SentinelOne Q3 Surge: Strong Margins, AWS Deals & Cautious Optimism in Ratings

SentinelOne’s latest financials (Q3 FY2026, ended October 31, 2025) illustrate a strong continuation of growth coupled with improving unit economics. Revenue rose 23% year-over-year to $258.9 million, and ARR also increased 23% to $1,055.3 million. On the margin side, non-GAAP operating margin improved significantly to 7% versus (5)% a year ago; non-GAAP net income margin rose to 10%; and free cash flow margin turned positive, at 6%, from (6)% a year prior.

Alongside financials, product- and technology-led momentum is accelerating. SentinelOne continues to lean into its AI-native Singularity platform, bolstered by acquisitions: Observo AI (for data pipelines) complements existing AI-SIEM and Purple AI offerings. Their AWS integrations showcase practical value, e.g. delivering integrations with AWS Security Hub, CloudWatch, bringing Purple AI MCP Server and Observo AI pipeline onto AWS Marketplace to simplify deployment. These moves target key strategic pain points—telemetry volume, signal-to-noise ratio, and operational costs.

Analyst support is evolving more mixed as the company edges toward profitability. Major firms like TD Cowen maintain Buy ratings, but price targets have been trimmed: TD Cowen cut theirs to $22 from $24, citing cautious guidance and CFO transition risk. Fair values now cluster around $22-$24, with upside potential still dependent on execution and macro.

Despite encouraging metrics, some warning signs merit attention. Guidance for Q4 FY2026 projects revenue of $271 million, just barely above some Street expectations (~$273 million), indicating investor skepticism on upside. Product sunsetting (e.g. Deception line) risks erosion of ARR growth or customer satisfaction in specific segments. Moreover, competition remains intense in the AI-powered cybersecurity space, especially from larger incumbents. The CFO transition in mid-Jan 2026 introduces execution risk.

Strategic implications:

• SentinelOne’s trajectory suggests it is transitioning from high growth toward more disciplined, margin-aware performance; near-term profitability may be within reach if execution holds.
• Acquisitions and integrations strengthen its competitive positioning in AI-native SIEM, endpoint, cloud and GenAI security—areas with rising enterprise demand.
• Pricing and cost structures (especially around data ingestion and telemetry) are likely to become differentiators; the Observo AI deal helps directly address this.
• Investor patience may be tested: the company will need to deliver on Net New ARR, execution post-CFO transition, and ensure guidance aligns better with consensus to support valuation.