SentinelOne (S) Q1 2025 Earnings Call Transcript

SentinelOne (S -6.27%)
Q1 2025 Earnings Call
May 30, 2024, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good afternoon. Thank you for attending the SentinelOne first quarter fiscal year 2025 earnings conference call. My name is Cameron, and I’ll be your moderator for today. All lines will be muted during the presentation portion of the call, with an opportunity for questions and answers at the end.

I would now like to pass the conference over to your host, Doug Clark, vice president of investor relations. You may proceed.

Doug Clark — Vice President, Investor Relations

Good afternoon, everyone, and welcome to SentinelOne’s earnings call for the first quarter and fiscal year ’25, which ended April 30. With us today are Tomer Weingarten, CEO; and Dave Bernhardt, CFO. Our press release and the shareholder letter were issued earlier today and are posted on the Investor Relations section of our website. This call is being broadcast live via webcast, and an audio replay will be available on our website after the call concludes.

Before we begin, I would like to remind you that during today’s call, we will be making forward-looking statements about future events and financial performance, including our guidance for the second fiscal quarter and our full fiscal year ’25 as well as long-term financial targets. We caution you that such statements reflect our best judgment based on factors currently known to us and that our actual events or results could differ materially. Please refer to the documents we file from time to time with the SEC, in particular, our annual report on Form 10-K and our quarterly reports on Form 10-Q. These documents contain and identify important risk factors and other information that may cause our actual results to differ materially from those contained in our forward-looking statements.

Any forward-looking statements made during this call are being made as of today. If this call is replayed or reviewed after today, the information presented during the call may not contain current or accurate information. Except as required by law, we assume no obligation to update these forward-looking statements publicly or to update the reasons actual results could differ materially from those anticipated in the forward-looking statements, even if new information becomes available in the future. During this call, we will discuss non-GAAP financial measures unless otherwise stated.

These non-GAAP financial measures are not prepared in accordance with generally accepted accounting principles. A reconciliation of the GAAP and non-GAAP results other than with respect to our non-GAAP financial outlook is provided in today’s press release and in our shareholder letter. These non-GAAP measures are not intended to be a substitute for our GAAP results. Our financial outlook excludes stock-based compensation expense, employer payroll tax on employee stock transactions, amortization expense of acquired intangible assets, acquisition-related compensation costs, restructuring charges, and gains and losses on strategic investments, which cannot be determined at this time and are, therefore, not reconciled in today’s press release.

And with that, let me turn the call over to Tom Weingarten, CEO of SentinelOne.

Tomer Weingarten — Chief Executive Officer

Good afternoon, everyone, and thank you for joining our fiscal first-quarter earnings call. Our first-quarter performance surpassed our revenue, gross margin, and operating margin expectations. Once again, we delivered industry-leading revenue growth and margin expansion. Revenue grew 40% year over year, distinguishing SentinelOne as one of the fastest-growing companies in the public markets.

Our gross margin increased back to a record high of 79%. In Q1, marked the 11th consecutive quarter with more than 25 points of operating margin expansion, which we believe is also one of the most sustained and significant margin improvement stories in public markets. I’m pleased to share that we achieved positive free cash flow margin for the first time in the company’s history, an incredible milestone. We delivered on our commitment to generate positive free cash flow well ahead of our prior target.

In Q1, we achieved a Rule of 58 on a free cash flow basis, generating a substantial positive 18% free cash flow margin. We also achieved our first quarter or breakeven earnings per share. This shows an impressive combination of growth, operating leverage, and cash management. I’m proud of our teams for leading us to this remarkable achievement.

These results reflect the strong demand of SentinelOne’s autonomous cybersecurity platform, unit economics, and scalability of our business model. Our pace of innovation and AI-driven autonomous security are setting new benchmarks across the industry. In Q1 alone, we amplified our cloud security offering with full CNAPP integration, introduced the first-of-its-kind AI security system to Purple AI, and dramatically enhanced the security experience by launching the new Singularity Operations Center. Our industry-leading growth and margin expansion shows an extraordinary financial profile.

Still, we have the opportunity to enhance our go-to-market execution and evolve related processes to support increasing scale and diverse growth. I’ll share more on this later. As always, please also read our shareholder letter published on the Investor Relations website, which provides more detail. Let’s dig into our first-quarter performance.

Structurally, the threat landscape is intensifying. This is evident by a sharp rise in cyberattacks and breaches. The total cost of breaches and operational disruptions are reaching new highs. More and more enterprises are turning to SentinelOne for best-in-class security, simplification, and savings.

We are the leader in autonomous security. Our AI-based security platform enables new and existing customers to defend against modern attacks and consolidate these joint ecosystems of subpar solutions and outcomes. This is driving strong demand for our endpoint, cloud, and data solutions as well as unprecedented interest in our AI capabilities. Our momentum with large enterprises remains strong, customers with more than $100,000 in ARR grew 30% year over year, and customers with more than $1 million in ARR reached a new company record.

We’re helping enterprises reduce complexity and optimize costs, all while significantly enhancing their security posture. Platform adoption and success with larger enterprises continue to drive higher ARR per customer which increased double digits year over year to a record high. Customer expansion rates remain healthy. Similar to last quarter, a larger portion of our business mix was driven by new customer additions in the quarter, which we believe will open doors for significant expansion over time.

Traction with our platform capabilities is leading to new growth channels and diversifying our business mix. Emerging Solutions continued to grow at a faster pace than the overall business. In Q1, Singularity Data Lake remained our fastest-growing solution once again growing triple digits, followed by cloud, identity, and others. We’re just scratching the surface of a massive addressable market right for disruption.

