generated 59% of first quarter fiscal 2027 total revenue at $124.4 million, up 9.4% year over year, reflecting recurring support and subscription activity.
• Product revenue — Generated 41% of first quarter fiscal 2027 total revenue at $86.0 million, up 17.8% year over year, driven partly by Service Assurance demand and newer Omnis Sensor and Streamer solutions.
• Cybersecurity and DDoS protection — Includes Arbor Cloud and the acquired DigiCert DDoS protection business; management said cybersecurity revenue in the quarter was consistent with the prior year against a strong comparison and expects roughly $20 million in annualized revenue from the acquisition.
• Service assurance — Management attributed first quarter growth largely to Service Assurance, benefiting in part from government-related orders received earlier than anticipated.

Recent performance

For the first quarter ended June 30, 2026, total revenue grew 12.7% to $210.4 million from $186.7 million. Product revenue rose 17.8% to $86.0 million and service revenue rose 9.4% to $124.4 million. GAAP net income was $21.8 million, or $0.29 per diluted share, versus a GAAP net loss of $3.7 million, or $0.05 per diluted share, a year earlier. Non-GAAP net income was $38.6 million, or $0.52 per diluted share, and adjusted EBITDA was $46.9 million, or 22.3% of revenue. Cash, cash equivalents and short and long-term marketable securities totaled $668.5 million as of June 30, 2026, down from $705.1 million at March 31, 2026, primarily reflecting the DigiCert DDoS asset acquisition.

Strategy

Management said it is executing a strategy to drive revenue, expand margins and generate solid free cash flow. On May 1, 2026, the company acquired the assets and certain liabilities of DigiCert's DDoS protection business, which it expects to contribute roughly $20 million in annualized revenue while giving it greater control of the Arbor Cloud network. In July 2026, NETSCOUT announced doubling Arbor Cloud mitigation capacity to 33 terabits per second, aiming to bring the platform fully in-house for faster capacity investment, tighter alignment with threat intelligence and improved margin potential from recurring revenue. The company also cited traction in newer innovations including Omnis Sensor and Streamer, and in June 2026 was awarded its 750th patent.

Risks

• Service provider spending constraints — Management noted constrained customer spending in the service provider market, a key customer vertical.
• Macroeconomic and geopolitical uncertainty — The company lists armed conflicts or warfare, geopolitical tension, stock market volatility, exchange rate fluctuations, inflation, interest rates, tariffs and recession risk as factors that could affect results.
• AI-related supply-chain dynamics — NETSCOUT said its industry is experiencing AI-related supply-chain dynamics that could influence the timing and size of certain customer orders.
• Lumpy government and large order timing — First quarter Service Assurance strength benefited from government-related orders received earlier than anticipated, indicating revenue can shift between periods.

Outlook

For fiscal year 2027, NETSCOUT reaffirmed revenue guidance of $885.0 million to $915.0 million, implying 4.7% year-over-year growth at the midpoint. GAAP net income per diluted share is guided to $1.55 to $1.70, and non-GAAP net income per diluted share to $2.65 to $2.80, implying 9.9% year-over-year growth at the midpoint. Management said it remains optimistic but cognizant of ongoing macroeconomic dynamics and constrained service provider spending.