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SentinelOne Guards the Device Where Agents Run. Owners Lost $291M Last Year, and the Gap Is Widening
Revenue grows near 20% and the products target agent security, but stock pay was 5.6 times operating cash flow, owner cash worsened to -$291.0M, and a new convertible could add 46.1M shares.
- Owner cash after all capex and stock pay
- -$291.0M
- Stock pay as a share of operating cash flow
- 562%
- Annualized recurring revenue growth
- 22%
1. Verdict and what this piece answers
Verdict: watch, with a negative lean. SentinelOne builds some of the best endpoint protection software in the market and keeps growing near 20%, but the business has never produced cash for its owners, and the gap is getting wider, not narrower.
Owner cash, meaning operating cash flow of $57.3M less $26.3M of equipment and capitalized software, less $322.1M of stock pay, was -$291.0M for the twelve months ended Jul 31, 2026, our calculation [2][3][13]. A year earlier, for fiscal 2026, it was -$245.7M.
Stock pay was more than five and a half times the operating cash the business generated.
The question this piece answers is whether SentinelOne owns a gate that superintelligence agents will have to pass, and whether owners will ever be paid for it. The company sits on the device and the cloud workload, where code actually runs, and it bought Prompt Security in 2025 to sit between employees and the agent and chat tools they use [1][2].
That is a real position. The problem is that it is priced per protected device, it competes head to head with a larger rival that has the same position, and the money it earns is spent on stock pay, acquisitions and, since October, financed with $1.25B or more of new convertible debt [1][6].
2. Rating metrics
| Metric | Value |
|---|---|
| R&D share of revenue | 32.3%, research and development expense of $323.9M on $1,001.3M of revenue, fiscal 2026, our calculation [13]. In the second quarter of fiscal 2027, R&D was $96.9M, 33.2% of revenue [3] |
| GAAP net margin | -45.0%, a net loss of $450.7M on $1,001.3M of revenue, fiscal 2026 [1]. The loss includes a $136.0M tax charge from the Israel Tax Authority dispute, settled in January 2026 [12]. Without it, the margin would have been about -31.4%, our calculation |
| API quality | 3 of 5, our scoring: documented management and threat-hunting APIs for the platform, a security data lake that accepts third-party data, and an integrations marketplace [1]. There is no free self-serve developer tier and no public price list; pricing is per protected agent through sales and partners [1] |
| Toll-gate score | 1 of 4 pass, 2 partial, 1 fail (section 2b) |
2b. Thesis and the toll-gate test
Endpoint security is the last line of defense: a lightweight software agent on every laptop, server, virtual machine and container that watches what code does and stops it when it turns hostile [1]. SentinelOne's agent runs its detection models on the device itself, which means it can act in milliseconds without waiting on the cloud [1].
As superintelligence agents start to run code, call tools and move files on company machines, that same agent is in a position to see and stop them. The company has also built a security data lake that stores telemetry from its own agents and from third parties, and it bought Observo in 2025 to route and clean that data before it lands [1][2].
