SailPoint, Inc. (SAIL) Q2 2026 Earnings Call Transcript
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Overview
The earnings call reflects strong financial performance with a 30% YoY ARR increase and optimistic guidance for Q2 and FY 2026. Positive market strategy elements include a focus on AI integration and strategic partnerships, notably with Deloitte. The Q&A highlighted strong analyst sentiment, with management addressing concerns effectively. No significant negative trends were identified, and the overall tone was confident, supporting a positive stock price reaction.
Key Financial Performance
Annual Recurring Revenue (ARR) $982 million, a 28% year-over-year increase. SaaS ARR grew 37% year-over-year. The growth reflects strong demand for identity security solutions and the ability to support large-scale enterprises.
Customers with ARR greater than $1 million 48% year-over-year increase. This highlights the company's ability to handle the scale and complexity of large enterprises.
Total Q2 Revenue $264 million, a 33% year-over-year increase. Subscription revenue grew 36% year-over-year. The increase was driven by strong bookings and SaaS/Term mix, as well as timing of term contract renewals.
Adjusted Operating Margins Expanded by 980 basis points to 20.4%. This was due to strong top-line growth, economies of scale, and disciplined expense management.
Cash Flow from Operating Activities $50 million, a record high. This reflects robust growth, disciplined expense management, and strong collection efforts.
New SaaS Customers 30% increase in average ARR per new SaaS customer. 40% attach rate of add-on modules compared to 25% in the same quarter last year. This indicates strong demand for advanced features and add-on modules.
Emerging Add-On Modules ARR More than doubled year-over-year. This contributed to a Net Revenue Retention (NRR) of 114%.
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Operating Highlights
SailPoint Accelerated Application Management: Introduced to address enterprise challenges in connecting applications to identity security solutions. Enables organizations to onboard and govern hundreds of applications quickly, reducing time from years to hours or days.
SailPoint Agent Identity Security: Launching at Navigate event, designed to govern AI agents and subagents across their lifecycle. Provides real-time authorization and deep governance for AI-driven workflows.
SailPoint Machine Identity Security: Fastest-growing new product in SailPoint's history, addressing the need for advanced identity solutions for machine identities.
Emerging Add-on Modules: Includes non-employee risk management, data access security, and machine identity security. These modules have seen ARR more than double year-over-year.
Market Transformation: Identity security is becoming the backbone of enterprise security, with real-time controls across all identities, including human and machine, becoming essential.
Global Expansion: Partnership with HCL Technologies to bring modern identity security to more markets and geographies, especially in the age of AI.
Annual Recurring Revenue (ARR): Closed Q2 2026 with $982 million in ARR, a 28% year-over-year increase, with SaaS ARR growing 37% year-over-year.
Customer Growth: 48% year-over-year increase in customers with ARR greater than $1 million. New SaaS customers had a 40% attach rate of add-on modules, up from 25% last year.
Revenue Growth: Total Q2 revenue increased 33% year-over-year, with subscription revenue growing 36% year-over-year.
Financial Performance: Adjusted operating margins expanded to 20.4%, and $50 million in cash flow from operating activities was generated.
Acquisition of Savvy Assets: Expected to close later this year, enhancing SaaS application visibility and identity risk detection.
Focus on AI and Machine Identities: Positioning SailPoint as a leader in governing AI agents and machine identities, addressing new identity challenges.
Independent Platform Strategy: Maintaining independence in a market defined by consolidation, offering a unified platform for identity, data, and security.
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Risk or Challenges
Market Transformation and Competitive Pressures: The market is undergoing a transformation with increasing demand for identity security solutions. SailPoint faces competitive pressures from other vendors consolidating identity and security solutions, which could challenge its market position.
AI and Machine Identity Risks: The rise of AI agents and machine identities introduces new risks, such as unauthorized access to sensitive data and circumvention of security controls. Enterprises must address these risks with real-time governance and identity context, which could be challenging to implement effectively.
Complexity of Enterprise Environments: SailPoint's customers often operate in highly complex environments with a mix of legacy systems, SaaS applications, cloud platforms, and hybrid environments. Managing and securing these diverse systems at scale poses significant challenges.
Emerging Identity Challenges: New challenges such as entitlement explosion, application sprawl, and the need for advanced governance for non-human identities require continuous innovation. Failure to address these challenges could impact SailPoint's ability to meet customer needs.
