NETSCOUT Revenue Dips Amidst Market Headwinds

TL;DR

**NTCT's revenue dip is a yellow flag; watch for sustained growth or prepare for further downside.**

AI Summary

NETSCOUT SYSTEMS INC reported total revenue of $143.2 million for the quarter ended June 30, 2025, a decrease from $147.2 million in the same period of 2024. Product revenue declined to $54.3 million from $58.1 million year-over-year, while service revenue also saw a slight dip to $88.9 million from $89.1 million. The company's net income for the quarter was not explicitly detailed, but the filing indicates a focus on managing operational costs. Key business changes include ongoing investments in research and development, with R&D expenses at $29.8 million for the quarter. Risks highlighted include general economic conditions and competitive pressures in the cybersecurity and network performance management markets. The strategic outlook involves leveraging its technology portfolio to address evolving customer needs in enterprise and service provider segments, despite the slight revenue contraction.

Why It Matters

This slight revenue decline for NETSCOUT SYSTEMS INC could signal increasing competitive pressures in the network performance and cybersecurity markets, impacting investor confidence. Employees might face pressure to innovate and cut costs to improve profitability. Customers could benefit from intensified competition leading to better product offerings or pricing, but also face potential instability if the company's financial health deteriorates. For the broader market, it reflects a challenging environment for technology companies reliant on enterprise and service provider spending, especially against larger, more diversified competitors like Cisco or Palo Alto Networks.

Risk Assessment

Risk Level: medium — The company experienced a revenue decrease from $147.2 million in Q1 2024 to $143.2 million in Q1 2025, a 2.7% decline. This, coupled with a decrease in product revenue from $58.1 million to $54.3 million, indicates potential market saturation or increased competition, posing a medium risk to future growth and profitability.

Analyst Insight

Investors should monitor NETSCOUT's next earnings report closely for signs of revenue stabilization or growth, particularly in its service segment. Consider holding existing positions if you believe in their long-term strategic investments, but avoid new buys until a clear turnaround in revenue trends is evident.

Financial Highlights

revenue

$143.2M

revenue Growth

-2.7%

Revenue Breakdown

Key Numbers

• $143.2M — Total Revenue (Decreased from $147.2M in Q1 2024, a 2.7% decline.)
• $54.3M — Product Revenue (Down from $58.1M in Q1 2024, indicating a contraction in product sales.)
• $88.9M — Service Revenue (Slightly down from $89.1M in Q1 2024, showing relative stability but no growth.)
• $29.8M — R&D Expenses (Reflects ongoing investment in innovation despite revenue dip.)
• 2.7% — Revenue Decline (Percentage decrease in total revenue year-over-year for Q1.)

Key Players & Entities

• NETSCOUT SYSTEMS INC (company) — filer of the 10-Q
• Cisco (company) — competitor in network performance
• Palo Alto Networks (company) — competitor in cybersecurity
• $143.2 million (dollar_amount) — total revenue for Q1 2025
• $147.2 million (dollar_amount) — total revenue for Q1 2024
• $54.3 million (dollar_amount) — product revenue for Q1 2025
• $58.1 million (dollar_amount) — product revenue for Q1 2024
• $88.9 million (dollar_amount) — service revenue for Q1 2025
• $89.1 million (dollar_amount) — service revenue for Q1 2024
• $29.8 million (dollar_amount) — research and development expenses for Q1 2025

FAQ

Risk Factors

• Competitive Market Pressures [medium — market]: The company operates in competitive markets for cybersecurity and network performance management. Increased competition could lead to pricing pressures and reduced market share, impacting revenue and profitability.
• General Economic Conditions [medium — financial]: Downturns in the general economy or specific industry segments could negatively affect customer spending on the company's products and services, leading to reduced demand and revenue.

Industry Context

NETSCOUT operates in the network performance management and cybersecurity markets, which are characterized by rapid technological advancements and evolving threat landscapes. Key trends include the increasing complexity of networks, the rise of cloud computing, and the growing demand for integrated security solutions. The competitive landscape features both established players and emerging companies, requiring continuous innovation.

Regulatory Implications

While no specific regulatory changes were detailed, companies in the technology sector are subject to data privacy regulations (e.g., GDPR, CCPA) and cybersecurity standards. Compliance with these evolving regulations is critical to avoid penalties and maintain customer trust.

