SentinelOne's Stock Decline Reflects Growth Deceleration and Unresolved Profitability Challenges

What happened

SentinelOne's stock has plummeted 32.4% over the past year and continued to fall in 2026, driven by investor sell-offs following three of its four quarterly reports, as highlighted in a Motley Fool article. DeepValue's master report confirms these concerns, noting that dollar-based net retention has cooled to around 110%, signaling a slowdown in customer expansion despite strong annual recurring revenue exceeding $1 billion. The company remains significantly loss-making under GAAP, with a net loss of $288 million in FY25 and heavy stock-based compensation of $267 million, undermining profitability. While operating cash flow has turned positive, reaching $72 million in the first nine months of FY26, intense competition from larger players like CrowdStrike and risks such as integration challenges and tax uncertainties persist. This blend of decelerating growth, ongoing losses, and competitive pressures explains the sustained negative market sentiment and aligns with DeepValue's 'WAIT' recommendation.

Implication

The stock's decline underscores market skepticism about SentinelOne's ability to sustain high growth and achieve GAAP profitability amid fierce competition, even as it shows progress with positive operating cash flow and a growing enterprise customer base. Cooling net retention rates indicate challenges in expanding within existing accounts, which could pressure future revenue if not addressed. Heavy stock-based compensation and structural losses dilute shareholder value and raise questions about financial discipline, particularly with ongoing acquisitions and share buybacks. Investors must closely monitor key metrics like ARR growth and profitability trends, as further deterioration could justify a more bearish view. Given the current 'WAIT' recommendation, avoiding new positions is prudent until evidence of durable competitive advantage and sustainable free cash flow materializes.

Thesis delta

The article's focus on decelerating sales growth reinforces DeepValue's observation of cooling net retention, emphasizing that SentinelOne's land-and-expand model is moderating just as competition intensifies. This confirmation increases the urgency for the company to demonstrate improved profitability and execution on its platform strategy, but does not fundamentally shift the thesis beyond the existing 'WAIT' stance, which already accounts for these growth and risk factors.