NetScout Systems (NASDAQ:NTCT) reported third-quarter fiscal 2026 results that management said came in ahead of expectations, helped by the pull-forward of certain product orders and service renewals that had originally been anticipated in the fourth quarter. The company also raised the midpoint of its full-year outlook, citing year-to-date execution and pipeline strength while cautioning that deal timing can remain uneven in a “dynamic” macro environment.
Quarterly results helped by deal timing
For the quarter ended Dec. 31, 2025, NETSCOUT reported total revenue of $250.7 million, which was “relatively consistent” with $252.0 million in the year-ago period and above the company’s outlook provided last quarter. President and CEO Anil Singhal said results benefited as some customers used remaining calendar year-end budgets, leading to acceleration of certain product orders and service renewals into the December quarter.
Non-GAAP diluted earnings per share for the third quarter were $1.00, up 6.4% year over year. Piazza said the year-over-year EPS comparison also benefited from the absence of a prior-year negative impact related to a foreign investment that the company sold earlier in the fiscal year, though he added it is not expected to materially affect full-year results.
By revenue category, product revenue was $121.7 million versus $128.2 million a year ago, which management attributed primarily to order timing between quarters. Service revenue rose 4.1% to $129.0 million, reflecting underlying growth as well as favorable timing of service renewals, including some renewals that carried “backdated maintenance components,” and the treatment of certain enterprise license agreements.
Gross margin was 82.8% on a non-GAAP basis, consistent with the prior-year quarter. Operating expenses decreased 1.1% year over year to $117.6 million, with Piazza attributing the decline largely to shifting the company’s annual Engage User and Technology Summit from the third quarter (last year) to the second quarter (this year), partially offset by higher employee-related costs. Operating margin improved to 35.9% from 35.6%.
Year-to-date growth led by cybersecurity and enterprise
For the first nine months of fiscal 2026, NETSCOUT reported revenue of approximately $656 million, up about 6% year over year, and non-GAAP diluted EPS of $1.96 compared with $1.70 in the year-ago period. Singhal said the company expanded gross and operating margins over that span.
Piazza provided additional detail on revenue trends for the first nine months (GAAP basis for revenue). Service assurance revenue increased 4.8% and cybersecurity revenue grew 9%. Service assurance represented about 64% of total revenue, with cybersecurity comprising the remaining 36%.
By customer vertical, enterprise revenue grew 9.4% for the first nine months, while service provider revenue increased 2.2%. Enterprise customers accounted for about 58% of total revenue over that period, with service providers representing about 42%. Piazza also noted revenue concentration in the third quarter: one customer and one channel partner each accounted for approximately 10% of revenue during the quarter, while no single customer exceeded 10% of revenue for the first nine months.
Geographically, the company said the U.S. represented 57% of revenue for the first nine months, with international markets at 43%.
Product and market commentary: AI observability, 5G, and DDoS
In prepared remarks, Singhal highlighted continued customer focus on digital initiatives, AIOps advancement, and “observability at the edge” within the service assurance business. He pointed to recently released Omnis AI Sensor and Omnis AI Streamer, describing them as an AI observability solution that captures high-fidelity packet data and processes it for real-time visibility. He also noted the planned launch of the nGenius Edge Sensor 795, which he said uses patented ASI technology and synthetic test analysis to enable “continuous observability” across enterprise environments, including remote site observability and next-generation Wi-Fi.
Among service provider customers, Singhal said the company continues to see “measured investment” in 5G initiatives as providers balance spending with monetization opportunities. He cited fixed wireless access and potential 5G network slicing as possible drivers and said network slicing services are scaling as 5G standalone adoption accelerates. In January, NETSCOUT announced capabilities designed to provide visibility into 5G standalone network slices used for applications including immersive gaming and “mission-critical” scenarios such as remote surgery.
In cybersecurity, Singhal tied demand to a “dynamic and complex” threat landscape, including distributed denial-of-service (DDoS) attacks. He said the company’s adaptive DDoS and Omnis Cyber Intelligence solutions are suited to customer needs. The company also referenced third-party recognition: Omnis Cyber Intelligence with Omnis CyberStream was named a 2025 CyberSecured Award winner by Security Today in the Network Security category, and Frost & Sullivan named NETSCOUT its 2025 Global Company of the Year in the global network monitoring industry.
Customer wins and AI-related use cases
Management described several wins in the quarter:
- Service assurance: a “mid-seven-figure” order from a new insurance customer, which Singhal said was driven by a need for scalable visibility with expanded cloud and AI functionality and an effort to consolidate tools onto a single platform.
- Service assurance: a “low-seven-figure” deal with a large electric utility, tied to capacity expansion and using AI to improve safety and monitor infrastructure health; the order included the AI Streamer product.
- Cybersecurity (Europe): two additional “mid-to-high seven-figure” deals with existing customers, including upgrades and expansion of DDoS protection and use of Omnis Cyber Intelligence for forensic analysis, regulatory compliance, and threat analysis.
During Q&A, Singhal discussed how NETSCOUT’s “Smart Data” is increasingly relevant to AI use cases, describing a shift from being used primarily within NETSCOUT’s own service assurance applications to being consumed in broader environments and mixed with other use cases. He also said AI-related revenue in service assurance is still small but estimated that “for the nine months, it was about $15 million.”
Raised fiscal 2026 outlook; timing and supply chain remain watch points
NETSCOUT raised the midpoint of its fiscal 2026 guidance ranges. Revenue is now expected to be $835 million to $870 million, compared with the prior range of $830 million to $870 million, which Piazza said represents 3.6% year-over-year growth at the midpoint. Non-GAAP diluted EPS is now expected to be $2.37 to $2.45, up from the prior range of $2.35 to $2.45. The company expects a full-year effective tax rate of about 20% and assumes 73 million to 74 million weighted average diluted shares outstanding, reflecting repurchases during the first nine months.
Management repeatedly emphasized that variability is more about timing than demand. Singhal and Piazza said demand remains strong and the pipeline is robust, but they flagged potential supply chain constraints—particularly customer procurement of servers needed to run NETSCOUT software—as a factor that could delay software order timing. On margins, management said higher server costs borne by customers do not directly pressure NETSCOUT’s margins given its software and services mix, though Singhal noted tariff impacts have been small and could occasionally result in minor software discounting tied to hardware budget constraints.
On the balance sheet, Piazza said NETSCOUT ended the quarter with $586.2 million in cash, cash equivalents, and marketable securities and investments, up $93.7 million from the end of fiscal 2025. Free cash flow in the quarter was $59.4 million, and the company had no outstanding balance on its $600 million revolving credit facility, which expires in October 2029. Piazza also said the company has remaining share repurchase authorization capacity and expects to be active in the market through the remainder of fiscal 2026 and into fiscal 2027, subject to market conditions.
About NetScout Systems (NASDAQ:NTCT)
NetScout Systems, Inc is a leading provider of network performance management, service assurance and cybersecurity solutions. The company designs and delivers hardware and software platforms that capture and analyze real-time and historical packet data, enabling IT teams and service providers to monitor application performance, troubleshoot network issues and defend against distributed denial-of-service (DDoS) attacks. NetScout’s flagship offerings include the nGeniusONE service assurance platform and the InfiniStream packet broker, which together provide end-to-end visibility across hybrid and multi-cloud environments.
Founded in 1984 and headquartered in Westford, Massachusetts, NetScout has built a reputation for scalable and resilient monitoring infrastructure.
