NetScout Systems (NTCT) investor relations material

Financial performance and outlook

• Achieved 15% revenue growth in Q2, with both service assurance and cybersecurity contributing; first half growth was 11%.

• Growth was driven by federal, product, and carrier maintenance segments, with no significant customer pullback observed.

• Excluding deal accelerations, revenue growth would have been mid-single digits, aligning with the high end of outlook.

• Guidance for Q3 reflects a reduction due to deal accelerations and a cautious service provider environment.

• Strong balance sheet and free cash flow enable flexibility for organic and inorganic investments, with share repurchases as a secondary priority.

Industry trends and market dynamics

• Years of headwinds, especially in 5G, are dissipating as network capacity is now being used, leading to new investments.

• Carriers are focusing CapEx on fiber backhaul to address bottlenecks and support growing wireless and AI-driven traffic.

• Satellite deployment is emerging as a cost-effective way to expand coverage, creating new monitoring needs.

• Growth in AI traffic and fixed wireless are key drivers for increased network investment and monitoring demand.

Product innovation and AI integration

• Launched AI Sensor and Streamer products, leveraging DPI data for observability and AI use cases.

• Early traction and revenue seen from AI-focused products, with partnerships in observability (e.g., Splunk, ServiceNow).

• DPI technology is being used to enhance DDoS mitigation and integrate observability with cybersecurity.

• Internal use of AI includes LLMs for enterprise data analysis and productivity improvements.