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Netscout Systems (NTCT)
NASDAQ:NTCT
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Netscout Systems
(NASDAQ:NTCT)
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Rating:71Outperform
Price Target:
$30.00
▲(4.82% Upside)
Action:ReiteratedDate:02/06/26
The score is driven primarily by strong financial fundamentals (conservative balance sheet and solid cash generation) and a constructive earnings call with raised guidance and margin strength. These positives are tempered by weak-to-mixed technicals and the fundamental overhang of uneven/declining revenue trends and timing-related variability.
Positive Factors
Conservative balance sheet
NetScout's very low leverage and large equity base provide durable financial flexibility. This reduces refinancing and solvency risk, enabling sustained investments in R&D, M&A or buybacks during downturns and supporting long-term operations without reliance on external debt markets.
Strong cash generation
Consistent operating and free cash flow near net income gives NetScout the ability to fund product development, customer deployments and share activity internally. Robust FCF supports capital allocation flexibility and reduces dependence on external financing over the medium term.
High margins and favorable product mix
Sustained high gross margins and recent operating margin expansion reflect software-heavy, subscription and cybersecurity mix with pricing power. This margin structure supports durable profitability even if revenues fluctuate and funds continued investment in AI and observability products.
Negative Factors
Shrinking trailing revenue
A meaningful decline in TTM revenue undermines earnings durability: it increases sensitivity of margins and cash flow to single large deals and makes sustaining positive operating leverage harder. Recovering top-line growth is critical for long-term margin and ROE stability.
Pressure in service-provider vertical
Weakness and pricing pressure in service-provider customers reflect constrained carrier budgets and headcount cuts, creating a persistent revenue headwind in a meaningful end market. Structural softness there can depress long-term revenue diversity and growth optionality.
Timing variability and rising receivables
Significant quarter timing shifts and higher DSO increase working capital needs and reduce revenue visibility. Persistent timing volatility can distort growth comparisons, strain cash conversion, and necessitate greater balance sheet liquidity or slower reinvestment over the medium term.
Netscout Systems (NTCT) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$2.07B
Dividend YieldN/A
Average Volume (3M)473.40K
Price to Earnings (P/E)22.0
Beta (1Y)1.00
Revenue Growth9.60%
EPS GrowthN/A
CountryUS
Employees2,273
SectorTechnology
Sector Strength88
IndustrySoftware - Infrastructure
Share Statistics
EPS (TTM)1.00
Shares Outstanding72,220,350
10 Day Avg. Volume549,896
30 Day Avg. Volume473,400
Financial Highlights & Ratios
PEG Ratio-0.03
Price to Book (P/B)0.97
Price to Sales (P/S)1.83
P/FCF Ratio7.14
Enterprise Value/Market Cap0.80
Enterprise Value/Revenue1.92
Enterprise Value/Gross Profit2.42
Enterprise Value/Ebitda9.41
Forecast
1Y Price Target
$32.00Price Target Upside11.81% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering2
EPS Forecast (FY)N/A
Revenue Forecast (FY)N/A
Netscout Systems Business Overview & Revenue Model
Company DescriptionNetScout Systems, Inc. provides service assurance and cybersecurity solutions for protect digital business services against disruptions in the United States, Europe, Asia, and internationally. The company offers nGeniusONE management software that enables customers to predict, preempt, and resolve network and service delivery problems, as well as facilitate the optimization and capacity planning of their network infrastructures; and specialized platforms and analytic modules that enable its customers to analyze and troubleshoot traffic in radio access and Wi-Fi networks. It also provides nGeniusPULSE, an active testing tool that enables enterprises to identify infrastructure performance issues and determine application availability, reliability, and performance; and nGenius Business Analytics solution, which enables service providers to analyze their network traffic. In addition, the company offers ISNG, an advanced passive network probe; packet flow systems that deliver targeted network traffic access to various monitoring and security tools and systems; and a suite of test access points that enable non-disruptive access to network traffic. Further, it provides cybersecurity solutions to protect their networks against distributed denial of service attacks under the Arbor brand, such as Arbor Sightline, Arbor Threat Mitigation System, Arbor Insight, Arbor Edge Defense, and Arbor Cloud. Additionally, it offers advanced threat detection solutions, such as Omnis Cyber Investigator. It serves enterprise customers in various industries, including financial services, technology, manufacturing, healthcare, utilities, education, transportation, and retail; mobile operators, wireline operators, cable operators, Internet service providers, and cloud providers; and governmental agencies through a direct sales force, and indirect reseller and distribution channels. NetScout Systems, Inc. was incorporated in 1984 and is headquartered in Westford, Massachusetts.
How the Company Makes MoneyNetscout generates revenue primarily through the sale of its software solutions, hardware appliances, and subscription services. The company has a diverse revenue model that includes license fees for its software products, maintenance and support services, and recurring revenue from cloud-based offerings. Key revenue streams also come from professional services, such as consulting and training, which assist customers in optimizing their network performance. Additionally, Netscout has established strategic partnerships with various technology firms and telecommunications providers, enhancing its market reach and capabilities, thus contributing to its overall earnings.