On the competitive front, enterprises continue to select SentinelOne against legacy and next-gen security vendors in a majority of evaluations. Our technology comes out on top across every capability, be it endpoint, cloud, data, or AI. Singularity outperforms both point products and disjointed platforms alike. For years running, SentinelOne has laid objective evaluations like MITRE as well as industry reviews from Gartner and others.

In a market riddled with complexity and substandard solutions, we’re empowering our customers and partners with the industry’s most advanced AI power protection through one data architecture, one platform, one agent, and one user interface. We focus on better security outcomes in real time, offering a unique combination of a premier security platform and lower cost of ownership to customers. It’s important to understand the structural forces surrounding cybersecurity and some of the hard realities the industry faces. Point products, data silos, and disjointed platforms leave gaps that are regularly exploited.

Large next-gen vendors try to sell endless list of products and modules. This approach may enhance their own profits, but it does not ensure the cybersecurity of their customers. A rising number of security breaches serves as clear evidence of this unfortunate reality. The status quo is failing, breaches continue to happen at a faster pace.

It’s impossible to ignore that vendors with leading market share are not preventing the very breaches they claim to stop. Deploying more and more modules is not solving the problem and enterprises increasingly understand it. After evaluating SentinelOne’s technology, customers quickly realize that the marketing-laden empty promises of half-baked alternative offerings do not translate to real usable outcomes. The difference between competitors’ technology in the market and SentinelOne is stark and visible.

When technology alone came to win, competitive solutions often rely on other tactics. No matter how tempting the price point might be, more and more practitioners are testing products and understand the real price of choosing an unproven capability even from an established vendor. Marketing claims for these solutions to modernize operations are built on an already obsolete architecture. Choosing this path is a recipe for disaster that can actually send back their security operations years into the past.

We lead with facts, not fiction, education, and collaboration, not propaganda. It is imperative to think differently about cybersecurity in the age of AI. This is why we purpose-built the Singularity platform with a holistic approach to security, data-driven, and autonomous. At SentinelOne, we focus our resources, investments, and innovations on transforming how security teams can better prepare and protect against the threats of tomorrow, evolving and simplifying enterprise infrastructure to gain control over their parameters.

The best security is invisible, working autonomously to defend you at all times. We’re already a leader in AI-based security and the only platform with multiple layers of AI, which give enterprises higher efficiency, better protection, and more automation. Singularity is secured by design, with fully integrated threat intelligence by default. Our platform’s best-in-class efficacy connects the dots automatically without requiring overlay services.

Let me provide a few examples to showcase the transformative power of Singularity. In the coming years, AI is going to consolidate many point solutions and feature products across the entire security landscape. With our advances around Purple AI, we’re significantly widening the competitive gap even more in preparing for this future. Purple AI is natively integrated across our entire platform.

With our open platform approach, Purple touches every aspect of managing security and has the ability to see and manage all security events including those of competing products. This creates compounded value for customers wishing to enhance existing security investments while benefiting from best-of-breed security products. Purple detect anomalies, enforces policies, takes mitigation, remediation, and orchestration actions autonomously with full control and audit by the human user. Doing so across all security ecosystem product is a dramatic force multiplier and allows for a central responsive control plane.

Purple AI also radically simplifies and accelerates the more complex tasks of cybersecurity, threat hunting, and investigations. It helps core security teams detect threats earlier, respond faster, and stay ahead of attacks. Purple also enjoys real-time access to two of the best threat intelligence sources in the world. Our first-class threat intelligence is fully integrated for no charge into Purple.

We’ve also teamed up with Google’s trusted and world-leading threat intelligence by Mandiant, available on the Singularity platform. More security, more trust. One will be hard-pressed to find better security intelligence than this. Best of all, Purple AI works in real time.

This is not a vision. This is the new reality for cybersecurity. This is what we’re delivering today. To experience it firsthand, I encourage you to take a look at the Purple AI demo linked on Page 6 of our Q1 shareholder letter.

The combination of Purple AI and enterprisewide data analytics completely simplifies, streamlines, and transforms every aspect of the security journey. This is the true objective of modern cybersecurity, simplification over platformization. The only folks that care about platformization are the vendors themselves. Enterprises care about better security outcomes.

With Purple, there is no vendor lock-in or product compromises. Putting all eggs in the same basket is not advisable in security and does not ensure the benefit of the customer. While competitors are developing chatbot assistance, our vision is to deliver a fully autonomous AI-based security that is always on, securing the enterprise every day at all times. Purple is an AI security partner for humans.

In an age of AI-based attacks, Purple alleviates the challenges of machine speed response, talent shortage, alert fatigue and frees up analyst time by doing the grant work, all while autonomously securing the enterprise. The difference is vast. The feedback for enterprises has been overwhelmingly positive, and this is based on actual deployments, not just marketing demos. Early adopters of Purple AI have reported 80% faster threat hunting and investigation.

One enterprise said Purple was saving its security team hours over the course of a single day. In other words, enthusiastic about not having to memorize Splunk queries any longer. Finally, and this is my favorite quote, Purple AI changes everything. I finally feel in control.

Tasks are faster, incidents are clearer, and I don’t have to guess how I’m going to prioritize my time. Coming out of RSA, the interest for Purple AI is growing rapidly. It’s already leading to customer wins and competitive displacements. For instance, in Q1, a major insurance provider chose to replace Carbon Black after using it for 10 years and selected SentinelOne over other next-gen vendors.

Purple AI was the game changer for this customer. It unified the entire enterprise security aperture and unlocked the efficiency needed to stay ahead of attacks. And as I’ve mentioned, the true value of Purple gets compounded when paired with other aspects of the Singularity platform. This particular customer selected endpoint cloud identity and data.

Customers that choose Purple distinctly select a wider range of platform capabilities from SentinelOne. And we’re pairing Purple AI with our completely redesigned user interface. We call it the Singularity Operations Center. When security team spends all day, every day interacting with the platform, the experience needs to be flawless and intuitive.

