Executive Summary
NetScout Systems’ QQ1 2025 results reflect a difficult year-over-year revenue comparison driven by a substantial backlog-related revenue in the prior year period and a large one-time impairment. Reported revenue came in at $174.6 million, down 17.3% year over year, while non-GAAP earnings per share (EPS) were $0.28, aided by ongoing cost containment and an unrealized foreign investment gain. GAAP results were meaningfully negative, with an operating loss of approximately $463.3 million and net loss of about $443.4 million, after a $427 million goodwill impairment charge recorded in the quarter. Management emphasized strategic renewal in cybersecurity and service assurance, anchored by the Omnis Cyber Intelligence initiative and expansion into AI-enabled, edge-focused offerings (AIOps and Edge Instrumentation) to drive future growth. They also announced a voluntary separation program expected to yield run-rate savings of $25–$27 million annually, with a portion recognized in FY2025.
The company reiterated its full-year non-GAAP targets of revenue between $800–$830 million and non-GAAP diluted EPS of $2.10–$2.30, underscoring confidence in pipeline momentum despite near-term headwinds. The second-quarter guide implies modest sequential improvement with revenue of $185–$195 million and non-GAAP EPS of $0.42–$0.51. NetScout remains cash-rich with a net cash position (net debt negative) and a strong balance sheet, albeit burdened by the impairment and a higher DSO driven by bookings timing. The stock remains subject to execution risk as the company transitions toward a software-centric model and scales its cybersecurity and edge-focused offerings. Investors should monitor the conversion of backlog into revenue, the pace of Omnis and AIOps adoption, competitive dynamics in cybersecurity, and the realization of expected cost synergies.
Key Performance Indicators
QoQ: -14.19% | YoY:-17.32%
QoQ: -14.96% | YoY:-19.00%
QoQ: -1 153.04% | YoY:-9 768.46%
QoQ: -1 267.64% | YoY:-10 456.57%
QoQ: -1 247.83% | YoY:-10 462.18%
Key Insights
Revenue: $174.565 million in Q1 FY2025, down 17.3% YoY; Gross margin: 77.1% (down 1.2 pp YoY); Operating income (GAAP): -$463.324 million; Net income (GAAP): -$443.376 million; Diluted EPS (GAAP): -$6.20; Diluted EPS (non-GAAP): $0.28 (includes ~+$0.10 unrealized foreign investment gain);
Free cash flow (FCF): $37.2 million; Operating cash flow: $38.4 million; Capex: $1.27 million; Net cash provided by operating activities: $38.4 million; Cash and equivalents + investments: ~$406.2 million; Net ...
Financial Highlights
Revenue: $174.565 million in Q1 FY2025, down 17.3% YoY; Gross margin: 77.1% (down 1.2 pp YoY); Operating income (GAAP): -$463.324 million; Net income (GAAP): -$443.376 million; Diluted EPS (GAAP): -$6.20; Diluted EPS (non-GAAP): $0.28 (includes ~+$0.10 unrealized foreign investment gain);
Free cash flow (FCF): $37.2 million; Operating cash flow: $38.4 million; Capex: $1.27 million; Net cash provided by operating activities: $38.4 million; Cash and equivalents + investments: ~$406.2 million; Net debt: -$240.1 million; DSO: 66.6 days; Revenue mix: Service Assurance ~67%, Cybersecurity ~33%; Geography: US 57%, international 43%; Backlog-related revenue impact: ~$37 million YoY; YoY revenue decline largely explained by prior-year backlog and continued spend discipline across enterprise and service provider segments; 2025 guidance maintained despite headwinds.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
174.57M |
-17.32% |
-14.19% |
| Gross Profit |
130.20M |
-19.00% |
-14.96% |
| Operating Income |
-463.32M |
-9 768.46% |
-1 153.04% |
| Net Income |
-443.38M |
-10 456.57% |
-1 267.64% |
| EPS |
-6.20 |
-10 462.18% |
-1 247.83% |
Key Financial Ratios
operatingProfitMargin
-265%
operatingCashFlowPerShare
$0.54
freeCashFlowPerShare
$0.52
Management Commentary
- Strategy and growth drivers: NetScout is prioritizing Omnis Cyber Intelligence in cybersecurity and moving service assurance toward AI-enabled operations (AIOps) with Edge Instrumentation to extend visibility to remote sites and cloud. Management noted that Omnis has started to gain traction and is viewed as a long-term growth vector. "Our goal is to have double-digit growth in cybersecurity this year... Omnis Cyber Intelligence... we’re starting to gain traction on that." (Anil Singhal)
- Market conditions and execution: The company sees cybersecurity as a persistent growth area amid an expanding threat landscape and notes that 5G investments in carriers are ongoing but measured. They aim to leverage existing hardware with new software modules for AIOps, targeting a broader audience beyond traditional fan-out. "The movement to AIOps and extending instrumentation to the Edge... those are things that we developed many, many years ago" (Jean Bua).
- Outlook and cost management: NetScout is advancing a voluntary separation program to achieve annualized cost savings of ~$25–$27 million, with some savings realized in FY2025, and it reiterates its FY2025 revenue and non-GAAP EPS targets. "We expect to benefit from approximately $25 million to $27 million of annualized cost reduction, a portion of which will be recognized during fiscal year 2025" (Michael Szabados/Anil Singhal).
"Our goal is to have double-digit growth in cybersecurity this year... Omnis Cyber Intelligence... we’re starting to gain traction on that."
— Anil Singhal
"Omnis platform is consistent on a year-over-year basis in the first quarter, but shows a lot of promise. Moving into service assurance, the movement to AIOps and extending instrumentation to the Edge... those are things that we developed many, many years ago."
— Jean Bua
Forward Guidance
- Outlook highlights: FY2025 revenue guidance of $800–$830 million and non-GAAP EPS guidance of $2.10–$2.30, with a roughly 20% effective tax rate and ~73 million diluted shares. They anticipate continued volatility from the unrealized gain on foreign investments, which will be evaluated as the year progresses.
- Near-term guidance specifics: Q2 revenue guidance of $185–$195 million and non-GAAP EPS of $0.42–$0.51, with an expected 45% H1 and 55% H2 revenue split. A $0.15 per share headwind in Q2 2025 from incentive-related expenses reversal occurred in Q2 2024.
- Assessment: The earnings trajectory hinges on converting backlog into recurring revenue, sustaining cybersecurity growth into the double-digits, and executing cost-savings programs. The Omnis platform and Edge/AIOps strategy offer meaningful long-term upside, but near-term performance will depend on the cadence of deal wins in service assurance and cybersecurity, win-rate of new Omnis offerings, and customer adoption of AI-enabled management. Investors should monitor: (1) backlog conversion pace, (2) security backlog replenishment, (3) realized cost savings from the voluntary separation program, (4) progress in partnerships and integrations with AWS, Palo Alto Networks, and Cisco/Splunk ecosystems, and (5) the impact of any foreign-investment gains on EPS.