| Test | Result | Evidence |
|---|---|---|
| Owns the record | Partial | The security data lake and its cloud event management product hold detection telemetry and logs for customers that adopt them [1]. But most customers keep their system of record for security events elsewhere, and the 10-K lists large platform vendors and specialist log analytics firms as competitors [1] |
| Owns the connection | Partial | The endpoint agent sits on the device where code runs, and Prompt Security sits between employees and the generative and agent tools they use, applying guardrails and governance [1]. It does not sit on the network path the way an inline proxy does, and customers can swap endpoint vendors at renewal |
| Prices close to outcomes | Fail | The platform is sold in tiers priced on a per agent basis, which generally means per endpoint, server, virtual machine or host [1]. Data products add consumption and usage-based contracts, but nothing in the filings ties price to threats stopped or to agent actions governed [1][2] |
| R&D on the gate vs features | Pass | R&D is a third of revenue and rising in dollars, and the recent spending targets the gate: Prompt Security for governing agent and chat tool use, Observo for security data pipelines, and the generative analyst and autonomous detection service built into the platform [1][2] |
3. Growth
| Measure | Value | Change |
|---|---|---|
| Fiscal 2024 revenue | $621.2M | +47.1% [13] |
| Fiscal 2025 revenue | $821.5M | +32.3% [13] |
| Fiscal 2026 revenue | $1,001.3M | +21.9% [1][13] |
| Q2 fiscal 2027 revenue | $292.0M | +20.6% [3] |
| Annualized recurring revenue, Jul 31, 2026 | $1,218.1M | +21.6%, from $1,001.4M [2] |
| Customers with annualized recurring revenue of $100,000 or more | 1,715 | +13.3%, from 1,513 [2] |
| Remaining performance obligations, Jul 31, 2026 | $1.7B | 79% expected within 24 months [2] |
| Q3 fiscal 2027 revenue guide | $309M to $311M | +19.3% to +20.1%, our calculation [3][13] |
| Fiscal 2027 revenue guide | $1,202M to $1,207M | +20.0% to +20.5%, our calculation [3] |
Growth has slowed every year since the 2021 listing: 47.1% in fiscal 2024, 32.3% in fiscal 2025, 21.9% in fiscal 2026, and a guide of about 20% for fiscal 2027, our calculation [13][3]. The rate of slowdown has eased.
Second-quarter revenue grew 20.6%, close to fiscal 2026's pace, and annualized recurring revenue grew 21.6%, which suggests revenue growth near 20% can hold into fiscal 2028 [2][3]. Management raised the fiscal 2027 revenue outlook in August [3].
Part of that growth was bought. Prompt Security and Observo closed in September 2025, so they add to growth until they lap their anniversary in the third quarter of fiscal 2027 [2].
The filings do not break out their revenue. Large customers grew 13.3%, slower than recurring revenue, so more of the growth comes from existing large accounts buying more modules
4. New products and how fast the company ships them
The core product is the Singularity Platform, which runs the same agent across Windows, macOS and Linux and is sold in tiers from Core, an antivirus replacement, through Control and Complete to Commercial and Enterprise bundles that add cloud and identity protection [1]. Around it the company has built a broad catalog: agent and agentless cloud workload protection and cloud posture management, identity threat detection, mobile protection, and a cloud security data and event management product that runs on its own data lake [1].
Wayfinder is its managed detection and response service, staffed around the clock and using SentinelOne and Google threat intelligence [1].
The newest pieces are aimed at superintelligence on both sides. Purple is a generative security analyst built into the platform: it lets a security team hunt threats and investigate alerts in plain language, and the company says it reduces time to detect and investigate [1].
Wayfinder uses autonomous agents to triage alerts with more context [2]. Prompt Security, bought for about $133.6M in cash plus 1.56M Class A shares and assumed options, provides guardrails and governance for the generative and agent tools that employees and developers use [2][11].
Observo, bought for about $130.2M in cash plus 5.26M Class A shares, cleans and routes security data before it reaches the data lake
5. Net revenue retention
SentinelOne stopped giving a net retention figure and now only says the rate remained in expansion territory [1][2]. That tells owners retention is above 100% and nothing more.
Recurring revenue from customers spending $100,000 or more is growing, and the count rose 13.3% in a year, but without a retention number we cannot separate expansion from new customers [2]. We treat the missing figure as a data gap and a signal: companies tend to drop a metric when it stops improving.
