NetScout Q4 FY’25 slides reveal EPS miss, leadership transition, and cautious FY’26 outlook

NetScout Systems Inc (NASDAQ:NTCT) presented its fourth quarter and full fiscal year 2025 results on May 8, 2025, showing modest revenue growth but falling short of earnings expectations. The company’s stock declined 2.07% following the presentation, trading at $20.77.

Quarterly Performance Highlights

NetScout reported Q4 FY’25 revenue of $205.0 million, representing a slight 0.8% increase from the $203.4 million reported in the same quarter last year. While the company highlighted improved margins, its non-GAAP earnings per share (EPS) of $0.52 missed analyst expectations of $0.71 and declined 5.5% from $0.55 in Q4 FY’24.

The company’s presentation emphasized margin improvements, with Q4 gross margin increasing to 79.2% from 77.2% year-over-year, and operating margin rising significantly to 23.1% from 19.2% in the prior year period.

As shown in the following comprehensive financial results table:

For the full fiscal year 2025, NetScout reported revenue of $822.7 million, a slight decrease of 0.8% from $829.5 million in FY’24. Annual EPS increased marginally to $2.22, up 0.9% from $2.20 in the previous year. The company noted that it had overcome a $50 million headwind from prior year backlog and maintained consistent year-over-year revenue after adjusting for divestiture.

Detailed Financial Analysis

NetScout’s revenue mix shifted slightly in FY’25, with Service Assurance growing from 33% to 35% of total revenue, while Cybersecurity decreased from 67% to 65%. From a customer perspective, Service Provider revenue increased to 57% from 53%, while Enterprise revenue declined to 43% from 47%.

The following chart illustrates these revenue trends by product line and customer vertical:

Geographically, NetScout’s revenue distribution remained stable, with the United States accounting for 57% of total revenue in both FY’24 and FY’25. International markets maintained their 43% share, with Europe slightly increasing from 18% to 19%, Asia holding steady at 8%, and Rest of World decreasing from 17% to 16%.

This geographic distribution is visualized in the following chart:

The company’s balance sheet remains strong, with $492.5 million in cash and securities and no long-term debt as of the end of Q4 FY’25. Total (EPA:TTEF) deferred revenue stood at $449.3 million, and free cash flow for FY’25 reached $211 million. NetScout reported a liquidity ratio of 5.0x and a net leverage of (2.3x), indicating a solid financial position.

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

Strategic Initiatives & Leadership Changes

A significant announcement during the presentation was the upcoming retirement of two key executives. Chief Operating Officer (COO) Michael Szabados and Chief Financial Officer (CFO) Jean Bua will retire effective May 31, 2025, though both will continue in advisory roles to support the transition.

NetScout has appointed internal successors, with Deputy COO Sanjay Munshi set to become COO and Deputy CFO Tony Piazza promoted to CFO, effective June 1, 2025. The company emphasized that this leadership transition reflects its strong succession planning and will ensure continuity in operational and financial leadership.

The company highlighted its continued focus on cybersecurity solutions and investments in artificial intelligence (AI) as key strategic initiatives. Despite the earnings miss, NetScout’s presentation pointed to strong Q4 performance driven by its cybersecurity products, suggesting this will remain a focus area going forward.

Forward-Looking Statements

Looking ahead to fiscal year 2026, NetScout provided a cautiously optimistic outlook while acknowledging macroeconomic uncertainties. The company projects FY’26 revenue between $825 million and $865 million, potentially representing growth from FY’25’s $822.7 million.

For earnings, NetScout forecasts GAAP diluted EPS of $1.07 to $1.22 and non-GAAP diluted EPS of $2.25 to $2.40, which would represent growth from FY’25’s $2.22. The company’s outlook is based on an estimated annual tax rate of approximately 20% and weighted average diluted shares outstanding of 74-75 million.

The following slide details the company’s financial outlook for FY’26:

A more detailed reconciliation between GAAP and non-GAAP metrics for the FY’26 outlook provides additional context for investors:

While NetScout’s presentation emphasized cost management and financial stability, the company’s approach appears cautious given the current macroeconomic environment. The company is targeting revenue and profitability growth for FY’26 but seems prepared for potential challenges ahead.

The Q4 earnings miss and modest revenue growth suggest NetScout faces competitive pressures in its markets, though margin improvements indicate effective cost control measures. As the company navigates through leadership transitions and macroeconomic uncertainties, investors will be watching closely to see if its strategic focus on cybersecurity and AI investments can drive stronger growth in the coming fiscal year.

Full presentation:

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