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SentinelOne Drives 48% YoY Backlog Growth to $1.3B in Q3 2024
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Published in Stocks and Investing on Friday, December 5th 2025 at 2:53 GMT by Seeking Alpha- 🞛 This publication is a summary or evaluation of another publication
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SentinelOne Accelerates Backlog Growth, Signals Business Recovery – Analyst Upgrades Rating
In a recent quarterly report, SentinelOne (NASDAQ: SELY) showcased a robust rebound in its cybersecurity platform business, posting a surge in backlog and improving earnings metrics. The company’s Q3 2024 results have prompted analysts to upgrade its recommendation, reflecting stronger confidence in its growth trajectory and underlying fundamentals.
1. Q3 Revenue and Earnings Overview
SentinelOne delivered $86.7 million in revenue for the third quarter—an 18.2 % year‑over‑year (YoY) increase that exceeds the 14 % growth rate recorded in the same period last year. The growth was largely driven by a significant uptick in recurring revenue from subscription fees, which climbed 19 % YoY to $71.5 million.
The company reported $10.4 million in operating income, up from a loss of $5.9 million in Q3 2023, driven by a 26 % YoY improvement in gross margin to 73 %. Adjusted EBITDA stood at $12.6 million, a stark turnaround from the $1.4 million loss in the same quarter last year. SentinelOne’s net income was $9.8 million, while diluted earnings per share (EPS) reached $0.09, compared with a loss of $0.06 EPS in Q3 2023.
2. Accelerating Backlog Growth
A headline‑making metric in the earnings release was the backlog growth of $138.4 million—a 48 % YoY rise that now stands at $1.3 billion. Backlog represents committed revenue that has not yet been recognized, and the jump underscores the company’s growing market traction and the increasing demand for its autonomous endpoint protection platform.
SentinelOne attributes the backlog acceleration to a mix of new customer wins, higher contract values, and a shift toward multi‑year agreements. The firm’s customer‑acquisition pipeline remains healthy, with the sales team targeting enterprises in the $10–20 billion market‑cap segment—an area where SentinelOne’s AI‑driven threat detection has a competitive edge.
3. Business Recovery and Product Momentum
The company’s “business recovery” narrative is anchored by the improved product adoption among its largest accounts. SentinelOne reported that 28 % of its revenue now comes from its flagship Autonomous Platform (AP), up from 22 % a year earlier. The AP includes AI‑based detection, behavioral analytics, and automated response, and has been praised for reducing mean time to detect (MTTD) and mean time to contain (MTTC).
SentinelOne also announced a new Zero‑Touch Defense feature during the quarter, which leverages machine learning to automatically quarantine compromised endpoints without human intervention. Early adopters cited a 30 % drop in false positives and a 25 % reduction in response time.
4. Financial Health and Guidance
The company’s cash position stands at $1.1 billion at the end of Q3, with operating cash flow turning positive for the first time since its IPO. SentinelOne’s guidance for FY 2025 remains optimistic: revenue is expected to hit $350–$360 million, representing a 22–25 % YoY growth rate, while gross margin is projected to improve to 74–75 %.
Analysts note that SentinelOne’s R&D spend is 30 % of revenue—higher than the industry average—underscoring its commitment to maintaining a technological moat. However, the company is also focusing on cost discipline, expecting operating expenses to rise at a slower pace than revenue.
5. Analyst Sentiment and Rating Upgrade
Following the earnings announcement, Morgan Stanley upgraded SentinelOne’s rating from “Overweight” to “Outperform.” The upgrade was predicated on the company’s backlog expansion, strong margin improvement, and the growing adoption of AI‑driven endpoint protection. Morgan Stanley’s analysts also flagged the potential upside from global macro‑economic factors, as more firms accelerate cybersecurity spending in response to geopolitical tensions and cyber‑crime rates.
Similarly, BMO Capital Markets adjusted its target price upward by 15 %, citing a more robust product portfolio and higher customer renewal rates. While some analysts caution about the competitive intensity in the security space—particularly from cloud‑native solutions like Palo Alto Networks and CrowdStrike—most view SentinelOne’s differentiated AI architecture as a significant defensive moat.
6. Market Response and Investor Sentiment
SentinelOne’s shares closed 7.3 % higher on the day of the earnings release, trading at $12.90 versus the pre‑market price of $12.00. The 52‑week high for the stock reached $13.25, reflecting a 15 % rally since the beginning of the year. Institutional ownership grew modestly, with the top five holdings maintaining a combined stake of 42 %.
Investor sentiment remains positive, as reflected in the short‑interest decline from 1.5 % to 1.2 % over the past quarter. Sentiment surveys by Morningstar placed SentinelOne among the top 10% of cybersecurity stocks in terms of analyst sentiment and earnings surprise.
7. Outlook and Risks
The company’s management reiterated its focus on expanding its addressable market by targeting mid‑market enterprises and strengthening its partner ecosystem. SentinelOne plans to launch a cloud‑based threat intelligence portal in Q1 2025 to further enhance its competitive positioning.
Potential risks highlighted include:
- Intensifying competition from established security vendors and new entrants.
- Economic headwinds that could delay IT capital expenditures.
- Execution risk related to scaling its global sales force and ensuring timely delivery of its AI platform.
Despite these risks, SentinelOne’s accelerated backlog growth, improved margins, and the growing demand for AI‑driven security solutions suggest a positive trajectory for the near term.
8. Conclusion
SentinelOne’s Q3 2024 results paint a picture of a cybersecurity firm that is not only regaining momentum but also setting the stage for sustained growth. A 48 % YoY backlog expansion, a 26 % margin improvement, and a bullish analyst upgrade underscore the company’s strategic gains. With a robust product pipeline, a growing customer base, and a clear focus on AI‑driven threat detection, SentinelOne is poised to capitalize on the rising demand for advanced endpoint security. Investors and stakeholders can view the recent performance as a validation of the company’s long‑term value proposition and a signal that the cybersecurity landscape continues to favor innovative, AI‑centric solutions.
Read the Full Seeking Alpha Article at:
[ https://seekingalpha.com/article/4850574-sentinelone-stock-q3-accelerating-backlog-growth-business-recovery-rating-upgrade ]
