Cybersecurity is a hot investment space, and for good reason. A 2021 Gartner survey indicated that among 61% of executives polled, cybersecurity was the top priority for new spending. The demand bodes well for SentinelOne (S 1.70%), which uses artificial intelligence to hunt for and respond to threats.
The company acquired cloud-native data analytics company Scalyr in 2021 for $155 million and roughly a year later launched DataSet, its data analytics business. This marks SentinelOne's move outside of pure cybersecurity and creates potential new opportunities for the company. Here is what investors need to know.
What is DataSet?
DataSet is an analytics platform that lets businesses aggregate, store, search, and analyze massive amounts of data quickly and easily. Companies create vast amounts of data these days; many software programs must work together to make things "work" inside a business.
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Computer systems create "logs," coded events that tell a step-by-step account of what's happening. What if something stops working? How do you know if your system is working as efficiently as possible? Answering questions like this can mean looking through billions of logs, trying to find that needle in a haystack.
CEO Tomer Weingarten elaborated on SentinelOne's reasoning for getting into data analytics in a press release announcing the launch of DataSet:
Our enterprise customers have the same data needs as SentinelOne -- the ability to understand and action live data sets at speed. We're announcing DataSet because we believe every business benefits from the power of understanding and acting on its data. Instantaneous, easy to use, and efficient understanding of a data set is the key to making better business decisions.
In other words, SentinelOne said hey, we are good at analyzing data because we needed to be for the artificial intelligence that drives our core product. Why not help others analyze data? The company built DataSet on top of Scalyr, which it acquired last year.
What's the potential?
DataSet is not a completely unique product; it's entering a competitive space where companies like DataDog, Splunk, and Elastic roam. Each company has differences, but there is some overlap. The industry of monitoring system data is often called "observability," which DataDog estimates is worth an estimated $38 billion market today and could grow to $53 billion by 2025.
SentinelOne's management spoke briefly about DataSet on its fiscal 2022 Q4 earnings call, saying that hundreds of companies already use DataSet, including DoorDash, Copart, Asana, and TomTom. The product just officially launched in February, so investors will likely need to wait at least a year to get a real sense of how much traction DataSet is getting in the market.
SentinelOne's ability to execute and grow DataSet in a competitive market could speak a lot about management's ability to pivot, especially since it recently made another acquisition, buying identity security company Attivo Networks for $616 million in cash and stock.
What to watch
Tech stocks can be a broad yet complex industry. Some true innovators may successfully build out and expand from their core business, growing their addressable market opportunities.
Time will tell if SentinelOne falls into this category, but the potential should be exciting for investors at least. Shareholders will want to see how management communicates progress through customer wins, revenue growth, and whether it decide to break out DataSet as a revenue category at some point in the future.