Regulatory and Compliance Risks: As identity security becomes central to enterprise operations, regulatory and compliance requirements are likely to increase. SailPoint must ensure its solutions meet these evolving standards to avoid potential legal and financial repercussions.
Economic Uncertainties: Economic uncertainties could impact customer budgets and spending on identity security solutions, potentially affecting SailPoint's revenue growth.
Execution Risks: SailPoint's ability to execute its strategy, including the successful integration of acquisitions like Savvy and the rollout of new products, is critical. Any missteps could hinder growth and customer satisfaction.
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Guidance & Outlook
ARR (Annual Recurring Revenue): Expected to cross $1 billion in Q3 2026, reaching $1.029 billion, representing a 26.5% year-over-year growth. Fiscal year 2026 ARR outlook increased to $1.11 billion, up 26.6% year-over-year.
Revenue: Fiscal year 2026 revenue guidance increased to $1.055 billion, reflecting a 22.4% year-over-year growth. Q3 2026 revenue expected to be $270 million, a 15% year-over-year increase.
Adjusted Operating Margin: Fiscal year 2026 adjusted operating margin guidance increased to 17%, up from the prior guidance of 15.7%. Q3 2026 adjusted operating margin expected to be 16%.
Free Cash Flow: Second half fiscal year 2026 free cash flow expected to be approximately $85 million, with one-third generated in Q3 and two-thirds in Q4.
Product Innovations and Launches: New innovations to be showcased at the Navigate conference, including real-time authorization across all identities, advanced security solutions, and privileged security posture management. SailPoint agent identity security to govern AI agents and subagents across their lifecycle.
Market Trends and Strategic Positioning: Identity security is becoming central to enterprise security, with a focus on real-time controls for human, machine, and AI identities. SailPoint aims to lead this transformation with its unified platform combining identity, data, and security.
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Shareholder Return Plan
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Key Q&A
Q:Could you peel back a layer on the guidance a little bit, specifically regarding the upfront revenue recognition from the renewals on the federal side and its impact on ARR from the non-SaaS ARR?
A:Brian Carolan explained that the upfront revenue recognition was due to term renewals in the federal space, with a 100% renewal rate in fiscal Q2. This resulted in a $7 million timing shift from Q3 to Q2. He clarified that there was no ARR impact from these renewals as they were already included in ARR.
Q:What gives you confidence in the pickup in Q4 despite the net new ARR deceleration in Q3 from Q2?
A:Brian Carolan noted that Q2 had a tough comparable from last year but achieved a $57 million net new ARR, consistent with last year. He emphasized a 2-year CAGR of over 40% and expressed confidence in their beat-and-raise cadence heading into the second half of the year.
Q:Where are you seeing the most opportunity in the machine identity market, and what are the use cases driving your solution?
A:Mark McClain highlighted that their machine identity approach focuses on discovery and assignment of ownership for non-human identities like service accounts and software bots. He emphasized the importance of governance and security for these identities, which aligns with their traditional life cycle approach for human identities.
Q:What are your thoughts on the AI-driven connector integration and its potential incremental monetization opportunities?
A:Mark McClain discussed the emerging role of agents and the need for tight alignment between identity and entitlement data. He emphasized the importance of understanding agents' characteristics and data access to manage risks effectively. He also noted that this integration could enhance use cases like risk detection and access control.
Q:How much legacy still remains within the installed base, and are we seeing a tipping point in the transformation of identity within that legacy base?
A:Matthew Mills noted an acceleration in migrations from the installed base and legacy environments. He attributed this to the inadequacy of customized legacy solutions to support modern needs, creating a sense of urgency for transformation.
Q:How do you think about the mix of your business between SaaS and Term over the next 12 months?
A:Brian Carolan stated that the mix will ebb and flow, with Q2 being 86% SaaS. He expects Q3 to be slightly heavier on Term due to the Fed year-end but emphasized the ongoing trend towards SaaS, driven by new SaaS-enabled offerings.
Q:Can you talk about the relative difference in pricing for identity in machines versus humans?
A:Matthew Mills explained that machine identities are priced at about 30-35% higher than workforce identities. Autonomous agents, which operate more like humans, are priced similarly to workforce identities.