Security analysts don’t want to worry about an endless list of modules. We’re building a seamless security experience that just works and results in better posture with one centralized view of all security workflows across the enterprise. Security teams can now manage all SentinelOne and non-SentinelOne security alerts in one place with comprehensive investigations that clarify clarity, origin in context of an alert. It’s like sitting in the cockpit of a modern spacecraft.

Fully autonomous experience while having complete visibility of all events as well as physical and virtual assets, including endpoints, cloud, identity, and network. Behind all of this is our Singularity Graph and Correlation Engine, which contextualizes all alerts, identified patterns, and ultimately aid in early detection to prevent breaches. Together, we believe that Purple AI and our new Singularity Operations Center creates the most advanced security platform available for enterprises, simple, automated, and secure with full visibility across the entire network. Also at RSA, we launched Singularity Cloud Native Security. In just a few months, we acquired and integrated PingSafe into our unified Singularity Platform.

I’m proud of the speed in which we were able to bring the solution to the market. Our new agentless cloud security helps enterprises prioritize their time and prevent attacks before they happen. Our Cloud Native Security cuts through the noise using a unique Offensive Security Engine that safely simulates attack paths and provides proactive security. No other solution in the market takes this approach, removing the noise and making it more actionable than competing solutions.

In a recent product evaluation by G2, a leading peer review marketplace used by millions of businesses around the world, Singularity Cloud ranked as the No. 1 for ease of use and received 4.9 out of five on customer reviews. Even at this early stage, our CNAPP is receiving extremely positive customer response, ahead of solutions from public and private competitors. In Q1, a Fortune 500 enterprise selected the Singularity platform for both the cloud and endpoint security.

This company has been a longtime customer over next-gen endpoint peer. With the protection and reliability of our Cloud Workload Security completely changed the conversation. The CISO at this enterprise said, “I couldn’t believe what we had been missing. Singularity Cloud caught incidents we didn’t even know existed.” One other aspect of this interaction that’s worth pointing out, the CISO of this enterprise said, “I know I’m more protected now.

And the experience was terrific. SentinelOne listened to what I wanted and needed and clearly showed how the platform can help. I didn’t have to decode a list of SKUs.” The cloud security space continues to be a clear greenfield opportunity to engage with new enterprises regardless of endpoint incumbency. We’ve seen this time and again.

Combined, we believe our Cloud Workload and Cloud Native Security create the most advanced cloud security portfolio to protect critical enterprise infrastructure. We’re excited about the growth potential as we move throughout the year. Finally, the momentum of our data capabilities remain extremely strong. After a record fourth quarter, Singularity Data Lake continued to grow triple digits in Q1.

SentinelOne is not a newcomer to the same market. For example, three years ago, SentinelOne was the first company to realize the transformation opportunity that would arise. We acquired a true next-gen data analytics platform. All other vendors are trying to emulate.

Our data lake superiority is tried, tested, and proven, fully integrated empowering the Singularity platform and securing tens of thousands of enterprises across the world. Singularity Data Lake provides a modern next-gen alternative to legacy SIM solutions, coupled with Purple AI, it is the preeminent AI SIM. Enterprises no longer have to be burdened by the cost-prohibitive and limited actionability of legacy SIM. With Singularity Data Lake, they get lower cost with faster speeds at petabyte scale.

Many of the newer SIM solutions are only the most basic use cases, have limited scalability out of the box, and are far from their advertised functionality. Enterprises are increasingly looking to move away from legacy SIMs, a technology that’s decades old. In one customer example, a Fortune 500 financial services company selected Singularity Data Lake to augment part of its Splunk contract ahead of a full contract expiry next year. Deals like these create significant expansion opportunities for Singularity Data Lake and are opening doors for broader platform adoption.

Data transformations are not trivial and take time but are necessary to operate efficiently and securely. We have just begun to help companies navigate the transition. This trend of evaluations and migration is picking up. Tying it all together, we’re seeing great traction with our emerging solutions.

The contribution from emerging solutions was a record in Q1, growing to about 40% of our bookings. Over time, our platform solutions will be an even more significant part of our business, driving diversity and long-term growth. As I reflect upon the last few years, our advancements in data, AI, and cloud security clearly illustrate the success of our technology evolution from endpoint security to a comprehensive enterprisewide cybersecurity platform. Moving forward, our goal is to replicate similar success across our go-to-market.

This is especially important in today’s macro environment, which raises the bar for execution. Macroeconomic uncertainty and tighter financial conditions continue to impact customer buying behavior. With better execution, we believe we can mitigate these factors and deliver higher growth. As you know, Michael Cremen recently joined SentinelOne as chief revenue officer to drive our go-to-market strategy for growth at scale.

We’ve pinpointed several opportunities to enhance our performance and are already making progress. Together, we are streamlining every aspect of our go-to-market organizations. We’re pulling everything together in service of a better sales experience and stronger engagement. Our strategy is straightforward.

First, we’re appointing proven leaders with growth at scale to guide our teams to their full potential. Second, we’re enhancing our processes and data analytics across the board, including scaling our renewals process, expanding our partner ecosystem, and evolving our marketing and sales enablement. These are high-value and high-return changes, which naturally take time to implement. At our scale, we can adapt quickly and be nimble.

All of this is part of the growth journey, which requires constant evolution. To reflect the impact of macro dynamics and our go-to-market transition, we’ve modestly revised our full-year revenue outlook range. With that, we have a line of sight to stronger new business generation in the second half of the year. Our confidence stems from a strong pipeline, ramping newer products, and leading indicators from our go-to-market improvements.

We’re expecting over 30% revenue growth this year, one of the fastest growth rates in public markets once again combined with a charge toward profitability. Our business fundamentals and opportunities remain unchanged, and our win rates are strong. Even as we evolve, we continue to deliver industry-leading results every single year. Indeed, we are investing for the future and leaning into areas of significant growth potential, namely cloud, data, and AI.

