NetScout Q2 FY'26 slides: Revenue jumps 15%, company raises full-year guidance

Introduction & Market Context

NetScout Systems Inc (NASDAQ:NTCT) presented its second-quarter fiscal year 2026 financial results on November 6, 2025, revealing strong performance that significantly exceeded analyst expectations. The network performance management and cybersecurity solutions provider reported a 15% year-over-year revenue increase and substantial margin improvements, prompting management to raise its full-year outlook.

The market responded positively to the results, with NetScout's stock surging 12.63% in pre-market trading to $30.76, pushing above its previous 52-week high of $30.40. By mid-morning, the stock was trading up 8.55% at $29.65.

Quarterly Performance Highlights

NetScout's Q2 FY'26 results demonstrated robust growth across key financial metrics. The company reported GAAP revenue of $219.0 million, representing a 15% increase compared to the same period last year. Non-GAAP earnings per share reached $0.62, up 32% year-over-year, significantly outperforming the analyst forecast of $0.44.

As shown in the following financial highlights slide, the company also achieved notable margin improvements:

Gross margin expanded to 81.4%, an increase of 1.7 percentage points year-over-year, while operating margin grew to 26.5%, up 3.4 percentage points. These improvements reflect NetScout's successful execution of its margin enhancement strategy and operational efficiency initiatives.

For the first half of FY'26, NetScout reported total revenue of $405.8 million, an 11% increase compared to the first half of FY'25. First-half EPS reached $0.95, up 27% year-over-year.

Detailed Financial Analysis

Breaking down the quarterly results, NetScout saw growth across both product and service revenue streams. Product revenue increased by 16.9% to $94.7 million, while service revenue grew by 12.9% to $124.3 million. The following slide provides a comprehensive view of the company's financial performance:

NetScout's business is structured around two main product lines: Service Assurance and Cybersecurity. As illustrated in the revenue trends slide below, both segments contributed to growth, with Service Assurance representing 65% of total revenue and Cybersecurity accounting for 35%:

From a customer vertical perspective, Enterprise customers generated 60% of total revenue, growing at 12.7% year-over-year, while Service Provider customers represented 40% of revenue with 8.4% growth.

Geographically, NetScout maintained a balanced revenue mix with 57% coming from the United States and 43% from international markets. The company experienced particularly strong growth in the "Rest of World" category, which increased by 27.9% compared to the same period last year:

Balance Sheet and Cash Flow

NetScout maintained a strong financial position with $526.9 million in cash and securities as of September 30, 2025. The company's total liquidity stood at $1,126.9 million, representing 4.6 times its EBITDA. This robust balance sheet provides NetScout with significant flexibility for potential investments, acquisitions, or shareholder returns.

The following slide details the company's balance sheet and free cash flow performance:

Free cash flow for Q2 FY'26 was $4.3 million, following a stronger Q1 where the company generated $71.7 million. This quarterly fluctuation is typical for NetScout's business, which often sees uneven cash flow throughout the fiscal year.

Strategic Initiatives

During the presentation, CEO Anil Singhal emphasized NetScout's strategic positioning at the intersection of Service Assurance and Cybersecurity markets. The company's approach is illustrated in the following business and market insights slide:

According to the earnings call transcript, Singhal highlighted the company's differentiation through smart data integration, stating, "We are differentiating by feeding smart data to algorithms in a unique way." This strategy appears to be resonating with customers, as evidenced by the strong growth across both product lines.

CFO Tony Piazza noted the company's ongoing transition toward software-related sales, commenting, "We continue to move more and more to software-related type sales." This shift is likely contributing to the improved gross margins reported in the quarter.

Forward-Looking Statements

Based on the strong performance in the first half of FY'26, NetScout raised its full-year guidance. The company now expects revenue in the range of $830-$870 million, up from its previous forecast. Non-GAAP earnings per share guidance was also increased to $2.35-$2.45.

The updated outlook is presented in the following slide:

Management noted that while they remain optimistic about the company's prospects, they continue to monitor the uncertain macroeconomic environment as they navigate the second half of the fiscal year. The company's strategic priorities remain focused on product innovation, annual revenue growth, and margin enhancement, as outlined in this summary slide:

Conclusion

NetScout's Q2 FY'26 results demonstrate the company's ability to execute effectively in both the Service Assurance and Cybersecurity markets despite macroeconomic uncertainties. The strong performance across key financial metrics and the raised full-year guidance reflect management's confidence in the company's strategic direction and market position.

With a solid balance sheet, improving margins, and consistent revenue growth, NetScout appears well-positioned to continue its positive momentum through the remainder of fiscal year 2026. Investors will likely be watching closely to see if the company can maintain this growth trajectory in the face of evolving market conditions.

Full presentation:

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