Netscout Systems Earnings Call Summary
Earnings Call Date:Feb 05, 2026
(Q3-2026)
| % Change Since: |
Next Earnings Date:May 07, 2026
Earnings Call Sentiment Positive
The call conveyed a generally constructive operational and financial picture: solid year-to-date revenue growth (~6%), stronger cybersecurity growth (9%), margin expansion, improved EPS, healthy cash generation and an upward adjustment to the fiscal year midpoint outlook. These positives were tempered by timing-related revenue variability (≈$15M of pull-ins), supply-chain and server-procurement timing risks, pressure in the service provider vertical, a rise in DSO to 82 days, and an inconsistency in reported third-quarter revenue figures noted between speakers. On balance the company showed execution, improving profitability and a resilient balance sheet, but with moderate near-term timing and industry headwinds to monitor.Q3-2026 Updates
Positive Updates
Quarter Ahead of Expectations and EPS Growth
Management reported third-quarter results ahead of expectations with diluted EPS of $1.00, an increase of approximately 6% year over year (management cited ~6%–6.4% improvements).
Nine-Month Revenue and EPS Improvement
Revenue for the first nine months was approximately $656 million, up about 6% year over year, and diluted EPS for the first nine months was $1.96, up ~15% from $1.70 a year ago.
Raised Full-Year Outlook (Midpoint Increase)
Company raised the midpoint of its FY2026 revenue outlook to $835M–$870M (midpoint implies ~3.6% year-over-year growth) and nudged non-GAAP diluted EPS guidance to $2.37–$2.45 (prior EPS range was $2.35–$2.45).
Revenue Mix and Product Line Growth
For the first nine months service assurance revenue grew ~4.8% (management also cited ~5%) while cybersecurity grew 9% year over year. Service assurance represented ~64% of total revenue; cybersecurity ~36%.
Enterprise Vertical Strength
Enterprise customer vertical revenue increased ~9.4% year over year and accounted for ~58% of total revenue, driven by demand for observability, AI-enabled monitoring and digital initiatives.
Strong Cash, Free Cash Flow and Balance Sheet
Cash, cash equivalents, marketable securities and investments totaled $586.2M (an increase of $93.7M since fiscal year 2025) and quarter free cash flow was $59.4M. No outstanding balance on the $600M revolving credit facility.
Margin Expansion and Cost Discipline
Gross profit margin remained high at 82.8% for the quarter; operating margin increased to 35.9% from 35.6% year over year. Quarterly operating expenses decreased ~1.1% to $117.6M.
Customer Wins and Product Innovation
Notable wins included a mid-7-figure new insurance customer, a low-7-figure electric utility order, and two mid- to high-7-figure cybersecurity deals in Europe. Product initiatives include Omnice AI Center, AI Streamer and upcoming Ingenious Edge Sensor 795.
Market Recognition
Received industry accolades: Omnice Cyber Intelligence named a 2025 Security Today award winner and Frost & Sullivan 2025 Global Company of the Year in the global network monitoring industry.
Negative Updates
Timing-Related Revenue Variability and Pull-Ins
Management noted timing-related shifts in customer purchasing (deal acceleration and pull-ins). Approximately $15M of revenue was pulled into the quarter, creating unevenness across reporting periods and potentially reducing near-term revenue in subsequent quarters.
Inconsistent Reported Quarterly Revenue Figures
The prepared remarks and CFO commentary included conflicting third-quarter total revenue figures (Anil referenced ~$200.15M while the CFO referenced $250.7M), indicating an inconsistency in public commentary that may create investor confusion.
Service Provider Vertical Lagging
Service provider customer vertical grew only ~2.2% year over year for the first nine months and management highlighted continued pricing pressure, budget constraints and headcount reductions at some carriers that may keep this vertical challenged near term.
Supply Chain and Timing Risks
Management flagged AI-driven and tariff-related supply chain dynamics and potential server procurement delays (customers run NetScout software on third-party servers) that could delay software deployments and affect timing of orders, though direct margin impact is limited.
Accounts Receivable and DSO Increase
Accounts receivable (net) rose to $234.6M (an increase of $70.9M since March 31, 2025) and days sales outstanding increased to 82 days from 75 days year over year, reflecting timing/composition of bookings and raising working capital considerations.
Product Revenue Decline Quarter-over-Year
Product revenue in the quarter was $121.7M vs. $128.2M the prior year, a decline of approximately 5.1%, largely attributed to timing of certain orders between quarters.
Near-Term Uncertainty Despite Pipeline
While management described a robust pipeline and healthy demand signals, they remained cautious about timing variability, limited visibility on additional pull-ins, and macro factors (customers managing budgets conservatively).