These are important growth levers for our business. We have long held the view that data and AI are the epicenter of security. Enterprise security will not look the same in the coming years. To reinforce both our commitment and conviction, we established the AI Security Innovation Center at our Tel Aviv office.

This investment in people and technology will ensure that we continue to lead at the forefront of modern AI-based cybersecurity and enterprises get the absolute best of protection and experience. Our financial profile is incredibly strong. We delivered 40% top-line growth and parallel margin improvement and positive free cash flow quarters ahead of our original target. Achieving free cash flow Rule of 58 shows that SentinelOne represents a rare combination of premium growth and returns.

We’re pleased with these milestones and excited by our future growth opportunities across massive end markets. The status quo of current cybersecurity offering is failing, leaving enterprises vulnerable and riddled with unnecessary complexity and cost. The real solution to the modern cybersecurity problem is better security, simplification, and savings. Our technology across endpoint, cloud, data, and AI is cutting edge and our platform experience is second to none.

Enterprises deserve better, and we’re delivering it. Lastly, none of this would have been possible without the extremely talented people of SentinelOne. We work with purpose that fuels resilience. I’m deeply grateful for the hard work and dedication of all Sentinels.

I also want to thank our customers and our partners for their trust and collaboration. AI is the new paradigm. Cybersecurity is the furthest frontier and SentinelOne is its foremost outpost. With that, I will turn the call over to Dave Bernhardt, our chief financial officer.

Dave Bernhardt — Chief Financial Officer

Thank you, Tomer, and thank you, everyone, again, for joining. This afternoon, I’ll discuss our quarterly financial performance and provide additional context regarding our guidance for Q2 and fiscal year ’25. As a reminder, all comparisons are year over year, and financial measures discussed here are non-GAAP unless otherwise noted. Our first quarter results not only met but exceeded our revenue and margin expectations, reinforcing our position as an industry leader in revenue growth and margin expansion.

We also delivered our first-ever quarter of breakeven EPS, a significant milestone on our path to sustained profitability. Revenue grew 40% to $186 million in the first quarter. Our growth was also balanced across geographies. Revenue from international markets grew 44%, representing 37% of quarterly revenue.

Our Q1 revenue also benefited from a strong contribution of PinnacleOne, our recently launched and technology-enabled cyber strategy and risk management practice. PinnacleOne helps governments, companies, management teams and boards evaluate and fortify their security framework above and beyond any single product or solution. This is more important than ever in the modern threat landscape. Total ARR grew 35% to $762 million in Q1 as we continue to drive a healthy mix of new customers and existing customer expansion across businesses of all sizes.

As we enter the new year, the macroeconomic uncertainty and tighter financial conditions have continued to pressure enterprise spending. We are still operating in a high-interest rate and a high inflation environment, which continues to impact new budgets and expansionary spending. Simultaneously, as Tomer mentioned, we’re in the process of revamping our go-to-market under our new CRO. Combined, these dynamics impacted our ARR in Q1, which is also our seasonally smallest quarter of the year.

While we expect macroeconomic challenges to persist, our go-to-market enhancements and technology leadership positions us well for future growth. We’re focused on the path forward. We have a clear plan and line of sight to better net new ARR growth trends in the second half of the year, supported by a strong pipeline, new product contributions, and an enhanced go-to-market. Looking beyond the top-line growth, our gross margin increased sequentially back to our record high of 79%, underscoring the effectiveness of our top-line and cost management.

Year-over-year gross margin improved four percentage points. We’re benefiting from scale efficiencies and strong platform unit economics. Our best-in-class gross margin also indicates healthy pricing in the success of our value-added approach. Our unified platform architecture delivers better unit economics for SentinelOne as well as our customers.

In addition, we continue to make extraordinary improvements to our operating margins. Q1 marked our 11th consecutive quarter of more than 25 percentage points of year-over-year expansion. Our increasing scale, efficiencies, and cost discipline are driving substantial operating margin improvement. In Q1, our operating margin expanded 32 percentage points to just negative 6%.

I’m pleased to share that we delivered on our commitment to achieve positive free cash flow margin well ahead of our original target and by a large degree. In Q1, we delivered a free cash flow margin of positive 18%, showing an improvement of more than 40 percentage points compared to last year. We generated $34 million of positive free cash flow in the quarter, reinforcing our strong financial position on top of more than $1 billion in cash and cash equivalents. We achieved a free cash flow Rule of 58 in the quarter.

This is a tremendous achievement and a testament to the scalability of our business model. Moving to our guidance for Q2 and the full fiscal year ’25. Looking ahead, we are optimistic about our growth trajectory and remain committed to delivering strong results. For Q2, we expect revenue of about $197 million, up 32% year over year.

For the full year, we expect revenue of $808 million to $815 million, reflecting our confidence despite challenging economic landscape. We are modestly revising our revenue outlook range to reflect the impact of persistent macro uncertainty and our go-to-market transition. Even still, we expect to deliver 31% growth at the midpoint. As I mentioned earlier, we have line of sight to better growth trends in the second half of the year.

Specifically, we expect second-half net new ARR growth trends to improve compared to the first half of the year. Our confidence is driven by early indications from our go-to-market transition, a strong and growing second-half pipeline, improving conversion rates and traction with newer solutions like CNAPP, AI, and data. Turning to our outlook for margins. In Q2, we expect gross margin to be about 79%, an improvement of two percentage points year over year.