What Investors Should Do

1. Monitor R&D spending effectiveness
2. Analyze drivers of product revenue decline
3. Assess service revenue stability

Glossary

us-gaap:ProductMember

Represents revenue generated from the sale of physical products or software licenses. (Essential for understanding the performance of NETSCOUT's hardware and software offerings.)

us-gaap:ServiceMember

Represents revenue derived from services, such as maintenance, support, and professional services. (Crucial for assessing the recurring revenue base and customer support aspects of NETSCOUT's business.)

Year-Over-Year Comparison

Compared to the prior year's comparable quarter, NETSCOUT SYSTEMS INC reported a 2.7% decrease in total revenue, falling to $143.2 million from $147.2 million. This decline was primarily driven by a contraction in product revenue, which decreased by 6.5% year-over-year. Service revenue showed more resilience, experiencing only a minor dip of 0.2%. The filing highlights ongoing investments in R&D ($29.8 million) despite the revenue contraction, suggesting a focus on future growth and innovation. No new significant risks were detailed, with existing concerns around economic conditions and competition remaining relevant.

Key Financial Figures

• $0.001 — nge on which registered: Common Stock, $0.001 par value per share NTCT Nasdaq Global

Filing Documents

• ntct-20250630.htm (10-Q) — 1213KB
• ntct-ex105_rsux20250630.htm (EX-10.5) — 193KB
• ntct-ex106_psux20250630.htm (EX-10.6) — 72KB
• ntct-ex311_20250630.htm (EX-31.1) — 10KB
• ntct-ex312_2025630.htm (EX-31.2) — 10KB
• ntct-ex321_202506301.htm (EX-32.1) — 5KB
• ntct-ex322_202506301.htm (EX-32.2) — 5KB
• image_0a.jpg (GRAPHIC) — 4KB
• image_1a.jpg (GRAPHIC) — 166KB
• 0001628280-25-038913.txt ( ) — 7832KB
• ntct-20250630.xsd (EX-101.SCH) — 46KB
• ntct-20250630_cal.xml (EX-101.CAL) — 85KB
• ntct-20250630_def.xml (EX-101.DEF) — 221KB
• ntct-20250630_lab.xml (EX-101.LAB) — 661KB
• ntct-20250630_pre.xml (EX-101.PRE) — 456KB
• ntct-20250630_htm.xml (XML) — 943KB

: FINANCIAL INFORMATION

PART I: FINANCIAL INFORMATION

Unaudited Financial Statements

Item 1. Unaudited Financial Statements: Consolidated Balance Sheets: At June 30, 2025 and March 31, 2025 2 Consolidated Statements of Operations: For the three months ended June 30, 2025 and 2024 3 Consolidated Statements of Comprehensive Loss : For the three months ended June 30, 2025 and 2024 4 Consolidated Statements of Stockholder s ' Equity: For the three months ended June 30, 2025 and 2024 5 Consolidated Statements of Cash Flows: For the three months ended June 30, 2025 and 2024 6

