SentinelOne Continues to Sharpen Its AI Edge

Key Points

• Sentiment for SentinelOne's shares has stabilized, thanks to recent takeover speculation.

• Potential gains from improved results will likely exceed what a buyer is willing to pay for the company.

• 10 stocks we like better than SentinelOne ›

In July, SentinelOne (NYSE: S) became the subject of takeover rumors. So far, these rumors have not led to an acquisition offer. Instead, rather than being a takeover target, this cybersecurity software company has gone on an acquisition spree of its own.

Since August, SentinelOne has announced not one, but two bolt-on acquisitions of smaller competitors. While not certain, these announcements may be a sign that it plans to continue "going it alone" as an independent company.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

Better yet, its independence could be the better move in terms of SentinelOne's stock price. It all has to do with the potential impact of these acquisitions on future fiscal results.

Image source: Getty Images.

Slowing growth, takeover rumors weigh on this stock

Founded in 2012, SentinelOne has scaled from a start-up to nearly $1 billion in annual revenue, largely due to the success of Singularity, its AI-powered cybersecurity software platform. However, over the past few years, growth has slowed down considerably.

In the early 2020s, SentinelOne experienced revenue growth in excess of 100%, but last fiscal year, revenue growth came in at just 32.2%. During the first half of 2025, downward revisions to guidance, coupled with macro-related worries, heightened concerns about a further growth slowdown. As a result, the stock fell from the mid-$20s to the mid-teens per share.

Over the past two months, however, sentiment has stabilized. In July, rumors emerged that Palo Alto Networks, a large competitor, was interested in acquiring the company. Takeover speculation has faded, but an acquisition by Palo Alto, or perhaps another large competitor like CrowdStrike, might still be within the realm of possibility.

Again, though, this may not be the best outcome for the company and its investors. More substantial upside may be in the cards, even if SentinelOne's latest acquisitions only incrementally improve growth.

What recent acquisitions bring to the table

Takeover talk has seemingly been put on the back burner. SentinelOne has also since released its latest fiscal results for the quarter ending July 31. Management touted reaching $1 billion in annual recurring revenue (ARR) and raised its full-year revenue guidance. Still, with revenue rising by just 22% compared to the prior year's quarter, it's clear that the growth slowdown continues.

However, this could change, following SentinelOne's acquisitions of Prompt Security, announced last month, and of Observo AI, announced on Sept. 8. These deals look promising, mostly because they enhance SentinelOne's AI capabilities, while at the same time not endangering the company's fiscal health.

SentinelOne is spending $405 million on these acquisitions. Some of this figure will be paid in newly issued stock, with a portion of this figure subject to vesting. The company has $810 million in cash and a $6 billion market cap, so all of this is manageable.

Buying Prompt Security adds to the Singularity platform, a cybersecurity solution specifically made to address generative AI-related risks. Buying Observo AI bolsters Singularity's capabilities in the areas of security information and event management (SIEM) and data security.

The possible end result for SentinelOne stock

SentinelOne has made bolt-on acquisitions before, including during the ongoing slowdown in revenue growth. For instance, the company closed on its purchase of PingSafe last year. However, while growth has slowed, gross margins have continued to rise.

Over the past four years, SentinelOne's gross margins have gone from 60% to around 75%. The company hasn't released pro forma financials for these acquisitions, and it's unclear how far both targets have made it out of the pre-revenue stage.

Still, small improvements could have a big impact on SentinelOne's valuation. SentinelOne has yet to reach consistent, generally accepted accounting principles (GAAP) profitability. Delays in reaching this milestone have likely contributed to the company, with a price-to-sales (P/S) ratio of around 6.4, trading at a big discount to Palo Alto Networks and CrowdStrike, which trade at P/S ratios of 15.5 and 25.4, respectively.

Yet with the valuation spread so wide, even a small rerating could mean a big move for shares, far exceeding a likely takeover price for SentinelOne. Back when the takeover rumor emerged, speculation was that Palo Alto Networks was interested in paying $7 billion for the company. That's approximately $21 per share, or just 12% above the current stock price as of Sept. 18.

Hence, as the company sharpens its AI edge, while at the same time setting the stage for higher margins and a higher valuation, now may be the time to go bullish on SentinelOne.

Should you invest $1,000 in SentinelOne right now?

Before you buy stock in SentinelOne, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and SentinelOne wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $662,520!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,043,346!*

Now, it’s worth noting Stock Advisor’s total average return is 1,056% — a market-crushing outperformance compared to 188% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of September 15, 2025

Thomas Niel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends CrowdStrike and SentinelOne. The Motley Fool recommends Palo Alto Networks. The Motley Fool has a disclosure policy.