As a result, we are raising our full-year gross margin guidance to 78% to 79%, up more than 100 basis points year over year at the midpoint. We expect our increasing scale and improving data processing efficiencies to continue benefiting our results. Finally, we expect our Q2 operating margin to be negative 6%, implying an improvement of more than 16 percentage points year over year. On a full-year basis, as we continue to invest for our future, we expect to maintain operating margins between negative 6% and negative 2%, an improvement of about 15 points at the midpoint compared to fiscal year ’24.

We have the opportunity to be cash flow positive on a full-year basis in fiscal ’25. However, it is elective and will depend on our pace of investments. Importantly, we remain on track for turning the page on profitability within fiscal ’25, delivering positive operating income by the end of the year. We’re focused on improving our execution and operating a great business even more efficiently.

I’m convinced that we are becoming a stronger company. Our investments in AI, data, and cloud security are reshaping the cybersecurity landscape and will drive our next phase of growth, bringing greater scale and cementing a more diverse business mix. With our positive free cash flow in Q1 and substantial progress toward breakeven operating margin, we continue to improve the scalability and leverage within our model. As a result, we are leaning into investing for growth without compromising on our near-term margin improvement.

Going forward, our goal is to operate toward the Rule of 40 on an EBIT basis. Through this lens, we will continue to evaluate the opportunities for investments, growth, and leverage. We have a very strong balance sheet with $1.1 billion in cash, cash equivalents and investments, and zero debt. This provides durability and flexibility.

We have already demonstrated tremendous potential for operating leverage across the business. The cybersecurity landscape is ever-evolving. Self-proclaimed industry leaders are facing the same challenges of legacy solutions and even given massive R&D budgets are failing to innovate at a fast pace. They’re failing to stop breaches and solving security problems.

Our Singularity platform offers superior protection, and we’re widening the gap of AI-based security in a significant way. This transformation has placed us at the intersection of massive market opportunities and critical enterprise needs. And we are delivering superior top-line growth and margin improvement. We lead with facts, not fiction.

We’re building the future of AI-based security around superior security, simplicity, and savings. With our robust financial position and innovations, we are well-prepared to continue leading the industry and delivering value to our stakeholders. Thank you all for joining us today. We will now take questions.

Operator, please open up the line.

Questions & Answers:

Operator

Thank you. We will now begin the question-and-answer session. [Operator instructions] And we will pause here briefly as questions are registered. The first question is from the line of Brian Essex with JPMorgan.

You may proceed.

Brian Essex — JPMorgan Chase and Company — Analyst

Yeah. Hi. Thank you. Good afternoon, and thank you for taking the question.

Tomer, just — I guess first question for you is I wanted to really kind of dig into the macro. And apologies, I missed some of the first introductory comments, but wanted to really understand what happened from a macro perspective and execution perspective that you didn’t see last quarter. In other words, what changed this quarter to lead you to kind of trim the guidance for the full year? And then I have a follow-up.

Tomer Weingarten — Chief Executive Officer

First, you know, we definitely see some of the same factors that we’ve seen in previous quarters. So, I don’t think a lot is changing. We guided to revenue. We beat revenues all in all.

We feel we got a good grasp on most macro factors. I think you’re still seeing for us a seasonally small quarter or the smallest quarter we have. And you’re seeing timing of large deals, you’re seeing sizes of different deals change throughout the quarter. That, I think, is kind of the full extent of what we see from kind of the macro pressure.

I do think that for us internally, execution-wise, I mean, our go-to-market is constantly evolving. We’re improving our renewal process. We’re improving our marketing process. We’re improving our enablement.

All of that is also taking shape very, very nicely. But with that, it does add some level of transition in our operations. And that’s what we’re factoring in. It’s less than a 1% adjustment to the year, and we feel that’s kind of needed at this point.

But all in all, again, really strong performance, keeping the year kind of an industry-leading growth. I mean, we feel pretty good about it.

Operator

The next question is from the line of Adam Tindle with Raymond James. You may proceed.

Adam Tindle — Raymond James — Analyst

All right. Thanks. Good afternoon. Tomer, I just want to acknowledge, obviously, business is doing well on profitability, generating positive free cash flow, and you have over $1 billion of cash.

So, a little bit of a devil’s advocate question here. If I think about the fastest areas growing in the industry, data, cloud, and AI, you have meaningful products that you’re outlining that are very differentiated. Why not invest more in sales and marketing behind these areas to accelerate growth? Or another way to ask is, what are you going to do with the buildup of cash given this positive trajectory? And how do you and the board justify that as the right path versus perhaps investing even more heavily in sales and marketing behind those platforms to accelerate growth? Thanks.

Tomer Weingarten — Chief Executive Officer

Absolutely. You know, for us, it’s all about growth. But with that, we have made a commitment to be profitable. At the same time, I think what happened this quarter for us, which is something that we’ve been working on for quite a while, which is turning into a cash flow generating machine basically gives us that license to go back and invest in the business.

So, what happened this quarter is exactly what we wanted to see. It was extremely positive. Now, that gives us, I think, the ability to understand where we want to invest, how much we want to invest as we keep that same trajectory toward profitability and continue to generate as much free cash flow as we can throughout the year. So, I would say this quarter for us really unlocked how much we can invest and how aggressively we can go.

And yes, there’s no question that we’re leaning into growth. We mentioned we’re opening more innovation centers around AI. We think the way that people procure software in the future, even in the next couple of years, it’s going to change, and I think we want to make sure we address that. So, we’re balancing all of that while we also transition our go-to-market, and that’s why we definitely don’t want to get ahead of our skis, and we’re balancing all of this to get to the envelope that we have committed to.

Operator

The next question is from the line of Hamza Fodderwala with Morgan Stanley. You may proceed.

Hamza Fodderwala — Morgan Stanley — Analyst

Hey, good afternoon, and thank you for taking my question. Dave, you talked about reflecting some improvement in net new ARR in the back half of your guidance. Based on some new products and some of the go-to-market improvements that you’re expecting under the new CRO. I’m curious, to what extent have you factored in the potential for some go-to-market disruption? Because when you do bring sales changes, that is a risk.

