NetScout Systems, Inc. reported third‑quarter fiscal 2026 results that surpassed analyst expectations. Total revenue reached $250.7 million, a 0.5% decline from $252.0 million a year earlier, while non‑GAAP operating income climbed to $89.9 million and the non‑GAAP operating margin expanded to 35.9%. GAAP net income was $55.1 million, or $0.75 per diluted share, up 12.5% from $48.8 million a year ago.
Revenue mix shifted as product revenue fell 5.4% to $121.7 million, largely due to a timing shift of large orders and a volatile foreign‑exchange environment. In contrast, service revenue grew 4.2% to $129.0 million, reflecting stronger demand for NetScout’s subscription‑based Cybersecurity and Service Assurance offerings and a higher mix of recurring contracts.
Operating income and margin gains were driven by the higher service mix and disciplined cost management. The company’s non‑GAAP operating income rose 3.2% year‑over‑year, while the operating margin improved 0.4 percentage points, underscoring the company’s ability to convert revenue growth into profitability even as product sales slipped.
Management raised the midpoint of its fiscal 2026 guidance, now projecting revenue of $830–$870 million and non‑GAAP EPS of $2.35–$2.45, up from the previous $825–$865 million and $2.25–$2.40 ranges. The upgrade reflects accelerated order flow, a robust pipeline, and confidence in the AI‑ready data platform that is driving new customer acquisitions and higher‑margin contracts.
CEO Anil Singhal highlighted the impact of year‑end budget utilization, noting that “certain product orders and service renewals originally anticipated for the fourth quarter were realized in Q3, accelerating revenue and supporting the raised guidance.” He added that the company remains focused on disciplined execution, product innovation, and margin expansion as it leverages its AI platform to meet evolving customer demands.
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