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements 7

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 23

Quantitative and Qualitative Disclosures About Market Risk

Item 3. Quantitative and Qualitative Disclosures About Market Risk 35

Controls and Procedures

Item 4. Controls and Procedures 35

: OTHER INFORMATION

PART II: OTHER INFORMATION

Legal Proceedings

Item 1. Legal Proceedings 36

Risk Factors

Item 1A. Risk Factors 36

Unregistered Sales of Equity Securities and Use of Proceeds

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 36

Defaults Upon Senior Securities 36

Item 3. Defaults Upon Senior Securities 36

Mine Safety Disclosures 36

Item 4. Mine Safety Disclosures 36

Other Information 37

Item 5. Other Information 37

Exhibits

Item 6. Exhibits 38

SIGNATURES

SIGNATURES 39 Unless the context suggests otherwise, references in this Quarterly Report on Form 10-Q, or Quarterly Report, to "NetScout," the "Company," "we," "us," and "our" refer to NetScout Systems, Inc. and, where appropriate, our consolidated subsidiaries. NetScout, the NetScout logo, Adaptive Service Intelligence and other trademarks or service marks of NetScout appearing in this Quarterly Report are the property of NetScout Systems, Inc. and/or its subsidiaries and/or affiliates in the United States and/or other countries. Any third-party trade names, trademarks and service marks appearing in this Quarterly Report are the property of their respective holders. Table of Contents Cautionary Statement Concerning Forward-Looking Statements In addition to historical information, the following discussion and other parts of this Quarterly Report contain forward-looking statements under Section 21E of the Securities Exchange Act of 1934, as amended, and other federal securities laws. These forward-looking statements involve risks and uncertainties. These statements relate to future events or our future financial performance and are identified by terminology such as "may," "will," "could," "should," "expects," "plans," "intends," "seeks," "anticipates," "believes," "estimates," "potential," or "continue," or the negative of such terms or other comparable terminology. These statements are only predictions. You should not place undue reliance on these forward-looking statements. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, and other factors, including those described in Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for our fiscal year ended March 31, 2025, filed with the Securities and Exchange Commission, and elsewhere in this Quarterly Report. These factors may cause our actual results to differ materially from any forward-looking statement. Moreover, we operate in a very compe

: FINANCIAL INFORMATION

PART I: FINANCIAL INFORMATION

Unaudited Financial Statements

Item 1. Unaudited Financial Statements NetScout Systems, Inc. Consolidated Balance Sheets (In thousands, except for per share data) June 30, 2025 March 31, 2025 (Unaudited) Assets Current assets: Cash and cash equivalents $ 489,572 $ 457,415 Marketable securities and investments 42,937 34,058 Accounts receivable and unbilled costs, net of allowance for credit losses of $ 92 and $ 214 a t June 30, 2025 and March 31, 2025, respectively 92,200 163,654 Inventories and deferred costs 13,047 12,891 Prepaid income taxes 14,800 13,380 Prepaid expenses and other current assets 31,359 31,786 Total current assets 683,915 713,184 Fixed assets, net 21,494 21,529 Operating lease right-of-use assets 36,226 37,717 Goodwill 1,070,155 1,076,383 Intangible assets, net 249,902 258,690 Deferred income taxes 72,689 66,294 Long-term marketable securities 10,997 1,004 Other assets 12,048 11,777 Total assets $ 2,157,426 $ 2,186,578 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 14,016 $ 18,208 Accrued compensation 46,978 56,696 Accrued other 20,310 19,397 Income taxes payable 884 883 Deferred revenue and customer deposits 293,911 301,753 Current portion of operating lease liabilities 10,883 10,995 Total current liabilities 386,982 407,932 Other long-term liabilities 8,132 8,210 Deferred tax liability 2,851 2,643 Accrued long-term retirement benefits 29,418 27,379 Long-term deferred revenue and customer deposits 151,842 147,510 Operating lease liabilities, net of current portion 30,650 32,509 Total liabilities 609,875 626,183 Commitments and contingencies (Note 13) Stockholders' equity: Preferred stock, $ 0.001 par value: 5,000,000 shares authorized; no shares issued or outstanding at June 30, 2025 and March 31, 2025 — — Common stock, $ 0.001 par value: 300,000,000 shares authorized; 135,857,091 and 134,038,262 shares issued and 72,520,702 and 72,060,237 shares outstanding at June 30, 2025 and March 31, 2025,

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements (Unaudited) NOTE 1 – BASIS OF PRESENTATION The accompanying unaudited interim consolidated financial statements have been prepared by NetScout Systems, Inc. (NetScout or the Company). Certain information and footnote disclosures normally included in financial statements prepared under United States generally accepted accounting principles (GAAP) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). In the opinion of management, the unaudited interim consolidated financial statements include all adjustments, consisting of normal recurring adjustments, necessary for a fair statement of the Company's financial position and stockholders' equity, results of operations and cash flows. The year-end consolidated balance sheet data and statement of stockholders' equity were derived from the Company's audited financial statements, but do not include all disclosures required by GAAP. The results reported in these unaudited interim consolidated financial statements are not necessarily indicative of results that may be expected for the entire year. All significant intercompany accounts and transactions are eliminated in consolidation. These unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements, including the notes thereto, included in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2025 filed with the SEC on May 15, 2025. Global and Macroeconomic Conditions The Company continues to closely monitor the current global and macroeconomic conditions, including the impacts of the ongoing war in Ukraine and hostilities in the Middle East, global geopolitical tension, stock market volatility, industry-specific capital spending trends, exchange rate fluctuations, inflation, interest rates, international trade relations (including trade protection measures, such as tarif

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