So, I’m wondering to what extent you thought about handicapping that in your guidance for at least the next couple of quarters. Thank you.

Dave Bernhardt — Chief Financial Officer

Yeah. Thanks, Hamza. We guide to what we have line of sight to. So, as Tomer discussed, we’re factoring in macro conditions, the go-to-market transition, and the ramp of new products.

Obviously, we have the full CNAPP offering happening in the second half. We’re early in the stages of AI sales to customers, which are both very positive in building tremendous pipeline. We know that the second-half pipeline is a lot stronger than the first half. And we’re addressing execution dynamics and the new products being offered.

I think that is — also just in general, there’s going to be go-to-market enhancements as Michael builds out this team. So, you can take that. You take the heavier mix of large enterprise sales in the second half. And then you take on the increased contribution from the newer products, and I think we’re all just very positive on the second half.

Tomer Weingarten — Chief Executive Officer

So, just to add to that, I mean, 40% contribution for emerging product really starts to paint the picture to what the platform opportunity is for the company. And obviously, that requires also a change in our sales DNA and in many other derivative aspects of it. So, we’re absolutely cognizant of that. I think we’re balancing that with the strength of the new ramping products.

But with that, again, that go-to-market transitory effect will take hold in the next few quarters, I think, more than any other point, and that’s what we’re balancing. So, both factors kind of negate each other, and we felt like we need to slightly tick down the revenue projections. But all in all, I mean, extremely strong growth. We feel good about the year.

And as Dave mentioned, I mean, transition will continue to happen. Evolution will continue to happen. This is not a statement market by any degree, and we embrace that. And SentinelOne has executed a true change for many, many years, and that’s not going to change.

I mean, it’s a very dynamic market.

Operator

The next question is from the line of Shaul Eyal with TD Cowen. You may proceed.

Shaul Eyal — TD Cowen — Analyst

Thank you. Hi. Good afternoon. Thank you for taking my question.

Tomer or Dave, was there any business that slipped toward the end of April that’s already booked back over the course of the past four weeks?

Tomer Weingarten — Chief Executive Officer

We have some, but it’s really normal course of business. I mean, at this point, there’s constantly deals that book into the next quarter. Nothing significant, nothing challenging in terms of like what we needed for the quarter. It’s all just really normal dynamic.

But the answer is yes.

Operator

The next question is from the line of Trevor Walsh with Citizens JMP. You may proceed.

Trevor Walsh — JMP Securities — Analyst

Great. Thanks all for taking my question. Tomer, you mentioned the fairly quick integration of PingSafe. So, just curious around the dynamics of kind of was that just more internal efforts to get it going faster? And could you maybe share on top of that, what the — some level of what the uplift looks like for kind of selling into that CNAPP sector beyond kind of what you’re already doing with workload protection and kind of the stuff that was already on the truck as it were? Thanks.

Tomer Weingarten — Chief Executive Officer

Integration was mostly planned. We got a massively talented R&D force and that only gets stronger with the PingSafe acquisition. I think that for us, it was always about delivering a unified experience for the customer. You’ve heard that talk about that quite a bit.

So, keeping true to what the value should be when you’re using these platforms is really what guides us as we think about integration. The uplift is substantial. I mean, we had one leg of cloud security with workload protection. Now, we’ve got the other leg.

So, you can think about it as really doubling the opportunity for us. And obviously, as you look at our customer base, it’s very underpenetrated with cloud security. If you look at some of the forward-looking opportunities even with different endpoint incumbency, we’re still able to go in and demonstrate superiority in the cloud security footprint. So, all in all, a highly strategic motion for us.

PingSafe is a great technology, and it’s just going to make our entire cloud security suite stronger.

Operator

The next question is from the line of Peter Weed with Bernstein. You may proceed.

Peter Weed — AllianceBernstein — Analyst

Thank you. You know, I think there may have been some kind of separate performance if you look maybe at your enterprise versus SMB, and we’ve been hearing in the market some headwinds around that. Can you give us some color on the performance in each of those categories separately? And I guess a lot of the work you’re doing in go-to-market is to kind of drive performance, particularly in enterprise, like when might we see some inflection from kind of the investment that you’re making there?

Tomer Weingarten — Chief Executive Officer

Generally, I think you’re seeing kind of a continuum of improvement toward more and larger enterprise-based deals. In terms of headwinds, I think in this type of market, you kind of see pockets of headwinds all across the board. So, I wouldn’t call out any specific dynamic. At the end of the day, for us, I mean, we’re definitely strong in the SMB market and mid-market.

For us, it’s really developing more and more of that enterprise muscle. I think we’ve proven that again this quarter, again, 30% growth with large customers last quarter, another 30% growth with large customers. So, all in all, this is tracking to where we want to be. And the nature of the offerings that are coming up online for us in the second half of the year are more enterprise-oriented, to begin with.

So, for us, I mean, I don’t know if it’s going to be kind of a full inflection. I would really assume more growth across in parallel to all of these different segments of the [Inaudible]. So, the products that we build are so intuitive to use, that they’re great for the SMB. They’re great for mid-market.

They’re great for partners, they’re great for service providers and they’re great for large enterprises. We are looking for just better efficacy, more simplification, getting more from what they have in their environment, and that’s exactly what we’re delivering.

Operator

The next question is from the line of Tal Liani with Bank of America. You may proceed.

Tomer Weingarten — Chief Executive Officer

Tal, you may be on mute.

Tal Liani — Bank of America Merrill Lynch — Analyst

Oh, here you go. Can you hear me now?

Tomer Weingarten — Chief Executive Officer

Yes.