6. Owner cash
| Period | Operating cash flow | Capex and capitalized software | Stock pay | Owner cash |
|---|---|---|---|---|
| Fiscal 2023 | -$193.3M | $18.4M | $164.5M | -$376.2M [13] |
| Fiscal 2024 | -$68.4M | $15.3M | $216.9M | -$300.5M [13] |
| Fiscal 2025 | $33.7M | $27.0M | $267.5M | -$260.8M [13] |
| Fiscal 2026 | $76.6M | $24.7M | $297.6M | -$245.7M [13] |
| Twelve months to Jul 31, 2026 | $57.3M | $26.3M | $322.1M | -$291.0M [2][3][13] |
The twelve-month figures are built from the fiscal 2026 10-K plus the first half of fiscal 2027 less the first half of fiscal 2026, our calculation [2][3][13]. Owner cash improved each year from fiscal 2023 to fiscal 2026 as operating cash flow turned positive, but the improvement was small, about $40M a year, because stock pay rose almost as fast.
Over the last twelve months it went backward. Operating cash flow fell, and stock pay rose to $322.1M, 29.3% of revenue, our calculation.
Two items explain part of the drop. First, the company paid $30.7M of cash tax in the first half under the Israel Tax Authority settlement, a one-time cost [3][12].
Second, the May 2026 restructuring cost $13.6M of severance, of which $10.2M had been paid by Jul 31 [2]. Adding both back gives about -$247M, still no better than fiscal 2026. Under our standard, both were real cash costs and stay in the figure.
Two adjustments go the other way. Interest income was about $31M over twelve months by our estimate, so owner cash before interest income was about -$322M
7. Acquisitions in the last 24 months
| Company or investment | Closed | Consideration | Purpose |
|---|---|---|---|
| Prompt Security | Sep 5, 2025 | About $133.6M in cash, 1.56M Class A shares and assumed options; the 8-K put the total near $180M | Guardrails and governance for generative and agent tools [2][11] |
| Observo | Sep 22, 2025 | About $130.2M in cash and 5.26M Class A shares | Security data pipelines for the data lake and event management business [2] |
| Knight JV, LLC | First half of fiscal 2027 | $100.0M cash investment | Strategic investment; the filings do not describe the business [2] |
Cash paid for acquisitions, net of cash acquired, was $249.0M in fiscal 2026 and $123.8M in fiscal 2025 [13]. Both 2025 deals also paid in shares, which add to dilution on top of stock pay, and the integration awards for acquired staff are tied to the recurring revenue of those businesses [2].
The $100.0M put into Knight JV, LLC is the largest strategic investment the company has made, and the 10-Q mentions current and contemplated further investments in it in 2026 without saying what Knight does [2]. That is a material data gap.
Goodwill stands at $912.7M and intangible assets at $108.1M [3].
8. Risks and catalysts
Risks. Owner cash: negative in every year on record and worse over the last twelve months [13].
Dilution: stock pay near 30% of revenue, acquisition shares, and notes convertible into 46.1M shares, up to 59.9M in limited circumstances [6]. Competition: CrowdStrike, Microsoft and the large platform vendors bundle endpoint protection, and the 10-K warns of increased pricing pressure [1].
Gross margin: cloud hosting costs rise with data products [2]. Management turnover: three senior roles changed in seven months, and a third restructuring was announced in May 2026 [2][7][8][9].
Control: the co-founder chief executive holds about 30% of the voting power through Class B shares carrying twenty votes [4][5].
Catalysts: third quarter fiscal 2027 results, expected in early December 2026 (unconfirmed; the company had not announced the date as of Oct 31, 2026, and last year's third quarter results came out on Dec 4, 2025)
9. Valuation anchor and balance sheet
Owner cash has been negative in every fiscal year on record and for the trailing twelve months [13]. Our standard needs three positive years before a base value is set, so none is set here, and none is close.