Company Guidance
NetScout raised the midpoint of its fiscal 2026 outlook, now guiding revenue of $835 million to $870 million (midpoint implying ~3.6% year‑over‑year growth) versus the prior $830M–$870M range, and non‑GAAP diluted EPS of $2.37 to $2.45 (prior $2.35–$2.45); the company expects a full‑year effective tax rate of ~20% and assumes ~73–74 million weighted average diluted shares outstanding, says performance is expected around the midpoint while the wider range captures timing-related variability, and it retains capacity for share repurchases.Netscout Systems Financial Statement Overview
Summary
Strong balance sheet (very low leverage) and robust TTM operating/free cash flow support financial flexibility. Profitability has rebounded with high gross margin and positive operating/net margins, but the key risk remains the shrinking TTM revenue base and recent history of annual losses, making earnings durability less certain.Income Statement
TTM (Trailing-Twelve-Months) shows a clear profitability rebound with solid gross margin (~79%) and positive operating and net margins (~13% and ~11%). However, revenue is down meaningfully in TTM (about -16% growth), and the last two annual periods included sizable losses, highlighting that earnings have been volatile and the top-line trajectory remains the key weak spot.62
Positive
Balance Sheet
The balance sheet is a major strength: leverage is very low (debt-to-equity ~0.03 in TTM), and equity represents a large capital base versus total assets, providing flexibility. Return on equity is positive in TTM (~6%), but recent annual ROE swung negative during the loss periods, suggesting returns can weaken quickly if profitability softens again.86
Very Positive
Cash Flow
Cash generation is strong relative to earnings and has improved: TTM operating cash flow (~$284M) and free cash flow (~$275M) are robust, with free cash flow running close to net income. The main watch item is that operating cash flow coverage is not especially high in TTM (ratio ~0.64), implying cash conversion can fluctuate even though absolute free cash flow is currently healthy.78
Positive
| Breakdown | TTM | Mar 2025 | Mar 2024 | Mar 2023 | Mar 2022 | Mar 2021 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 861.43M | 822.68M | 829.46M | 914.53M | 855.58M | 831.28M |
| Gross Profit | 682.68M | 643.94M | 642.04M | 691.43M | 641.39M | 609.18M |
| EBITDA | 175.53M | -294.85M | -60.87M | 174.01M | 146.72M | 139.01M |
| Net Income | 95.91M | -366.92M | -147.73M | 59.65M | 35.87M | 19.35M |
Balance Sheet | ||||||
| Total Assets | 2.32B | 2.19B | 2.60B | 2.82B | 3.19B | 3.09B |
| Cash, Cash Equivalents and Short-Term Investments | 573.00M | 491.47M | 423.13M | 419.00M | 703.20M | 476.45M |
| Total Debt | 73.56M | 76.01M | 182.59M | 209.29M | 469.26M | 484.89M |
| Total Liabilities | 680.38M | 626.18M | 703.24M | 790.91M | 1.13B | 1.08B |
| Stockholders Equity | 1.64B | 1.56B | 1.89B | 2.03B | 2.06B | 2.01B |
Cash Flow | ||||||
| Free Cash Flow | 275.48M | 210.97M | 52.47M | 146.00M | 285.61M | 197.40M |
| Operating Cash Flow | 283.80M | 217.67M | 58.81M | 156.65M | 296.01M | 213.92M |
| Investing Cash Flow | -26.40M | -7.00M | 13.36M | 15.30M | -68.35M | 24.70M |
| Financing Cash Flow | -122.73M | -142.01M | -69.35M | -419.43M | -54.16M | -118.31M |
Netscout Systems Technical Analysis
Positive
28.62
Price Trends
27.90
Positive
27.38
Positive
25.48
Positive
Market Momentum
0.39
Negative
51.88
Neutral
47.60
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For NTCT, the sentiment is Positive. The current price of 28.62 is above the 20-day moving average (MA) of 28.46, above the 50-day MA of 27.90, and above the 200-day MA of 25.48, indicating a bullish trend. The MACD of 0.39 indicates Negative momentum. The RSI at 51.88 is Neutral, neither overbought nor oversold. The STOCH value of 47.60 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for NTCT.
Netscout Systems Risk Analysis
Netscout Systems disclosed 33 risk factors in its most recent earnings report. Netscout Systems reported the most risks in the "Finance & Corporate" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Netscout Systems Peers Comparison
UnderperformOutperform
Sector (61)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
71 Outperform | $2.07B | 21.96 | 6.07% | ― | 9.60% | ― | |
70 Outperform | $1.36B | 33.23 | 19.01% | 1.33% | 10.27% | 3.52% | |
69 Neutral | $970.54M | 49.36 | 6.09% | ― | 10.40% | ― | |
68 Neutral | $3.27B | 18.40 | 204.27% | ― | 7.21% | 58.61% | |
63 Neutral | $1.36B | 39.46 | 5.60% | ― | 12.48% | ― | |
61 Neutral | $37.18B | 12.37 | -10.20% | 1.83% | 8.50% | -7.62% |
* Technology Sector Average
NTCT
Netscout Systems
29.34
6.35
27.62%
RDWR
Radware
22.99
-0.20
-0.86%
ATEN
A10 Networks
19.28
-0.64
-3.23%
FIVN
Five9
17.85
-20.10
-52.96%
BOX
Box
23.01
-9.54
-29.31%
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.