Tal Liani — Bank of America Merrill Lynch — Analyst

Good. Perfect. So, I’m taking a step back. I want to — your ARR growth of 35% is great on any metric is great.

But when I look at the space, the space is growing, there are only two legit players in the space, and a company that is substantially larger than you is growing the same rate, which means there is a problem with your ability to grow in relative terms despite your small size. And the question is what — why can’t you outgrow your bigger competitor? Is this an issue of product portfolio, your more limited product portfolio? Or is this an issue of focus on SMB or go-to-market? When you analyze your performance, how can you do better given your smaller size in the market? Thanks.

Tomer Weingarten — Chief Executive Officer

I don’t see any problem with our growth. I think the only thing that’s the balance here is how much we can invest in a company that strives for profitability, obviously, is constrained by how much it can invest. I mean, we had $1.1 billion of cash in our bank last quarter, in the quarter prior and this quarter as well. So, obviously, we’re somewhat electively constrained by how much power we put behind our go-to-market.

With that, we treat this as an opportunity to become more and more and more efficient, and that’s what we’re seeing us do. We’re doing more with less, and that’s our focus right now. That’s what we said we’re going to do this year. We’re not going to chase to outgrow anybody.

We are building the best technology, and we’re building a very, very effective go-to-market machine when the time is right. And as I mentioned, this quarter has been a great indication for us to start moving away and investing back into our business. I mean, that’s our focus. And lastly, to me, the No.

1 thing this company wakes up and thinks about is how we stop breaches and keep our customers safe. I think that’s what we’re doing every single day. I think the promises of other vendors in the space might prove to be a bit lax. So, I wouldn’t put this all on just the chase after growth and how aggressive your marketing can be.

You need to grow in a responsible way. You need to keep your customers safe. You need to make sure for a company like us at our scale that you can also achieve the profitability target that we set out to achieve. And that’s the entire picture that we’re looking at.

Still, again, industry-leading growth, I think we’re incredibly proud of our growth profile. Ending up this quarter with 40% growth and basically breakeven or 18% positive free cash flow, that’s a Rule of 58 company. I think this is a tremendous profile.

Operator

Next question is from the line of Eric Heath with KeyBanc Capital Markets. You may proceed.

Eric Heath — KeyBanc Capital Markets — Analyst

Hey, thanks for taking the question. I guess just to follow on some of these comments Tomer and Dave. I mean, it’s good to see the reiteration of the margin guide, but I just — I guess given the competitive nature of the market and some of the go-to-market changes and continue to have strong growth targets for this year. Just curious how you’re thinking about the confidence to support that growth and product innovation while maintaining a fairly modest opex growth.

And then a second one, if I could, just I don’t know if we got great granularity on some of the go-to-market changes. So, would love to hear some more details on what some of those changes you’re instituting on it. Thank you.

Tomer Weingarten — Chief Executive Officer

Growth for us is, again, something that’s very elective. We feel really good about our ability to continue and grow under this investment envelope. We’re not in a chase to invest in marketing. We feel like you need to grow smarter.

You don’t need to grow necessarily in a more expensive way. If anything, I think that the lack of technology superiority by some of the other vendors in the space leads them to lead with marketing. It leads them to saturate the space with marketing messaging that maybe is far ahead over the product are actually in reality. So, for us, I mean, this dynamic is no different, and we continue to outexecute them with technology.

For me, focusing on the core areas, data, Purple, which is kind of our AI offering, obviously, and cloud is the right way to go, instead of diluting across a multitude of different modules that dilutes your R&D, dilutes your focus. We just find more effective ways to grow in this market. This is still a very difficult macro environment. I wouldn’t advise that customers out there are looking to spend so much at this point in time.

So, for us, it’s really about taking it quarter by quarter, assessing our investments, and then deciding where do we want to put more firepower and that has been the philosophy from the start of this year. So, far, I think we’re on the right path, and we’re excited for the second half of the year. I just want to touch on the go-to-market question. We kind of called out.

Obviously, we’re bringing in new leadership sales DNA, expanding the platform selling motion, onboarding more partners, striking new partnerships, moving to more modern enablement, enabling our partners, putting systems to automate quoting for our partners. So, we’re scaling our go-to-market significantly. We always had the reach and the partnerships. Now, it’s about making them more effective, which I think is a common theme across everything we’re doing this year.

Operator

Your next question is from the line of Joshua Tilton with Wolfe Research. You may proceed.

Joshua Tilton — Wolfe Research — Analyst

Hey, guys. Thanks for taking my questions. Also jumping around tonight, and there’s a fire alarm going off in my office, so I apologize if this was mentioned already. But I guess what I’m just trying to understand is you’re talking us to believe in confidence in the second half.

Is there anything that you can give us to kind of increase investor comfort around the visibility you have? Because from our perspective, we were giving guidance 90 days ago, and the quarter kind of shook out a little bit worse than expected. So, where does the confidence in the visibility a few quarters out from now come from when it’s been kind of difficult to guide just 90 days in advance? And then the second part of my question is just there’s a lot of talk at the end of the prepared remarks about how you guys were thinking about profitability, lenses, and rule statuses. And I’m just trying to understand as we go forward, are you going to continue the margin expansion story that we see today? Are you guys going to put the brakes on that? How should we think about the pace of margin expansion in the future relative to the like amazing and outstanding pace that you’ve delivered over the last few quarters? Thank you.

Tomer Weingarten — Chief Executive Officer

First, I hope everybody is safe. Second, we have guide to revenue and beat on revenue. To us, everything we’re doing here is just expanding, I think, the range that we’re giving folks, given what we’re seeing from the macro, given what we’re seeing from our own execution, and our ability to mitigate these factors. So, I believe we’re actually taking a safer approach by giving you just a better range to what we have a line of sight to.