The anchor to track is twelve-month owner cash, -$291.0M today, our calculation. It would need to improve by roughly $300M, through higher operating cash flow or lower stock pay, just to reach zero.
| Item | Jan 31, 2026 | Jul 31, 2026 |
|---|---|---|
| Cash and cash equivalents | $169.6M | $201.0M [3] |
| Short-term investments | $459.0M | $454.3M [3] |
| Long-term investments, including strategic | $140.9M | $158.0M [3] |
| Debt | None | None [3] |
| Deferred revenue, current and noncurrent | $633.1M | $577.6M [3] |
| Goodwill | $912.7M | $912.7M [3] |
| Total stockholders' equity | $1,437.1M | $1,448.5M [3] |
The balance sheet changed after the quarter. On Oct 16, 2026 the company closed an offering of 0% convertible senior notes due Oct 1, 2031 [6].
The 8-K gives the principal as $1,250M including the $187.5M option, and also gives net proceeds of about $1,408M; the two figures do not reconcile as written, and we flag the principal as uncertain until the third quarter 10-Q. Of the proceeds, $151.4M paid for capped calls and $150.0M bought back about 6.2M shares from note buyers [6].
The rest is for general purposes, more buybacks, capital spending and possible acquisitions [6].
This is the company's first debt. It carries no cash interest, and the capped calls reduce dilution up to a cap, but it adds a claim of $1.25B or more ahead of owners, due in five years, at a company that has never covered its own stock pay.
10. Superintelligence angle
Mixed: a tailwind for demand, a headwind for pricing and margin. Superintelligence agents running on company machines create more activity that needs to be watched and stopped, and SentinelOne's on-device detection and Prompt Security's guardrails are built for exactly that [1].
Attackers using the same tools raise the threat level, which supports security budgets. But the company prices per device, so agents that run on protected laptops and servers add no revenue, and its own generative analyst and autonomous triage run on rented cloud compute, which is already pushing up cost of revenue [1][2].
The same tools also lower the cost for rivals and bundlers to match features. Chief executive Tomer Weingarten describes the company as leading both in using superintelligence for security and in securing superintelligence [3].
The filings show the products for both; they do not yet show a price for either.
11. Leadership and control
Tomer Weingarten co-founded SentinelOne in 2013 and is president, chief executive officer and chairman [4]. He holds 7.72M Class B shares, 79.5% of that class, and with a voting proxy over 4.24M Class A shares controls 29.99% of total voting power [4].
Class B shares carry twenty votes and Class A one [5]. Daniel Scheinman, a director since 2015, is lead independent director and holds 22.6% of the Class B shares and 6.19% of the vote; directors and executive officers as a group hold 35.83% of the vote [4].
Vanguard entities are the largest outside holders at 5.21% and 6.49% of Class A shares [4].
The finance seat turned over twice. Chief financial officer Barbara Larson gave notice on Dec 1, 2025 and left in mid-January 2026, with no disagreement stated [7].
Barry Padgett, the chief growth officer, served as interim chief financial officer [7]. Sonalee Parekh, formerly chief financial officer at Asana and RingCentral, was appointed on Feb 28, 2026 and started Mar 24, 2026 [8].
The same day Padgett became president and chief operating officer; he joined in March 2025 after running Amperity and serving as Stripe's chief revenue officer
12. Questions for the owner and predictions
Questions for the owner. First, when does stock pay fall below operating cash flow, and what is the plan to get there?
Second, what is Knight JV, LLC, why did it need $100.0M, and how much more will go in? Third, what was net retention, as a number, at Jan 31, 2026 and Jul 31, 2026?
Fourth, will the company ever price per agent action or per governed tool rather than per device? Fifth, conviction on a 1 to 5 scale: our view is 2. The technology and the growth are real, but owner cash is negative and getting worse, and new debt and dilution sit ahead of owners.
Predictions to register: third quarter fiscal 2027 revenue lands at or above $311M, the top of the guide (65%); annualized recurring revenue grows 20% or more at Oct 31, 2026 (60%); fiscal 2027 stock pay exceeds $330M (65%); twelve-month owner cash, as we define it, stays below -$200M at Jan 31, 2027 (80%); the company discloses a numeric net retention rate by Mar 31, 2027 (20%); the company discloses the business of Knight JV, LLC in the third quarter 10-Q (50%).
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