A maker of network observability and cybersecurity tools, NetScout lets companies watch internet traffic in real time and defend against DDoS attacks; its nGeniusONE and Arbor products serve telecoms, governments, banks, and hospitals. Founded in 1984 as Frontier Software by Anil Singhal and Narendra Popat, the firm renamed itself NetScout to evoke "scouting" networks for trouble, and added its security arm by acquiring Arbor Networks. Fun fact: it built one of the first remote network monitoring probes in 1992.
NetScout revenue rose 13% to $210.4M in Q1 FY2026, driven by enterprise service assurance demand and a favorable software mix.
NetScout's growth accelerated to 13% in the first quarter of fiscal 2026. Revenue reached $210.4 million and widened 2.1 points to 78.9% as a shift toward higher-margin software licensing continued, while swung to a $21.8 million profit from a $3.7 million loss a year ago. The company used $55 million in cash to acquire DigiCert's DDoS protection business, a move that expands its network control but reduces the cash balance that had been a defining feature of the balance sheet.
Key takeaways
rose 12.7% to $210.4 million, with product revenue up 18% and service revenue up 9%, led by a 20% increase in service assurance offerings.
widened 2.1 percentage points to 78.9%, driven by a favorable product mix from increased software licensing.
swung to $21.8 million, or $0.29 per diluted share, from a net loss of $3.7 million a year ago, helped by growth, a $3.7 million tax benefit, and higher capitalized software, partially offset by $11.8 million in higher employee-related variable compensation.
Section summaries
Management's Discussion and Analysis
Revenue rose 13% to $210.4M driven by enterprise service assurance demand; gross margin improved to 79% on favorable software mix.
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Total grew 13% to $210.4M, with product revenue up 18% and service revenue up 9%, led by a 20% increase in service assurance offerings.
U.S. surged 24% to $124.8M, while international revenue dipped 1% to $85.7M, reflecting regional demand divergence.
U.S. rose 24% to $124.8 million, while international revenue fell 1% to $85.7 million, widening the geographic concentration of growth.
Cash and equivalents fell $36.7 million sequentially to $552.8 million, as $55.0 million used for the DigiCert DDoS protection business acquisition more than offset $50.8 million in .
The DigiCert DDoS acquisition is expected to contribute approximately $20 million in annualized and give the company greater control over its Arbor Cloud network.
What changed
The growth rate accelerated to 12.7% in Q1 FY2026 from 4.5% for the full year FY2026, continuing the upward trajectory that began in FY2026 after the prior year's decline.
The 78.9% was below the 81.6% recorded in Q3 FY2026 and the 79.4% full-year FY2026 level, suggesting the software licensing mix benefit may be normalizing as previously flagged.
The company deployed $55.0 million on an acquisition this quarter, a shift in capital allocation from the share repurchases and debt repayment that had defined the prior two fiscal years, addressing the open question of how the $705.1 million cash and investment balance would be used.
The divergence between U.S. (up 24%) and international revenue (down 1%) persisted and widened, confirming the geographic concentration of growth that has been a recurring pattern since FY2023.
What to watch
Whether the DigiCert DDoS acquisition delivers the expected $20 million in annualized and whether integration costs pressure operating margins in the next two quarters.
Whether the 78.9% stabilizes at this level or continues to drift lower as the software licensing mix benefit annualizes, a risk the company has acknowledged in prior filings.
Whether international returns to growth after the 1% decline this quarter, or whether the geographic concentration of growth in the U.S. becomes a structural feature of the business.
Whether the $11.8 million increase in employee-related variable compensation is a one-time reset tied to improved performance or signals a permanently higher cost base that will pressure margins if growth decelerates.
margin expanded 2pp to 79%, primarily due to a favorable product mix from increased software licensing.
swung to $21.8M from a $3.7M loss, driven by growth, a $3.7M tax benefit, and higher capitalized software, partially offset by $11.8M in higher employee-related variable compensation.
Cash and equivalents decreased $36.7M to $668.5M, mainly due to $55.0M used for the DigiCert DDoS protection business acquisition, partially offset by $50.8M in .
The company expects the DigiCert DDoS acquisition to contribute approximately $20M in annualized and provide greater control over its Arbor Cloud network.
Quantitative and Qualitative Disclosures About Market Risk
There were no material changes to our quantitative and qualitative disclosures about market risk during the three months ended June 30, 2026. Refer to “Part II. Item 7A. Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the year en…
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There were no material changes to our quantitative and qualitative disclosures about market risk during the three months ended June 30, 2026. Refer to “Part II. Item 7A. Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the year ended March 31, 2026 for a discussion of our interest rate and foreign currency exchange risks.
From time to time, we may be subject to legal proceedings and claims in the ordinary course of business. In the opinion of management, none of the Company’s current legal proceedings and claims, if determined adversely and based on the information known to the management as of t…
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From time to time, we may be subject to legal proceedings and claims in the ordinary course of business. In the opinion of management, none of the Company’s current legal proceedings and claims, if determined adversely and based on the information known to the management as of the date of this Quarterly Report, is expected to have a material adverse effect on our financial condition, results of operations or cash flows.
In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, Item 1A. “Risk Factors” in our Annual Report. The risks discussed in our Annual Report could materially affect our business, financial condition and futu…
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In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, Item 1A. “Risk Factors” in our Annual Report. The risks discussed in our Annual Report could materially affect our business, financial condition and future results. There have been no material changes to those risk factors since we filed our Annual Report. The risks described in our Annual Report are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition or operating results.