And that has been our philosophy. It will continue to be our philosophy. And again, ARR could be just a different measure for us from revenue given that there’s a lot that goes into revenue that doesn’t go for ARR for us. And lastly, if you zoom out and you look at every single year for SentinelOne, has resulted in outperformance of the market.

Better revenue growth, better margin improvement in pretty much every other company in the market. And specifically, when we look at the second half of the year, we’re looking at a very robust pipeline and we’re looking at pipeline that’s diversified across endpoint, data, cloud, Purple, more adjacent modules, better-executing sales team, more scrutiny to our deals, more and better cross-sell and upsell dynamics. So, all of those give us a lot of confidence. With that, obviously, we talked about the other factors going in.

And that’s why, again, we’re opening up the range. The entire adjustment here is about less than 1%. So, I wouldn’t read too much into it.

Dave Bernhardt — Chief Financial Officer

Yeah. I would add to that that really what we want to do is we want to be a Rule of 40 company, and we’re going to work to achieve that. That’s our goal. That’s our investment philosophy, everything we’re doing to is drive to that strategic initiative.

Operator

The next question is from the line of Rudy Kessinger with D.A. Davidson. You may proceed.

Rudy Kessinger — D.A. Davidson — Analyst

Hey, thanks for taking my question. I don’t believe it’s in the shareholder letter. Just what was net retention, TTM net retention? I know you said business continues to skew more toward new versus existing, but could you share that figure?

Dave Bernhardt — Chief Financial Officer

Yeah. Thanks, Rudy. We remain in expansionary territory, so we’re north of 110%. That’s continuing to focus on new customer acquisition, still in very good relationship, and upsell to existing customers as well.

So, we’re pretty proud of the remaining in expansionary territory as we continue to grow at the scale we are.

Operator

The next question is from the line of Fatima Boolani with Citi. You may proceed.

Fatima Boolani — Citi — Analyst

Thank you for taking my questions. Tomer, I was hoping you could comment with more granularity, kind of getting down to the brass tacks with respect to go-to-market organization. So, what I mean by that is, clearly, you are very optimistic about the pipeline and your ability to prosecute the pipeline. But the only inference we can draw is that there was some sort of a productivity delta or disparity.

So, wondering if you can kind of talk us through that as it relates to overall go-to-market sales capacity, productivity levels. And if you can talk to attrition, whether voluntary or involuntary under the offices of the new CRO. So, just maybe a little bit more granularity from a sales capacity, productivity, and attrition input standpoint. Thank you.

Tomer Weingarten — Chief Executive Officer

For both productivity and participation, I would say. I mean, we’re definitely seeing these metrics on the rise, which is very, very encouraging, that comes hand in hand with our emerging product team, basically being rebuilt over the course of the last 12 months. We mentioned new leadership in place for emerging products, seasoned, bringing their own team, bringing new partners on board. I mean, that part of our business is now about 40%.

So, obviously, that has a very positive impact as to our growth trajectory. Sales attrition, it’s always going to be there and it’s nothing that’s unique to SentinelOne. We continue and hone in on the talent that we need. We continue to uplevel.

If you kind of see some of this hater’s attrition, it’s going to be there. It’s part of doing business. It’s part of growing the sales force. It’s part of changing DNA.

It’s part of going after different aspects of the market in selling to different people in the enterprise. So, all in all, I think that what you’re seeing is just normal GTM transition. Some of the folks that we let go, we repurposed to other parts of the business, we invest more and more into the most yielding parts of our business. All of that is positive.

Does it come sometimes with some involuntary attrition? Yes, I mean, that’s also part of business. None of that to us is alarming, and all of that is positive.

Operator

The next question is from the line of John DiFucci with Guggenheim.

John DiFucci — Guggenheim Partners — Analyst

Hello. Thank you for taking my question. Questions for Tomer. Tomer, you said that enterprise demand remained strong, and there’s been a lot of discussion on that.

But can you talk about demand in the SMB to mid-market and any changes to that more recently? Because that seems to be an area where we’re starting to see some softness elsewhere. Thanks.

Tomer Weingarten — Chief Executive Officer

We’re seeing strength across the board. I think that generally, as I mentioned, there’s going to be some pockets of tailwinds in every part of this market. Some areas in SMB are softer than others. So, yes, you can claim there’s some softness in SMB, but also some softness in some other parts of enterprise.

I think in a normalized view, we can’t really call out any one specific area of our business that is experiencing some different dynamics in a — I think, in a material way. So, all in all, I think both statements are right. There is some softness, but at the same time, we don’t view it as material. We kind of feel it’s more skewed across the board.

And that’s what we kind of call out is just a more difficult macro. And that’s something that we just kind of work through, improve our execution, move to parts of the market that are just better yielding, and focus our investments there.

Operator

Unfortunately, there is no more time remaining. I’ll pass it back to the management team for closing remarks.

Tomer Weingarten — Chief Executive Officer

Thank you, everybody, for joining our call today.

Operator

[Operator signoff]

Duration: 0 minutes

Call participants:

Doug Clark — Vice President, Investor Relations

Tomer Weingarten — Chief Executive Officer

Dave Bernhardt — Chief Financial Officer

Brian Essex — JPMorgan Chase and Company — Analyst

Adam Tindle — Raymond James — Analyst

Hamza Fodderwala — Morgan Stanley — Analyst

Shaul Eyal — TD Cowen — Analyst

Trevor Walsh — JMP Securities — Analyst

Peter Weed — AllianceBernstein — Analyst

Tal Liani — Bank of America Merrill Lynch — Analyst

Eric Heath — KeyBanc Capital Markets — Analyst

Joshua Tilton — Wolfe Research — Analyst

Rudy Kessinger — D.A. Davidson — Analyst

Fatima Boolani — Citi — Analyst

John DiFucci — Guggenheim Partners — Analyst

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