Q:What drove the tough comp last year on net new ARR, and how do you think about it on a normalized year-over-year basis?
A:Brian Carolan attributed the tough comp to an 86% year-over-year increase in net new ARR last Q2, driven by strong migration and customer expansion cohorts. He noted a 2-year CAGR of over 40% and highlighted a strong SaaS quarter with a 30% year-over-year increase in average ARR per new SaaS customer.
Q:What are your thoughts on the competitive environment, especially with other public competitors talking more about governance?
A:Mark McClain stated that the competitive landscape has not changed significantly for mid-to-large enterprise deals. He noted that newer offerings have limited success in the lower end of the enterprise market, where buyers are less sophisticated.
Q:What are your views on the market trends, such as the shift towards privileged access and identity being part of a platform?
A:Mark McClain agreed that dynamic privilege controls are becoming more prevalent but argued that traditional PAM technologies are not scalable for broader use. He also emphasized the need for tight integration between identity and security ecosystems rather than bundling everything into one offering.
Q:How will the assets from Savvy enhance your accelerated application management, and what is the competitive landscape like in this area?
A:Mark McClain explained that Savvy's assets will accelerate application discovery and connection, providing visibility and governance. He noted that while some competitors offer easy connectivity, they lack the depth for governance and management, which is SailPoint's strength.
Q:What drove the stellar operating margin performance, and how do you think about second-half hiring plans?
A:Brian Carolan attributed the strong margins to top-line growth and disciplined cost management. He mentioned plans to invest in new product launches and scale the go-to-market engine in the second half of the year.
Q:Are you displacing existing solutions in the application segment, and when could this segment contribute to net new ARR growth?
A:Brian Carolan stated that the accelerated application management service aims to provide faster time-to-value, making SailPoint stickier. He expects this to contribute to net new ARR growth over time.
Q:What is your outlook on customer growth and its contribution to total growth over the next few quarters?
A:Brian Carolan emphasized quality over quantity in customer growth, focusing on larger, more complex environments. He highlighted a 48% year-over-year increase in customers with over $1 million ARR and a 30% year-over-year increase in ARR per new logo.
Q:How has the macro environment, including tariffs, impacted your visibility on demand and pipeline?
A:Brian Carolan stated that the macro environment and tariffs have not materially impacted their funnels. He highlighted the resilience of their market and balanced growth strategy across multiple verticals.
Q:Review of Unclear Management Responses
A:Management appeared to avoid directly addressing the question about the competitive environment in the application segment, particularly regarding whether they are displacing existing solutions. Their response focused on the capabilities of their offering rather than providing specific examples or data on competitive displacement.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Investor Relations
PAM
President
Relations today
SaaS application
SailPoint enterprise
SailPoint platform
SailPoint risk
access decision
admin
authorization
consolidation
context control
depth identity
detection
enforcement
enterprise demand
example SailPoint
future
governance identity
heritage
human machine
hundred
identity challenge
identity context
identity enterprise
identity human
identity solution
identity threat
intelligence
layer
life
market transformation
platform identity
policy
question agent
rise AI
risk SailPoint
scale complexity
scale identity
security challenge
security context
security demand
security innovation
security platform
shift
speed scale
SAIL Transcript
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Positive12-9
The earnings call summary and Q&A reveal strong financial performance with increased ARR and revenue guidance, innovative product launches, and strategic market positioning. The management's confidence and strategic initiatives, like the Savvy acquisition and SaaS migrations, are well-received. While there are some concerns about AI-driven decisions, the overall sentiment is positive, likely leading to a stock price increase in the short term.
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SailPoint, Inc. (SAIL) Presents At Goldman Sachs Communacopia + Technology Conference 2025 Transcript
Neutral9-10
SailPoint, Inc. (SAIL) Q2 2026 Earnings Call Transcript
Positive9-9
The earnings call reflects strong financial performance with a 30% YoY ARR increase and optimistic guidance for Q2 and FY 2026. Positive market strategy elements include a focus on AI integration and strategic partnerships, notably with Deloitte. The Q&A highlighted strong analyst sentiment, with management addressing concerns effectively. No significant negative trends were identified, and the overall tone was confident, supporting a positive stock price reaction.
SAIL Slides
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